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What changed in Williams-Sonoma, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Williams-Sonoma, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+340 added−334 removedSource: 10-K (2024-03-20) vs 10-K (2023-03-24)

Top changes in Williams-Sonoma, Inc.'s 2024 10-K

340 paragraphs added · 334 removed · 270 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWilliams Sonoma products include everything for cooking, dining and entertaining, including: cookware, tools, electrics, cutlery, tabletop and bar, outdoor, furniture and a vast library of cookbooks. The brand also includes Williams Sonoma Home, a premium concept that offers classic home furnishings and decorative accessories, extending the Williams Sonoma lifestyle beyond the kitchen into every room of the home.
Biggest changeA leading specialty retailer of high-quality products for the kitchen and home, the brand seeks to provide world-class service and an engaging customer experience. Williams Sonoma products include everything for cooking, dining and entertaining, including: cookware, tools, electrics, cutlery, tabletop and bar, outdoor, furniture and a vast library of cookbooks.
Depending on position and location, associates may be eligible for: 401(k) plan and other investment opportunities; paid vacations, holidays and other time-off programs; health, dental and vision insurance; health and dependent care tax-free spending accounts; 5 Table of Contents medical, family and bereavement leave; paid maternity/primary caregiver benefits; tax-free commuter benefits; wellness programs including telehealth visits; time off to volunteer, and matching donations to qualifying nonprofit organizations.
Depending on position and location, associates may be eligible for: 401(k) plan and other investment opportunities; paid vacations, holidays and other time-off programs; health, dental and vision insurance; health and dependent care tax-free spending accounts; medical, family and bereavement leave; paid maternity/primary 6 Table of Contents caregiver benefits; tax-free commuter benefits; wellness programs including telehealth visits; time off to volunteer; and matching donations to qualifying nonprofit organizations.
We believe volunteering deepens our presence in the community, enhances our relationships with customers and strengthens employee engagement. ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS We believe that strategies that support the health of our planet, the well-being of our people and a shared sense of purpose foster long-term, sustainable growth for the Company.
We believe volunteering deepens our presence in the community, enhances our relationships with customers and strengthens associate engagement. ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS We believe that strategies that support the health of our planet, the well-being of our people and a shared sense of purpose foster long-term, sustainable growth for the Company.
With design, manufacturing and distribution facilities in Portland, Oregon, Rejuvenation offers a wide assortment of made-to-order lighting, hardware, furniture and home décor inspired by history, designed for today and made to last for years to come. 3 Table of Contents Mark and Graham Established in 2012, Mark and Graham is a leading monogrammed lifestyle brand that offers thoughtfully designed personalized products and custom gifts.
With design, manufacturing and distribution facilities in Portland, Oregon, Rejuvenation offers a wide assortment of made-to-order lighting, hardware, furniture and home décor inspired by history, designed for today and made to last for years to come. Mark and Graham Established in 2012, Mark and Graham is a leading monogrammed lifestyle brand that offers thoughtfully designed personalized products and custom gifts.
We are also a member of CEO Action for Diversity & Inclusion, in which we pledged a goal to “identify and establish associate networks for underrepresented communities to promote diversity and inclusion throughout the Company.” In furtherance of our stated goal, we have developed associate equity networks including an LGBTQIA+ Network, Black Associate Network, Veterans Appreciation Network, Hispanic/LatinX Associate Network, Asian WSI Network, and a Disability, Education & Advocacy Network.
We are also a member of CEO Action for Diversity & Inclusion, in which we pledged a goal to “identify and establish associate networks for underrepresented communities to promote diversity and inclusion throughout the Company.” In furtherance of our stated goal, we have developed affinity group networks including an LGBTQIA+ Network, Black Associate Network, Veterans Appreciation Network, Hispanic/LatinX Associate Network, Asian WSI Network and a Disability, Education & Advocacy Network.
Our in-house teams design our own products and work with our talented vendors to bring quality, sustainable products to market through our high-touch multi-channel platform. Our business is subject to substantial seasonal variations in demand.
Our in-house teams design our own products and work with our talented suppliers to bring quality, sustainable products to market through our high-touch multi-channel platform. Our business is subject to substantial seasonal variations in demand.
Information on our website is not, and will not, be deemed a part of this report or incorporated into any other filings we make with the SEC. 7 Table of Contents
Information on our website is not, and will not, be deemed a part of this report or incorporated into any other filings we make with the SEC. 8 Table of Contents
We also support our communities through our associates’ time and leadership, and we provide 8 hours of paid Community Involvement Time each year to our eligible associates. Additionally, we brought back opportunities for associates to volunteer their time and talents with curated in-person events that support our local and national nonprofit partners.
Community Involvement We also support our communities through our associates’ time and leadership, and we provide 8 hours of paid Community Involvement Time each year to our eligible associates. Additionally, we provided opportunities for associates to volunteer their time and talents with curated in-person events that support our local and national nonprofit partners.
In addition, we have registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,” “potterybarnkids.com,” “potterybarnteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,” “rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, patents, copyrights, trade dress rights, domain names, trade secrets and other intellectual property and proprietary technology that we hold are of material importance to us.
In addition, we have registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,” “potterybarnkids.com,” “potterybarnteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,” “rejuvenation.com,” “markandgraham.com” and “greenrow.com.” Collectively, the trademarks, patents, copyrights, trade dress rights, 7 Table of Contents domain names, trade secrets and other intellectual property and proprietary technology that we hold are of material importance to us.
REGULATION As a company with global operations, we are subject to the laws of the United States and multiple foreign jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among jurisdictions.
REGULATION As a company with global operations, we are subject to the laws of the U.S. and multiple foreign jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among jurisdictions.
OPERATIONS As of January 29, 2023, we had the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation and Mark and Graham, which sell our products through our e-commerce websites, retail stores and direct-mail catalogs.
OPERATIONS As of January 28, 2024, we had the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow, which sell our products through our e-commerce websites, retail stores and direct-mail catalogs.
As of January 29, 2023, we own or have applied to register approximately 370 patents in connection with certain product designs, inventions and proprietary technology. Patents in the U.S. are generally valid for 15 to 20 years as long as their registrations are properly maintained.
As of January 28, 2024, we own or have applied to register approximately 420 patents in connection with certain product designs, inventions and proprietary technology. Patents in the U.S. are generally valid for 15 to 20 years as long as their registrations are properly maintained.
In preparation for and during our fiscal 2022 holiday selling season, we hired a substantial number of part-time and seasonal employees, primarily in our retail stores, distribution facilities and customer care centers. None of our employees are represented by a collective bargaining agreement. We have three key ESG pillars as key areas of focus for our Company.
In preparation for and during our fiscal 2023 holiday selling season, we hired a substantial number of part-time and seasonal associates, primarily in our retail stores, customer care centers, and distribution facilities. None of our associates are represented by a collective bargaining agreement. We have three key Environmental, Social and Governance "ESG" pillars as areas of focus for our Company.
Our retail stores serve as billboards for our brands, which we believe inspires new and existing customers to also shop online. We operate 530 stores, which include 489 stores in 41 states, Washington, D.C. and Puerto Rico, 20 stores in Canada, 19 stores in Australia and 2 stores in the United Kingdom.
Our retail stores serve as billboards for our brands, which we believe inspires new and existing customers to also shop online. We operate 518 stores, which include 480 stores in 40 states, Washington, D.C. and Puerto Rico, 19 stores in Canada, 17 stores in Australia and 2 stores in the United Kingdom.
Our work continued to earn recognition across our industry. We were included in Barron’s 100 Most Sustainable Companies for five years running, recognized as Sustainable Furnishings Council Top Scoring global company for sustainable wood furniture for the past five years, and were included in the Dow Jones Sustainability North America Index for the first time.
Our work continued to earn recognition across our industry. We were included in Barron’s 100 Most Sustainable U.S. Companies for 2024 for the 7th year running, recognized as Sustainable Furnishings Council Top Scoring global company for sustainable wood furniture for the past 6 years, and were included in the Dow Jones Sustainability North America Index for the second time.
INTELLECTUAL PROPERTY As of January 29, 2023, we own and/or have applied to register approximately 210 unique trademarks or service marks. We own and/or have applied to register our key brand names in the U.S. as well as in approximately 96 additional jurisdictions.
INTELLECTUAL PROPERTY As of January 28, 2024, we own and/or have applied to register approximately 200 unique trademarks or service marks. We own and/or have applied to register our key brand names in the U.S. as well as in 95 additional jurisdictions.
In June 2020, we established an Equity Action Plan and formed an Equity Action Committee, including a diverse group of executives and associates, to drive positive change in the fight for racial justice, and in 2022 we continued our commitment to equity through our partnership and donation support with our racial equity and justice non-profit partners such as the NAACP, the Jackie Robinson Foundation, the National Urban League, and Asian Americans Advancing Justice—Asian Law Caucus.
We maintain an Equity Action Plan and an Equity Action Committee, including a diverse group of executives and associates, and in 2023 we continued our commitment to equity through our partnership and donation support with our non-profit partners such as the NAACP, the Jackie Robinson Foundation, the National Urban League and Asian Americans Advancing Justice—Asian Law Caucus.
In preparation for and during our holiday selling season, we hire a substantial number of additional temporary employees, primarily in our retail stores, distribution facilities and customer care centers. 4 Table of Contents HUMAN CAPITAL MANAGEMENT As of January 29, 2023, we had approximately 21,100 employees, who we refer to as associates, of whom approximately 12,500 were full-time.
In preparation for and during our holiday selling season, we hire a substantial number of additional temporary associates, primarily in our retail stores, customer care centers, and distribution facilities. HUMAN CAPITAL MANAGEMENT As of January 28, 2024, we had approximately 19,300 employees, who we refer to as associates, of whom approximately 10,700 were full-time.
One of those three pillars is “People” in keeping with our long-held “People First” culture. This includes the following areas of focus: Associate Engagement We conduct an annual Associate Opinion Survey to directly engage with and collect feedback from our associates, which we use to improve the experience of our teams.
One of those three pillars is “People” in keeping with our long-held “People First” culture. This includes the following areas of focus: Associate Engagement We directly engage with associates throughout the year to collect feedback with surveys and in-person, facilitated round tables, which we use to celebrate our culture and improve the experience of our teams.
We are currently building relationships with approximately 180 organizations, universities, colleges and networks to expand our reach to potential candidates. We continue to ensure we bring forward a diverse slate of candidates for all of our corporate roles posted externally, and have seen improvement in both overall representation and hire rate since we launched our Equity Action Plan.
We continue to foster relationships with over 180 organizations, universities, colleges and networks to expand our reach to potential candidates. We continue to strive to bring forward a diverse slate of candidates for our corporate roles posted externally, which has resulted in improvement in both overall representation and hire rate since the inception of our Equity Action Plan.
We also own numerous patents, copyrights and trade dress rights for our products, proprietary designs, product packaging, catalogs, website designs and store designs, among other things, which are used by our subsidiaries and franchisees under license.
Trademark registrations can generally be renewed indefinitely so long as the marks are in use. We also own numerous patents, copyrights and trade dress rights for our products, proprietary designs, product packaging, catalogs, website designs and store designs, among other things, which are used by our subsidiaries and franchisees under license.
In the decades that followed, the quality of our products, our ability to identify new opportunities in the market and our people-first approach to business have facilitated our expansion beyond the kitchen into nearly every area of the home.
In the decades that followed, the quality of our products, our ability to identify new opportunities in the market and our people-first approach to business have facilitated our expansion beyond the kitchen into nearly every area of the home. We are focused on three key priorities — returning to growth, elevating our world-class customer service and driving earnings.
Substantially all of these purchases were negotiated and paid for in U.S. dollars. In addition, we manufacture merchandise, primarily upholstered furniture and lighting, at our facilities located in North Carolina, California, Oregon and Mississippi. The current macroeconomic environment is uncertain and we continue to incur increased costs across our global supply chain.
In addition, we manufacture merchandise, primarily upholstered furniture and lighting, at our facilities located in North Carolina, Oregon and Mississippi. The current macroeconomic environment is uncertain and we continued to incur increased costs across our global supply chain in the first half of fiscal 2023.
We were also included in the 2023 Bloomberg Gender-Equality Index, which tracks public companies’ commitment to gender equality. We are focused on increasing the representation of minority talent through hiring and career development.
We were also ranked on Forbes' List of Best Employers for Diversity in 2023 and were included in the 2023 Bloomberg Gender-Equality Index, which tracks public companies’ commitment to gender equality. We are focused on increasing under-represented talent at the Company through expanding our candidate pool and career development.
As a multinational retailer with a global supply chain, we are committed to responsible practices across our business—from designing and sourcing responsible products, to reducing waste, to working with suppliers to lower emissions and adopt sustainable business practices. We amplified our climate work in the past year, making progress towards our Science-Based Target for emissions reduction across our value chain.
As a multinational retailer with a global supply chain, we are committed to responsible practices across our business—from designing and sourcing responsible products, to reducing waste, to working with suppliers to lower emissions and adopt sustainable business practices. These practices are relevant to our business, critical to our associates, and important to our customers.
We also have multi-year franchise agreements with third parties in the Middle East, the Philippines, Mexico, South Korea and India that currently operate 138 franchised locations as well as e-commerce websites in certain locations.
We also have multi-year franchise agreements with third parties in the Middle East, the Philippines, Mexico, South Korea and India that currently operate 138 franchised locations as well as e-commerce websites in certain locations. 4 Table of Contents SUPPLIERS We purchase most of our merchandise from numerous foreign and domestic manufacturers and importers, the largest of which accounted for approximately 3% of our purchases during fiscal 2023.
Williams-Sonoma, Inc. is the world’s largest digital-first, design-led and sustainable home retailer. Our products represent distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, and Mark and Graham — are marketed through e-commerce websites, direct-mail catalogs and retail stores.
Our products in our portfolio of nine brands — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow — are marketed through e-commerce websites, direct-mail catalogs and our retail stores.
In addition, consistent with our commitment to diversity and inclusion, we have expanded our benefit offerings to include coverage for transgender-inclusive services, including gender confirmation surgery and hormone therapy.
In addition, consistent with our commitment to diversity and inclusion, we have expanded our benefit offerings to include coverage for transgender-inclusive services, including gender affirming care and therapy. As we strive to keep health care affordable and inclusive, we minimize cost increases to associates while adding offerings to support mental health and well-being.
We strive to deliver a workplace experience where the quality of our engagement with fellow associates, business partners and customers matches the quality of the products and services we bring to the marketplace.
We strive to deliver a workplace experience where the quality of our engagement with fellow associates, business partners and customers matches the quality of the products and services we bring to the marketplace. 5 Table of Contents Talent Development and Career Mobility We invest in our associates through accessible resources and structured training programs that help our associates to navigate and foster meaningful careers.
Diversity, Equity and Inclusion Associate engagement and retention require an understanding of the needs of a diverse, creative and purpose-driven workforce. We firmly believe that working in a culture focused on diversity, equity and inclusion spurs innovation, creates healthy and high-performing teams, and delivers superior customer experiences. We aim to provide equal opportunity for all employees.
We firmly believe that working in a culture focused on diversity, equity and inclusion spurs innovation, creates healthy and high-performing teams, and delivers superior customer experiences. We aim to provide equal opportunity for all associates. We have several systems under which associates can report incidents or discrimination confidentially or anonymously and without fear of reprisal.
It is hard to predict with certainty when these supply chain challenges will be fully resolved, and we currently expect these supply chain challenges to negatively impact our cost of goods sold into 2023. Additionally, we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as increasing labor costs and union organizing activity.
Additionally, we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as increasing labor costs and union organizing activity.
Our 6 Table of Contents core brand names, including “Williams Sonoma,” “Pottery Barn,” “pottery barn kids,” “Pottery Barn Teen,” “west elm,” “Williams Sonoma Home,” “Rejuvenation” and “Mark and Graham” are of material importance to us.
Our core brand names, including “Williams Sonoma,” “Pottery Barn,” “pottery barn kids,” “Pottery Barn Teen,” “west elm,” “Williams Sonoma Home,” “Rejuvenation”, “Mark and Graham” and “GreenRow” are of material importance to us. Trademarks are generally valid as long as they are in use and/or their registrations are properly maintained, and they have not been found to have become generic.
We have a company-wide Advisor Program, which matches associates in a manager-and-above role with an associate in a lower-level role to form advisor/advisee relationships to provide career guidance and receive support in working through career and development challenges. We created new learning programs to further build skills and career opportunities for associates, notably focused on design and core retail skills.
We offer development opportunities for our associates including in-person and online learning, as well as professional development courses, such as goal setting, and leadership training. We have a company-wide Advisor Program, which matches associates in a manager-and-above role with an associate to form advisor/advisee relationships to provide career guidance and receive support in working through career aspirations and development areas.
We also foster other team-based programs to develop talent at all levels of the Company, supplying associates with new skills and training. Through these programs, we give our associates the tools to succeed, learn new skills and develop their careers.
We also created learning programs to further build skills and career opportunities for associates, notably focused on design and core retail skills. We also foster other team-based programs to develop talent at all levels of the Company, supplying associates with new skills and training.
Thoughtfully designed and crafted to last, Pottery Barn’s furniture, bedding, lighting, rugs, table essentials, decorative accessories and more can be loved for a lifetime. Pottery Barn Kids Kids are, and have always been, the inspiration behind what we do at Pottery Barn Kids.
America’s most meaningful, beautiful design source, Pottery Barn brings together good products, people and values — seeking inspiration, quality, sustainability and service in everything we do. Thoughtfully designed and crafted to last, Pottery Barn’s furniture, bedding, lighting, rugs, table essentials, decorative accessories and more can be loved for a lifetime.
Since 1999, it’s been our mission to bring the utmost in quality, sustainability, safety and style into every family’s home. Most importantly, all our designs are rigorously tested to meet the highest child safety standards and expertly crafted from the best materials to last beyond their childhood years.
Most importantly, all our designs are rigorously tested to meet the highest child safety standards and expertly crafted from the best materials to last beyond their childhood years. 3 Table of Contents West Elm Born in Brooklyn in 2002, West Elm is dedicated to transforming people’s spaces through creativity, style and purpose.
We are also proud to be a leader in our industry with our Environmental, Social and Governance (“ESG”) efforts. Williams Sonoma From the beginning, our namesake brand, Williams Sonoma, has been bringing people together around food. A leading specialty retailer of high-quality products for the kitchen and home, the brand seeks to provide world-class service and an engaging customer experience.
We are also proud to be a leader in our industry with our values-based culture and commitment to achieving our sustainability goals. Williams Sonoma From the beginning, our namesake brand, Williams Sonoma, has been bringing people together around food.
The digitally native brand is known for high quality collections, ranging from home gifts to luggage to handbags, designed in-house that can be personalized with more than 50 exclusive monograms. Outward In 2017, we acquired Outward, Inc., a 3-D imaging and augmented reality platform for the home furnishings and décor industry.
The digitally-native brand is known for high quality collections, ranging from home gifts to luggage to handbags, designed in-house that can be personalized with more than 100 monograms. GreenRow GreenRow, established in 2023, is an internally designed and developed brand specializing in the use of sustainable materials and manufacturing practices to create colorful, vintage-inspired heirloom quality products.
West Elm Born in Brooklyn in 2002, West Elm is dedicated to transforming people’s lives and spaces through creativity, style and purpose. West Elm creates unique, modern and affordable home decor and curates a global selection of local, ethically-sourced and Fair Trade Certified products, available online and in our stores worldwide.
West Elm creates unique, modern and affordable home décor and curates a selection of goods that are crafted by makers from the across the world, with a focus on ethically-sourced and Fair Trade Certified products. The West Elm collection is available online and in our stores worldwide.
We have several systems under which associates can report incidents or discrimination confidentially or anonymously and without fear of reprisal. As of the end of fiscal 2022, approximately 67.4% of our total workforce identified as female and approximately 43.7% identified as an ethnic minority group. Additionally, approximately 54.8% of our Vice Presidents and above identified as female.
As of the end of fiscal 2023, approximately 68.1% of our total workforce identified as female and approximately 41.1% identified as an ethnic minority group. Additionally, approximately 56.6% of our Vice Presidents and above identified as female.
SUPPLIERS We purchase most of our merchandise from numerous foreign and domestic manufacturers and importers, the largest of which accounted for approximately 3% of our purchases during fiscal 2022. Approximately 67% of our merchandise purchases in fiscal 2022 were sourced from foreign vendors, predominantly in Asia and Europe.
Approximately 81% of our merchandise purchases in fiscal 2023 were sourced from foreign suppliers, predominantly in Asia and Europe, with 25% of our merchandise purchases sourced from China. Substantially all of these purchases were negotiated and paid for in U.S. dollars.
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Growth across our portfolio has been fueled by our three key differentiators - our in-house design, our digital-first channel strategy, and our values. Our in-house design capabilities and vertically integrated sourcing organization allow us to deliver high-quality, sustainable products at competitive prices.
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Our growth will be driven by our business strategies in each of our core businesses, our business-to-business program, our emerging brands and our global business. We will continue to improve our world-class customer service by driving supply chain improvements from reduced out-of-market and multiple shipments, fewer customer accommodations, lower returns and damages, and reduced replacements.
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Through our e-commerce platform, our in-house customer relationship management and data analytic teams optimize our digital spend and customer connections. We have expanded our in-store services to include ship-to-store as we transition our stores to not only provide an exceptional customer service experience but to also serve as design centers and omni-fulfillment hubs.
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Additionally, we see opportunity to drive margin by focusing on full-price selling and cost negotiations. As it relates to other cost efficiencies, we expect to maintain our employment cost savings that we achieved this year, following our comprehensive review of our organization structure. We are the world's largest digital-first, design-led and sustainable home retailer.
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Pottery Barn Established in 1949 and acquired by Williams-Sonoma, Inc. in 1986, Pottery Barn is a premier omni-channel home furnishings retailer. America’s most meaningful, beautiful design source, Pottery Barn brings together good products, people and values — seeking inspiration, quality, sustainability and service in everything we do.
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The brand also includes Williams Sonoma Home, a premium concept that offers classic home furnishings and decorative accessories, extending the Williams Sonoma lifestyle beyond the kitchen into every room of the home. Pottery Barn Established in 1949 and acquired by Williams-Sonoma, Inc. in 1986, Pottery Barn is a premier omni-channel home furnishings retailer.
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Talent Development and Engagement We invest in our employees through accessible resources and structured training programs that help our associates to create the career they envision for themselves. We offer a large selection of development opportunities for our employees including in-person and online learning, as well as professional development courses, such as goal setting, unconscious bias and inclusive leadership training.
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Pottery Barn Kids Kids are, and have always been, the inspiration behind what we do at Pottery Barn Kids. Since 1999, it’s been our mission to bring the utmost in quality, sustainability, safety and style into every family’s home.
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As we strive to keep health care affordable and inclusive, we minimized cost increases to associates and, for a large portion of the associate population, decreased the cost of health care while adding offerings to support mental health and well-being.
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Every product in the digitally-native brand's assortment supports at least one of our social or environmental initiatives and prioritizes utilizing innovative, sustainable manufacturing practices with low-impact materials wherever possible — including responsibly sourced linen, cotton, wood and recycled materials. Outward In 2017, we acquired Outward, Inc., a 3-D imaging and augmented reality platform for the home furnishings and décor industry.
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During fiscal 2022, we also raised our Company minimum wage to $16 per hour for U.S.-based hourly associates across our retail store, corporate, and supply chain workforce. Community Involvement Through online and in-store donations, special product collaborations, and national and local fundraising, we give back to the communities we serve. We remain committed to our partnerships with St.
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Through these programs, we give our associates the tools to succeed, learn new skills and develop their careers. We have a transparent process to post open jobs throughout the company and communicate opportunities for individuals to be considered for career advancement both within their current teams and across the company.
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Jude Children’s Research Hospital, No Kid Hungry, The Trevor Project, AIDS Walk, Canada Children’s Hospitals and the Arbor Day Foundation. We raised $4.0 million for St. Jude Children’s Research Hospital during fiscal 2022, which included donations from our customers at time of purchase, special St.
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We conduct annual talent reviews to identify talent development actions as well as strength and opportunities within our succession plans. Together, these actions enable us to maintain a strong talent pipeline internally. Diversity, Equity and Inclusion Associate engagement and retention require an understanding of the needs of a diverse, creative and purpose-driven workforce.
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Jude-designated product sales where a portion of the sale was donated, employee donations, and donations from the Company. We also support organizations and partners, such as Good360 and Habitat for Humanity, who assist those with damaged or lost homes, or those seeking decent, affordable housing.
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Our three pillars of Planet, People, and Purpose are the cornerstones of our ESG work. Within these pillars, we identified impact areas and set goals that our family of brands plays an active role in achieving. We continue to implement efforts to advance our Science-Based Target for emissions reduction across our operations and value chain.
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We give charitable grants, donate our merchandise, donate proceeds from the sale of certain products, and provide matching grants for charitable donations made by our associates. Our Williams-Sonoma, Inc. Foundation also provides need-based grants to our associates directly impacted by federally-declared disasters.
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Our strategies for energy efficiency and renewable energy, vendor engagement, and preferred materials guide our reduction efforts. In 2023, we drove progress towards our landfill diversion goal, implementing waste reduction initiatives, such as recycling and product donation, across our operations.
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Given the alignment of our ESG work with our strategic direction, our Board is highly engaged on the topic of sustainability. Since 2019, our Nominations, Corporate Governance and Social Responsibility Committee and our Board have overseen ESG matters.
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In addition to our environmental work, we offer programming to support and enhance the well-being of the workers in our supply chain. Our ambitious goals encourage us to scale our impact. More information about our sustainability efforts can be found on our website: sustainability.williams-sonomainc.com.
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The Nominations, Corporate Governance and Social Responsibility Committee oversees corporate policies and programs that speak to long-standing commitments to our associates, supply chain, environment, health and safety, human rights, cybersecurity and ethics. These policies and programs are relevant to our business, critical to our associates, and important to our customers.
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The Board of Directors’ oversees environmental and social matters through updates from WSI’s Executive Vice President of Sourcing, Quality Assurance, and Sustainable Development and annual updates from the organization’s dedicated sustainability team. The sustainability team presents to the full Board at least once a year to monitor and review existing and proposed strategy, goals and targets.
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The Executive Vice President leads both the organization’s dedicated global team of sustainability professionals as well as a working group of cross-functional leaders.
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Building on the progress of our cotton and wood goals, we are aligning our preferred materials work with our climate strategy, using materials as part of our efforts to reach our Science-Based Target. In 2022, we drove progress towards our landfill diversion goal with stores implementing waste reduction initiatives, such as backhauling of expanded polystyrene foam.
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We continued to divert products from landfill into donation streams and to identify opportunities for waste reduction. We hold our suppliers to high ethical standards, and we are committed to integrity and honesty throughout all aspects of our business.
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We require our vendors to adhere to the standards outlined in our Vendor Code of Conduct and accompanying implementation standards, which are informed by the conventions of the International Labour Organization (ILO) and the UN’s Guiding Principles on Business and Human Rights.
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Hundreds of factories in our audit scope are audited annually by independent third-party audit firms to ensure compliance with our standards relating to labor practices, health and safety, environmental protection, ethical conduct, sub-contracting, management systems, and transparency. Using a continuous improvement model, we work alongside factories to improve working conditions.
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Trademarks are generally valid as long as they are in use and/or their registrations are properly maintained, and they have not been found to have become generic. Trademark registrations can generally be renewed indefinitely so long as the marks are in use.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business • We are unable to control many of the factors affecting consumer spending, and declines in consumer spending on home furnishings and kitchen products in general could reduce demand for our products. • If we are unable to identify and analyze factors affecting our business, anticipate changing consumer preferences and buying trends, and manage our inventory and marketing spend commensurate with customer demand, our sales levels and operating results may decline. • Our business and operating results may be harmed if we are unable to timely and effectively deliver merchandise to our stores and customers. • Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results . • We must protect and maintain our brand image and reputation. • Our sales may be negatively impacted by increasing competition from companies with brands or products similar to ours. • Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters, adverse weather conditions, technology issues and other unexpected events, any of which could result in an interruption in our business and harm our operating results. • Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. • Our business is subject to evolving corporate governance and public disclosure regulations and expectations that could expose us to numerous risks. • Our failure to successfully manage the costs and performance of our digital advertising might have a negative impact on our business • If we are unable to effectively manage our e-commerce business and digital marketing efforts, our reputation and operating results may be harmed. • Declines in our comparable brand revenues may harm our operating results and cause a decline in the market price of our common stock. • Our business has been and may continue to be materially impacted by the COVID-19 pandemic, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain. • Our failure to successfully manage the costs and performance of our digital advertising might have a negative impact on our business. • If we are unable to successfully manage the complexities associated with an omni-channel and multi-brand business, we may suffer declines in our existing business and our ability to attract new business. • A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. • Our inability or failure to adequately protect or enforce our intellectual property could negatively impact our business. • We outsource certain aspects of our business to third-party vendors and are in the process of insourcing certain business functions from third-party vendors. • If we fail to attract and retain key personnel, our business and operating results may be harmed. • If we are unable to introduce new brands and brand extensions successfully, or to reposition or close existing brands, our business and operating results may be negatively impacted. • We may be subject to legal proceedings that could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources. 8 Table of Contents Risks Related to Technology • We may be exposed to cybersecurity risks and costs associated with credit card fraud, identity theft and business interruption that could cause us to incur unexpected expenses and loss of revenue. • We receive, process, store, use and share data, some of which contains personal information, which subjects us to complex and evolving governmental regulation and other legal obligations. • We are undertaking certain systems changes that might disrupt our business operations.
Biggest changeRisks Related to Our Business • We are unable to control many of the factors affecting consumer spending, and declines in consumer spending on home furnishings and kitchen products in general could reduce demand for our products. • If we are unable to identify and analyze factors affecting our business, anticipate changing consumer preferences and buying trends, and manage our inventory and marketing spend commensurate with customer demand, our sales levels and operating results may decline. • Our business and operating results may be harmed if we are unable to timely and effectively deliver merchandise to our stores and customers. • Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results . • We must protect and maintain our brand image and reputation. • Our sales may be negatively impacted by increasing competition from companies with brands or products similar to ours. • Our facilities and systems, as well as those of our suppliers, are vulnerable to natural disasters, adverse weather, climate change, technology issues and other unexpected events, any of which could result in an interruption in our business and harm our operating results. • Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. • Our business is subject to evolving corporate governance and public disclosure regulations and expectations that could expose us to numerous risks. • If we are unable to effectively manage our e-commerce business and digital marketing efforts, our reputation and operating results may be harmed. • Declines in our comparable brand revenues may harm our operating results and cause a decline in the market price of our common stock. • Our failure to successfully manage the costs and performance of our digital advertising might have a negative impact on our business. • If we are unable to successfully manage the complexities associated with an omni-channel and multi-brand business, we may suffer declines in our existing business and our ability to attract new business. • A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. • If we are unable to protect against inventory shrink, loss of other assets and fraud, our results of operations and financial condition could be adversely affected. • Our inability or failure to adequately protect or enforce our intellectual property could negatively impact our business. • We outsource certain aspects of our business to third-party suppliers and are in the process of insourcing certain business functions from third-party suppliers. • If we fail to attract and retain key personnel, our business and operating results may be harmed. • If we are unable to introduce new brands and brand extensions successfully, or to reposition or close existing brands, our business and operating results may be negatively impacted. • We may be subject to legal proceedings that could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources. 9 Table of Contents Risks Related to Technology • We are exposed to cybersecurity risks and costs associated with credit card fraud, identity theft and business interruption that could cause us to incur unexpected expenses and loss of revenue. • We receive, process, store, use and share data, some of which contains personal information, which subjects us to complex and evolving governmental regulation and other legal obligations. • We are undertaking certain systems changes that might disrupt our business operations.
We must also be able to identify and adjust the customer offerings in each of our brands to cater to customer demands. For example, a change in customer preferences for children’s room furnishings may not correlate to a similar change in buying trends for other home furnishings.
We must also be able to identify and adjust the offerings in each of our brands to cater to customer demands. For example, a change in customer preferences for children’s room furnishings may not correlate to a similar change in buying trends for other home furnishings.
Further, we cannot control all of the various factors that might affect our e-commerce fulfillment rates and timely and effective merchandise delivery to our stores. We rely upon third-party carriers for our merchandise shipments and reliable data regarding the timing of those shipments, including shipments to our customers and to and from our stores.
Further, we cannot control all of the various factors that might affect our e-commerce fulfillment rates and timely and effective merchandise delivery to our stores and customers. We rely upon third-party carriers for our merchandise shipments and reliable data regarding the timing of those shipments, including shipments to our customers and to and from our stores.
The continued sales growth in the e-commerce industry has encouraged the entry of many new competitors, including discount retailers selling similar products at reduced prices, new business models, and an increase in competition from established companies, many of whom are willing to spend significant funds and/or reduce pricing in order to gain market share.
The continued sales growth in the e-commerce industry has encouraged the entry of many new competitors, including discount retailers selling similar products at reduced prices, new business models, and an increase in competition from established companies, many of whom are willing to spend significant funds and/or reduce pricing to gain market share.
Although our credit facilities provide for up to a total of $750 million in unsecured revolving lines of credit (which includes a $250 million accordion feature subject to lender consent), in the event we require additional liquidity from our lenders, such funds may not be available to us on acceptable terms, or at all.
Our credit facilities provide for up to a total of $750 million in unsecured revolving lines of credit (which includes a $250 million accordion feature subject to lender consent). In the event we require additional liquidity from our lenders, such funds may not be available to us on acceptable terms, or at all.
Our quarterly results have fluctuated in the past and may fluctuate in the future, depending upon a variety of factors, including changes in economic conditions, shifts in the timing of holiday selling seasons, including Valentine’s Day, Easter, Halloween, Thanksgiving and Christmas, as well as timing shifts due to 53-week fiscal years, which occur approximately every five years.
Our quarterly results have fluctuated and may fluctuate in the future, depending upon a variety of factors, including changes in economic conditions, shifts in the timing of holiday selling seasons, including Valentine’s Day, Easter, Halloween, Thanksgiving and Christmas, as well as timing shifts due to 53-week fiscal years, which occur approximately every five years.
Collecting, measuring, and reporting ESG information and metrics can be difficult and time consuming and may require us to rely on data from third parties, such as suppliers and vendors, who may not reliably or accurately track or record such data.
Collecting, measuring, and reporting ESG information and metrics can be difficult and time consuming and may require us to rely on data from third parties, such as suppliers, who may not reliably or accurately track or record such data.
Our ability to achieve any ESG-related goal or objective is subject to numerous risks, many of which are outside of our control, including: (i) the availability and cost of renewable energy sources, credits and technologies, (ii) evolving regulatory requirements affecting ESG standards or disclosures, (iii) the availability of vendors and suppliers that can meet our sustainability, diversity and other standards, and (iv) the availability and cost of raw materials that meet and further our sustainability goals.
Our ability to achieve any ESG-related goal or objective is subject to numerous risks, many of which are outside of our control, including: (i) the availability and cost of renewable energy sources, environmental credits and technologies, (ii) evolving regulatory requirements affecting ESG standards or disclosures, (iii) the availability of suppliers that can meet our sustainability, diversity and other standards, and (iv) the availability and cost of raw materials that meet and further our sustainability goals.
We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology, evolving creative user interfaces, and other e-commerce marketing changes as it relates to paid search, re-targeting, loyalty programs, paid social advertising, and the proliferation of mobile usage, among others.
We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology (such as AI), evolving creative user interfaces, and other e-commerce marketing changes as it relates to paid search, re-targeting, loyalty programs, paid social advertising, and the proliferation of mobile usage, among others.
There are numerous federal, state, local and foreign laws and regulations regarding matters central to our business, data privacy and the collection, storing, sharing, use, processing, disclosure and protection of personal information and other data from customers, employees and business partners, the scope of which are regularly changing, subject to uncertain and differing interpretations and may be inconsistent among countries or conflict with other rules.
There are numerous federal, state, local and foreign laws and regulations regarding matters central to our business, data privacy and the collection, storing, sharing, use, processing, disclosure and protection of personal information and other data from customers, associates and business partners, the scope of which are regularly changing, subject to uncertain and differing interpretations and may be inconsistent among countries or conflict with other rules.
Disruptions or slowdowns in these areas could result from disruptions in telephone or network services, power outages, inadequate system capacity, system hardware or software issues, computer viruses, security breaches, human error, changes in programming, union organizing activity, insufficient or inadequate labor to fulfill the orders, disruptions in our third-party labor contracts, inefficiencies due to inventory levels and limited distribution facility space, issues with third-party order fulfillment and drop shipping, natural disasters, adverse weather conditions, outbreaks of disease (such as the COVID-19 pandemic), war or acts of terrorism.
Disruptions or slowdowns in these areas could result from disruptions in telephone or network services, power outages, inadequate system capacity, system hardware or software issues, computer viruses, security breaches, human error, changes in programming, union organizing activity, insufficient or inadequate labor to fulfill the orders, disruptions in our third-party labor contracts, inefficiencies due to inventory levels and limited distribution facility space, issues with third-party order fulfillment and drop shipping, natural disasters, adverse weather, climate change, outbreaks of disease (such as the COVID-19 pandemic) and war or acts of terrorism.
Additionally, if long-term, remote or flexible work options become more commonplace, potential employees may choose to move to lower cost of living areas or accept positions at companies with more favorable remote working policies, which could negatively impact our ability to recruit appropriately skilled personnel for positions that cannot be performed remotely.
Additionally, if long-term, remote or flexible work options become more commonplace, potential associates may choose to move to lower cost of living areas or accept positions at companies with more favorable remote working policies, which could negatively impact our ability to recruit appropriately skilled personnel for positions that cannot be performed remotely.
If our global growth initiatives are not successful, or if we or any of our third-party vendors fail to comply with any applicable regulations or laws, we may be forced to close stores or cease operations in certain countries, which may result in significant financial harm, diminish the value of our brands and negatively affect our future opportunities for global growth.
If our global growth initiatives are not successful, or if we or any of our third-party suppliers fail to comply with any applicable regulations or laws, we may be forced to close stores or cease operations in certain countries, which may result in significant financial harm, diminish the value of our brands and negatively affect our future opportunities for global growth.
Therefore, we may choose to forego or limit our purchase of relevant commercial insurance, choosing instead to self-insure one or more types or levels of risks. We are primarily self-insured and we purchase insurance only for catastrophic types of events for such risks as workers’ compensation, employment practices liability, employee health benefits, product recall and reputational risk, among others.
Therefore, we may choose to forego or limit our purchase of relevant commercial insurance, choosing instead to self-insure one or more types or levels of risks. We are primarily self-insured and we purchase insurance only for catastrophic types of events for such risks as workers’ compensation, employment practices liability, associate health benefits, product recall and reputational risk, among others.
Historically, a significant portion of our net revenues and net earnings have typically been realized during the period from October through January each year, our peak selling season. In preparation for and during our holiday selling season, we hire a substantial number of part-time and seasonal employees, primarily in our retail stores, distribution facilities and customer care centers.
Historically, a significant portion of our net revenues and net earnings have typically been realized during the period from October through January each year, our peak selling season. In preparation for and during our peak holiday selling season, we hire a substantial number of part-time and seasonal associates, primarily in our retail stores, distribution facilities and customer care centers.
Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online advertising campaigns.
Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our reliance on social media and online advertising campaigns.
Any event causing a disruption or delay of imports from foreign vendors could increase the cost, reduce the supply of merchandise available to us, or result in excess inventory if merchandise is received after the planned or appropriate selling season, all of which could adversely affect our business, financial condition and operating results.
Any event causing a disruption or delay of imports from foreign suppliers could increase the cost, reduce the supply of merchandise available to us, or result in excess inventory if merchandise is received after the planned or appropriate selling season, all of which could adversely affect our business, financial condition and operating results.
Any failure or perceived failure by us to comply with our privacy policies, data privacy-related obligations to customers or other third parties, or our data privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, or other failure to comply with these laws and regulations, or regulatory scrutiny, may result in governmental enforcement actions or litigation that could expose our business to substantial financial penalties, or other monetary or non-monetary relief, negative publicity, loss of confidence in our brands, decline in customer growth or damage 16 Table of Contents to our brands and reputation.
Any failure or perceived failure by us to comply with our privacy policies, data privacy-related obligations to customers or other third parties, or our data privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, or other failure to comply with these laws and regulations, or regulatory scrutiny, may result in governmental enforcement actions or litigation that could expose our business to substantial financial penalties, or other monetary or non-monetary relief, negative publicity, loss of confidence in our brands, decline in customer growth or damage to our brands and reputation.
Risks Related to Technology We may be exposed to cybersecurity risks and costs associated with credit card fraud, identity theft and business interruption that could cause us to incur unexpected expenses and loss of revenue. A significant portion of our customer orders are placed through our e-commerce websites or through our customer care centers.
Risks Related to Technology We are exposed to cybersecurity risks and costs associated with credit card fraud, identity theft and business interruption that could cause us to incur unexpected expenses and loss of revenue. A significant portion of our customer orders are placed through our e-commerce websites or through our customer care centers.
In addition, our main offices are located in the San Francisco Bay Area, where competition for personnel with digital/e-commerce and technology skills can be intense. Several of our strategic initiatives, including our e-commerce, design, technology and supply chain initiatives, require that we hire and/or develop employees with appropriate experience.
In addition, our main offices are located in the San Francisco Bay Area, where competition for personnel with digital/e-commerce and technology skills can be intense. Several of our strategic initiatives, including our e-commerce, design, technology and supply chain initiatives, require that we hire and/or develop associates with appropriate experience.
We purchase our merchandise from numerous foreign and domestic manufacturers and importers. We generally have no contractual assurances of continued supply, pricing, or access to new products, and any vendor could change the terms upon which it sells to us, discontinue selling to us, or go out of business at any time.
We purchase our merchandise from numerous foreign and domestic manufacturers and importers. We generally have no contractual assurances of continued supply, pricing, or access to new products, and any supplier could change the terms upon which it sells to us, discontinue selling to us, or go out of business at any time.
Non-governmental organizations might attempt to create an unfavorable impression of our sourcing practices or the practices of some of our foreign vendors that could harm our image. If either of these events occurs, we could lose customer goodwill and favorable brand recognition, which could negatively affect our business and operating results.
Non-governmental organizations might attempt to create an unfavorable impression of our sourcing practices or the practices of some of our foreign suppliers that could harm our image. If either of these events occurs, we could lose customer goodwill and favorable brand recognition, which could negatively affect our business and operating results.
These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by Congress, making compliance more difficult and uncertain. In addition, increasingly, regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by Congress, making compliance more difficult and uncertain. In addition, increasingly, regulators, customers, investors, associates and other stakeholders are focusing on ESG matters and related disclosures.
In addition, our vendors may have difficulty adjusting to our changing demands and growing business. Any inability to acquire the appropriate amount of suitable merchandise on acceptable terms or the loss of one or more of our foreign vendors or third-party agents could have a negative effect on our business and operating results.
In addition, our suppliers may have difficulty adjusting to our changing demands and growing business. Any inability to acquire the appropriate amount of suitable merchandise on acceptable terms or the loss of one or more of our foreign suppliers or third-party agents could have a negative effect on our business and operating results.
This, in turn, might cause such foreign vendors to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments to us, or discontinue selling to us, any of which could ultimately reduce our sales or increase our costs.
This, in turn, might cause such foreign suppliers to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments to us, or discontinue selling to us, any of which could ultimately reduce our sales or increase our costs.
Conversely, if we experience lower than expected sales demand, we may not be able to reduce our purchase orders with our vendors, which may lead to higher than anticipated inventory levels, and could require us to mark down certain products and sell excess inventory at a discount.
Conversely, if we experience lower than expected sales demand, we may not be able to reduce our purchase orders with our suppliers, which may lead to higher than anticipated inventory levels, and could require us to mark down certain products and sell excess inventory at a discount.
Further, our Board of Directors may, at its discretion, decrease or entirely discontinue the payment of dividends at any time and the stock repurchase program may be limited or eliminated at any time. Our ability to pay dividends and repurchase stock will depend on our ability to generate sufficient cash flows from operations in the future.
Further, our Board of Directors may, at its discretion, decrease or entirely discontinue the payment of dividends at any time and the stock repurchase program may be limited or terminated at any time. Our ability to pay dividends and repurchase stock will depend on our ability to generate sufficient cash flows from operations in the future.
If any of these events result in damage to our facilities or systems, or those of our vendors, we may experience interruptions in our business until the damage is repaired, resulting in the potential loss of customers and revenues. In addition, we may incur costs in repairing any damage beyond our applicable insurance coverage.
If any of these events result in damage to our facilities or systems, or those of our suppliers, we may experience interruptions in our business until the damage is repaired, resulting in the potential loss of customers and revenues. In addition, we may incur costs in repairing any damage beyond our applicable insurance coverage.
In addition, changes to any of our software implementation strategies could result in the impairment of software-related assets. We are also subject to the risks associated with the ability of our vendors to provide information technology solutions to meet our needs. Any disruptions could negatively impact our business and operating results.
In addition, changes to any of our software implementation strategies could result in the impairment of software-related assets. We are also subject to the risks associated with the ability of our suppliers to provide information technology solutions to meet our needs. Any disruptions could negatively impact our business and operating results.
We depend on foreign vendors and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in appropriate quantities and at acceptable prices to meet our needs. Our performance depends, in part, on our ability to purchase our merchandise in sufficient quantities at competitive prices.
We depend on foreign suppliers and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in appropriate quantities and at acceptable prices to meet our needs. Our performance depends, in part, on our ability to purchase our merchandise in sufficient quantities at competitive prices.
In addition, as we continue to expand our global operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices Act, as well as the laws of the foreign countries in which we operate. We must ensure that our employees and third-party agents comply with these laws.
In addition, as we continue to expand our global operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices Act, as well as the laws of the foreign countries in which we operate. We must ensure that our associates and third-party agents comply with these laws.
The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing trends. Our vendors also may not have the capacity to handle our demands or may go out of business or have other delays in production in times of economic crisis.
The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing trends. Our suppliers also may not have the capacity to handle our demands or may go out of business or have other delays in production in times of economic crisis.
Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. There has been increased focus from our stakeholders, including consumers, employees and investors, on our ESG practices. We have established and announced goals and other objectives related to ESG matters.
Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. There has been increased focus from our stakeholders, including consumers, associates and investors, on our ESG practices. We have established and announced goals and other objectives related to ESG matters.
Although we continue to be focused on improving our global compliance program, there remains a risk that one or more of our foreign vendors will not adhere to our global compliance standards, such as fair labor standards and the prohibition of child labor.
Although we continue to be focused on improving our global compliance program, there remains a risk that one or more of our foreign suppliers will not adhere to our global compliance standards, such as fair labor standards and the prohibition of child labor.
Failure to reduce our merchandise orders from our vendors during times of decreased customer demand could also harm our business because it may result in higher than anticipated inventory levels, which could require us to sell inventory at a discount.
Failure to reduce our merchandise orders from our suppliers during times of decreased customer demand could also harm our business because it may result in higher than anticipated inventory levels, which could require us to sell inventory at a discount.
In addition, we are subject to certain risks that could limit our vendors’ ability to provide us with quality merchandise on a timely basis and at prices that are commercially acceptable to us, including risks related to the availability of raw materials, labor disputes, work disruptions or stoppages, union organizing activities, vendor financial liquidity, adverse weather, natural disasters, political unrest, war, acts of terrorism, outbreaks of disease (such as the COVID-19 pandemic), general economic and political conditions and regulations to address climate change.
In addition, we are subject to certain risks that could limit our suppliers’ ability to provide us with quality merchandise on a timely basis and at prices that are commercially acceptable to us, including risks related to the availability of raw materials, labor disputes, work disruptions or stoppages, union organizing activities, supplier financial liquidity, adverse weather, natural disasters, climate change, political unrest, war, acts of terrorism, outbreaks of disease (such as the COVID-19 pandemic), general economic and political conditions and regulations to address climate change.
Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation, stock price, and results of operation.
Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation, stock price, and results of operations.
Our comparable brand revenues have fluctuated significantly in the past on an annual, quarterly and monthly basis, and we expect that comparable brand revenues will continue to fluctuate in the future. In addition, past comparable brand revenues are not necessarily an indication of future results and comparable brand revenues may decrease in the future.
Our comparable brand revenues have recently fluctuated on an annual, quarterly and monthly basis, and we expect that comparable brand revenues will continue to fluctuate in the future. In addition, past comparable brand revenues are not necessarily an indication of future results and comparable brand revenues may decrease in the future.
We may not be able to develop relationships with new vendors or third-party agents, and products from alternative sources, if any, may not be of a suitable quality and/or may be more expensive than those we currently purchase.
We may not be able to develop relationships with new suppliers or third-party agents, and products from alternative sources, if any, may not be of a suitable quality and/or may be more expensive than those we currently purchase.
We operate several retail businesses, subsidiaries and branch offices throughout Asia, Australia, Europe, Mexico, and Canada, which includes managing overseas employees, and may expand these overseas operations in the future. Our global presence exposes us to the laws and regulations of these jurisdictions, including those related to marketing, privacy, data protection, employment and product safety and testing.
We operate several retail businesses, subsidiaries and branch offices throughout Asia, Australia, Canada, Europe and Mexico, which includes managing associates in those jurisdictions, and we may expand these operations in the future. Our global presence exposes us to the laws and regulations of these jurisdictions, including those related to marketing, privacy, data protection, employment and product safety and testing.
If we are unable to effectively manage our inventory levels and responsiveness of our supply chain, including predicting the appropriate levels and type of inventory to stock within each of our distribution facilities, our business and operating results may be harmed.
If we are unable to effectively manage our inventory levels and supply chain, including by predicting the appropriate levels and type of inventory to stock within each of our distribution facilities, our business and operating results may be harmed.
We recognize that we may need to increase the number of our employees, especially during holiday selling seasons, and incur other expenses to support new brands and brand extensions and the growth of our existing brands, including the opening of new stores.
We recognize that we may need to increase the number of our associates, especially during holiday selling seasons, and incur other expenses to support new brands and brand extensions and the growth of our existing brands, including the opening of new stores.
We continually analyze the business results of our channels, brands and products in an effort to find opportunities to build incremental sales. A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. Approximately 34% of our net revenues are generated by our retail stores.
We continually analyze the business results of our channels, brands and products in an effort to find opportunities to build incremental sales. A number of factors that affect our ability to successfully open new stores or close existing stores are beyond our control. Approximately 34% of our net revenues were generated by our retail stores in fiscal 2023.
We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us. Additionally, we may not be able to modify our existing purchase orders with our vendors in response to fluctuating sales demand from our customers.
We may not be able to acquire desired merchandise in sufficient quantities on terms acceptable to us. Additionally, we may not be able to modify our existing purchase orders with our suppliers in response to fluctuating sales demand from our customers.
Our vendors’ failure to manufacture or import quality merchandise in a timely and effective manner could damage our reputation and brands, and could lead to an increase in customer complaints and litigation against us and an increase in our routine insurance and litigation costs.
Our suppliers’ failure to manufacture or import quality merchandise in a timely and effective manner could damage our reputation and brands, and could lead to an increase in customer complaints and litigation against us and an increase in our routine insurance and litigation costs.
In addition, we face the risk that we cannot hire enough qualified employees to support our e-commerce operations, or that there will be a disruption in the workforce we hire from our third-party providers, especially during our peak season. The need to operate with fewer employees could negatively impact our customer service levels and our operations.
In addition, we face the risk that we cannot hire enough qualified associates to support our e-commerce operations, or that there will be a disruption in the workforce we engage from our third-party providers, especially during our peak season. The need to operate with fewer associates could negatively impact our customer service levels and our operations.
Should we need it, we also may not be able to obtain additional credit on terms which are acceptable to us, if at all. 20 Table of Contents Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, and the operation and growth of our business may be harmed if we are unable to attract qualified personnel.
Should we need it, we also may not be able to obtain additional credit on terms which are acceptable to us, if at all. Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, and the operation and growth of our business may be harmed if we are unable to attract qualified personnel.
In addition, the rising cost of labor in the countries in which our foreign vendors operate has resulted in increases in our costs of doing business. Any further increases in the cost of living in such countries may result in additional increases in our costs or in our foreign vendors going out of business.
In addition, the rising cost of labor in the countries in which our foreign suppliers operate has resulted in increases in our costs of doing business. Any further increases in the cost of living in such countries may result in additional increases in our costs or in our foreign suppliers going out of business.
If our vendors fail to adhere to our quality control standards and test protocols, we may delay a product launch or recall a product, which could damage our reputation and negatively affect our operations and financial results.
If our suppliers fail to adhere to our quality control standards and test protocols, we may delay a product launch or recall a product, which could damage our reputation and negatively affect our operations and financial results.
Furthermore, as more companies increase their use of organic, recycled, lower emission or related materials in their product assortments, the availability of raw materials that meet and further our sustainability goals may be a risk. As a result of these developments, our business and operating results could be negatively impacted.
Furthermore, as more companies increase their use of organic, recycled, lower emission or related materials in their product assortments, the availability of raw materials that meet 21 Table of Contents and further our sustainability goals may be a risk. As a result of these developments, our business and operating results could be negatively impacted.
We outsource certain aspects of our business to third-party vendors and are in the process of insourcing certain business functions from third-party vendors. We outsource certain aspects of our business to third-party vendors that subject us to risks of disruptions in our business as well as increased costs.
We outsource certain aspects of our business to third-party suppliers and are in the process of insourcing certain business functions from third-party suppliers. We outsource certain aspects of our business to third-party suppliers that subject us to risks of disruptions in our business as well as increased costs.
We, and our foreign vendors, are also subject to other risks and uncertainties associated with changing economic, political, social, health and environmental conditions and regulations within and outside of the U.S.
We, and our foreign suppliers, are also subject to other risks and uncertainties associated with changing economic, political, social, health and environmental conditions and regulations within and outside of the U.S.
In addition, an economic downturn, or failure of foreign markets, may result in financial instabilities for our foreign vendors, which may cause our foreign vendors to decrease production, discontinue selling to us, or cease operations altogether.
In addition, an economic downturn, or failure of foreign markets, may result in financial instabilities for our foreign suppliers, which may cause our foreign suppliers to decrease production, discontinue selling to us, or cease operations altogether.
The GDPR, CCPA, CPRA and other such laws and regulations impose new and burdensome obligations, and include substantial uncertainty as to their interpretation, and we may face challenges in addressing their requirements, which could result in fines or penalties, lead us or our third-party vendors to change our data privacy policies and practices and limit our ability to deliver personalized advertising.
The GDPR, CPPA, CPRA and other such laws and regulations impose new and burdensome obligations, and include substantial uncertainty as to their interpretation, and we may face challenges in addressing their requirements, which could result in fines or penalties, lead us or our third-party suppliers to change our data privacy policies and practices and limit our ability to deliver personalized advertising.
In addition, we must manage our inventory effectively and commensurate with customer demand. Much of our inventory is sourced from vendors located outside of the U.S.
In addition, we must manage our inventory effectively and commensurate with customer demand. Much of our inventory is sourced from suppliers located outside of the U.S.
In addition, public health conditions (such as the COVID-19 pandemic), or other unforeseen events, could affect our ability to deliver our products to our customers and stores, alter consumer behavior, or require us to close certain stores temporarily or reduce customer capacity within certain stores temporarily, thus reducing store traffic and materially impacting our comparable brand revenues.
In addition, public health conditions 15 Table of Contents (such as the COVID-19 pandemic), or other unforeseen events, could affect our ability to deliver our products to our customers and stores, alter consumer behavior, or require us to close certain stores temporarily or reduce customer capacity within certain stores temporarily, thus reducing store traffic and materially impacting our comparable brand revenues.
Industries that are particularly seasonal, such as the home furnishings business, face a higher risk of harm from operational disruptions during peak sales seasons. These problems could result in a reduction in sales as well as increased expenses.
Industries that are 12 Table of Contents particularly seasonal, such as the home furnishings business, face a higher risk of harm from operational disruptions during peak sales seasons. These problems could result in a reduction in sales as well as increased expenses.
For example, we utilize outside vendors for such things as payroll processing, email and other digital marketing and various distribution facilities and delivery services. In some cases, we rely on a single vendor for such services. Accordingly, we are subject to the risks associated with their ability to successfully provide the necessary services to meet our needs.
For example, we utilize outside suppliers for such things as payroll processing, email and other digital marketing and various distribution facilities and delivery services. In some cases, we rely on a single supplier for such services. Accordingly, we are subject to the risks associated with their ability to successfully provide the necessary services to meet our needs.
For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements, and similar proposals by state regulators and other international regulatory bodies.
For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s and the state of California's newly-adopted climate-related reporting requirements, and similar proposals by state regulators and other international regulatory bodies.
Risks Related to Our Vendors and Our Global Operations • Our dependence on foreign vendors and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results. • We depend on foreign vendors and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in appropriate quantities and at acceptable prices to meet our needs. • If our vendors fail to adhere to our quality control standards and test protocols, we may delay a product launch or recall a product, which could damage our reputation and negatively affect our operations and financial results. • Our efforts to expand globally may not be successful and could negatively impact the value of our brands. • We have limited experience operating on a global basis and our failure to effectively manage the risks and challenges inherent in a global business could adversely affect our business, operating results and financial condition and growth prospects.
Risks Related to Our Suppliers and Our Global Operations • Our dependence on foreign suppliers and our increased global operations subject us to a variety of risks and uncertainties that could impact our operations and financial results. • We depend on foreign suppliers and third-party agents for timely and effective sourcing of our merchandise, and we may not be able to acquire products in appropriate quantities and at acceptable prices to meet our needs. • If our suppliers fail to adhere to our quality control standards and test protocols, we may delay a product launch or recall a product, which could damage our reputation and negatively affect our operations and financial results. • Our efforts to expand globally may not be successful and could negatively impact the value of our brands. • Our global operations present unique risks, and our failure to effectively manage the risks and challenges inherent in a global business could adversely affect our business, operating results and financial condition and growth prospects.
Third parties may have or develop the technology or knowledge to breach, disable, disrupt or interfere with our systems or processes or those of our vendors.
Third parties may have or develop the technology or knowledge to breach, disable, disrupt or interfere with our systems or processes or those of our suppliers.
We could also incur additional costs and require additional resources to implement various ESG practices to make progress against our public goals and to monitor and track our performance with respect to such goals. The standards for tracking and reporting on ESG matters are relatively new, have not been formalized and continue to evolve.
We could also incur additional costs and require additional resources to implement various ESG practices to make progress against our public goals and to monitor and track our performance with respect to such goals. The standards for tracking and reporting on ESG matters are relatively new and continue to evolve.
If our ESG practices do not meet evolving consumer, employee, investor, regulatory body, or other stakeholder expectations and standards or our publicly-stated goals, then our reputation, our ability to attract or retain employees and our competitiveness, including as an investment and business partner, could be negatively impacted.
If our ESG practices do not meet evolving consumer, associate, investor, regulatory body, or other stakeholder expectations and standards or our publicly-stated goals, then our reputation, our ability to attract or retain associates and our competitiveness, including as an investment and business partner, could be negatively impacted.
Our vendors might not adhere to our quality control standards, and we might not identify the deficiency before merchandise ships to our stores or customers.
Our suppliers might not adhere to our quality control standards, and we might not identify the deficiency before merchandise ships to our stores or customers.
If any of our overseas operations, or our employees or third-party agents, violates such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results.
If any of our operations, or our associates or third-party agents, violates such laws, we could become subject to sanctions or other penalties that could negatively affect our reputation, business and operating results.
Further, in the event we need to hire additional personnel, we may experience difficulties in attracting and successfully hiring such individuals due to competition for highly skilled personnel, increasing wages throughout the United States, as well as the significantly higher cost of living expenses in our markets.
Further, in the event we need to hire additional personnel, we may experience difficulties in attracting and successfully hiring such individuals due to competition for highly skilled personnel, increasing wages throughout the U.S., as well as the significantly higher cost of living expenses in our markets.
Such increases in inventory levels may also lead to slower delivery times to customers, as capacity constraints at distribution facilities could cause delays in locating and shipping products, and increases in costs associated with inventory that is lost, damaged or aged.
Such increases in inventory levels may also lead to slower delivery times to customers, as capacity constraints at distribution facilities could 25 Table of Contents cause delays in locating and shipping products, and increases in costs associated with inventory that is lost, damaged or aged.
In addition, we are exposed to foreign currency exchange rate risk with respect to our operations denominated in currencies other than the U.S. dollar. Our retail stores in Canada, Australia and the United Kingdom, and our operations throughout Asia and Europe expose us to market risk associated with foreign currency exchange rate fluctuations.
In addition, we are exposed to foreign currency exchange rate risk with respect to our operations denominated in currencies other than the U.S. dollar. Our operations in Canada, Australia, and throughout Asia and Europe expose us to market risk associated with foreign currency exchange rate fluctuations.
Moreover, our global operations subject us to a variety of risks and challenges, including: • increased management, infrastructure and legal compliance costs, including the cost of real estate and labor in those markets; • increased financial accounting and reporting requirements and complexities; • increased operational and tax complexities, including managing our inventory globally; • the diversion of management attention away from our core business; • general economic conditions, changes in diplomatic and trade relationships, including the imposition of new or increased tariffs, political and social instability, war and acts of terrorism, outbreaks of diseases (such as the COVID-19 pandemic) and natural disasters in each country or region; • economic uncertainty around the world; • compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • compliance with U.S. laws and regulations for foreign operations; • reputational harm due to negative post about our brands or products on foreign social media or online forums; • fluctuations in foreign currency exchange rates and the related effect on our financial results, and the use of foreign exchange hedging programs to mitigate such risks; • growing cash balances in foreign jurisdictions which may be subject to repatriation restrictions; and • reduced or varied protection for intellectual property rights in some countries and practical difficulties of enforcing such rights abroad. 19 Table of Contents Any of these risks could adversely affect our global operations, reduce our revenues or increase our operating costs, which in turn could adversely affect our business, operating results, financial condition and growth prospects.
Moreover, our global operations subject us to a variety of risks and challenges, including: • increased management, infrastructure and legal compliance costs, including the cost of real estate and labor in those markets; • increased financial accounting and reporting requirements and complexities; • increased operational and tax complexities, including managing our inventory globally; • the diversion of management attention away from our core business; 23 Table of Contents • general economic conditions, changes in diplomatic and trade relationships, including the imposition of new or increased tariffs, political and social instability, war and acts of terrorism, outbreaks of diseases (such as the COVID-19 pandemic) and natural disasters in each country or region; • economic uncertainty around the world; • compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • compliance with U.S. laws and regulations for foreign operations; • reputational harm due to negative posts about our brands or products on foreign social media or online forums; • fluctuations in foreign currency exchange rates and the related effect on our financial results, and the use of foreign exchange hedging programs (if any) to mitigate such risks; • growing cash balances in foreign jurisdictions which may be subject to repatriation restrictions; and • reduced or varied protection for intellectual property rights in some countries and practical difficulties of enforcing such rights abroad.
These risks and uncertainties include import duties and quotas, compliance with anti-dumping regulations, work stoppages, economic uncertainties and adverse economic conditions (including inflation and recession), government regulations, trade restrictions, regulations to address climate change, employment and labor matters, wars and fears of war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease, and other unexpected events.
These risks and uncertainties include import duties and quotas, compliance with anti-dumping regulations, work stoppages, economic uncertainties and adverse economic conditions (including inflation and recession), government regulations, trade restrictions, regulations to address climate change, employment and labor matters, wars and fears of war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease (such as the COVID-19 pandemic), and other unexpected events.
We are subject to changing rules and regulations promulgated by a number of federal, state, and local governmental and self-regulatory organizations, including the United States Securities and Exchange Commission ("SEC"), the New York Stock Exchange and the Financial Accounting Standards Board.
We are subject to changing rules and regulations promulgated by a number of federal, state, and local governmental and self-regulatory organizations, including the SEC, the New York Stock Exchange and the Financial Accounting Standards Board.
Risks Related to Our Financial Statements and Liquidity • We may require funding from external sources, which may not be available at the levels we require or may cost more than we expect. • Disruptions in the financial markets may adversely affect our liquidity and capital resources and our business. • Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, and the operation and growth of our business may be harmed if we are unable to attract qualified personnel.
Risks Related to Our Financial Statements and Liquidity • We may require funding from external sources, which may not be available at the levels we require, or may cost more than we expect, and, as a consequence, our expenses and operating results could be negatively affected. • Disruptions in the financial markets may adversely affect our liquidity and capital resources and our business. • Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, and the operation and growth of our business may be harmed if we are unable to attract qualified personnel.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending, including general economic conditions, inflationary pressures, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, outbreaks of disease, adverse weather, availability of consumer credit, consumer debt levels, conditions in the housing market, elevated interest rates, sales tax rates and rate increases, consumer confidence 9 Table of Contents in future economic and political conditions, and consumer perceptions of personal well-being and security.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending, including general economic conditions, inflationary pressures, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, outbreaks of disease (such as the COVID-19 pandemic), adverse weather, availability of consumer credit, consumer debt levels, conditions in the housing market, elevated interest rates, sales tax rates and rate increases, consumer confidence in future economic and political conditions, and consumer perceptions of personal well-being and security.
While we believe that the surveys and other relevant information are helpful indicators of suitable store locations, we recognize that these information sources cannot predict future consumer preferences and buying trends with complete accuracy.
While we believe that this data and other relevant information are helpful indicators of suitable store locations, we recognize that these information sources cannot predict future consumer preferences and buying trends with complete accuracy.
We typically provide public guidance on our expected operating and financial results for future periods on an annual basis only, as we believe this approach is better aligned with the long-term view we take in managing our business and our focus on long-term stockholder value creation.
We typically provide public guidance on our expected operating and financial results for future periods, as we believe this approach is aligned with the long-term view we take in managing our business and our focus on long-term stockholder value creation.
Furthermore, some or all of our foreign vendors’ operations may be adversely affected by political and financial instability resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds and/or increased tariffs or quotas, war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease or other trade disruptions.
Furthermore, some or all of our foreign suppliers’ operations may be adversely affected by political and financial instability resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds and/or increased tariffs or quotas, war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease (such as the COVID-19 pandemic) or other trade disruptions.
We may also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible sourcing and social investments and other ESG-related matters, in our SEC filings or in other public disclosures.
We may also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible sourcing and social investments and other ESG- 14 Table of Contents related matters, in our SEC filings or in other public disclosures.
Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters, adverse weather conditions, technology issues and other unexpected events, any of which could result in an interruption in our business and harm our operating results.
Our facilities and systems, as well as those of our suppliers, are vulnerable to natural disasters, adverse weather, climate change, technology issues and other unexpected events, any of which could result in an interruption in our business and harm our operating results.
Our global operations in Asia, Australia, Europe and Canada 17 Table of Contents could also be affected by changing economic and political conditions in foreign countries, which could have a negative effect on our business, financial condition and operating results.
Our global operations in Asia, Australia, Canada, Europe and Mexico could also be affected by changing economic and political conditions in foreign countries, which could have a negative effect on our business, financial condition and operating results.
Our ability to open additional stores or close existing stores successfully will depend upon a number of factors, including: • general economic conditions; • our identification of, and the availability of, suitable store locations; • our success in negotiating new leases and amending, subleasing or terminating existing leases on acceptable terms; • the success of other retail stores in and around our retail locations; • our ability to secure required governmental permits and approvals; • the availability and cost of building materials needed for store remodels; • our hiring and training of skilled store operating personnel, especially management; • the unionization, or potential for unionization, of store personnel; • the availability of financing on acceptable terms, if at all; and • the financial stability of our landlords and potential landlords.
Our ability to open additional stores or close existing stores successfully will depend upon a number of factors, including: • general economic conditions; • our identification of, and the availability of, suitable store locations; • our success in negotiating new leases and amending, subleasing or terminating existing leases on acceptable terms; • the success of other retail stores in and around our retail locations; • our ability to secure required governmental permits and approvals; • the availability and cost of building materials needed for store construction and maintenance; • our hiring and training of skilled store operating personnel, especially management; • the unionization, or potential for unionization, of store personnel; • the availability of financing on acceptable terms, if at all; and • the financial stability of our landlords and potential landlords. 16 Table of Contents Many of these factors are beyond our control.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOperations New Jersey 3,269,000 California 3,150,000 Mississippi 2,267,000 Texas 1,682,000 Georgia 1,537,000 Arizona 1,200,000 Florida 650,000 Tennessee 603,000 North Carolina 412,000 Ohio 329,000 Massachusetts 140,000 Colorado 125,000 Oregon 93,000 Foreign Operations Australia 187,000 Corporate Facilities New York 238,000 California 94,000 Oregon 61,000 Customer Care Centers Nevada 36,000 Other 25,000 In addition to the above leased properties, we enter into agreements for other offsite storage needs for our distribution facilities and our retail store locations, as necessary.
Biggest changeOperations New Jersey 3,269,000 California 3,150,000 Mississippi 2,271,000 Georgia 1,537,000 Arizona 1,200,000 Texas 1,056,000 Tennessee 603,000 Florida 515,000 North Carolina 412,000 Ohio 265,000 Massachusetts 140,000 Oregon 93,000 Colorado 80,000 Foreign Operations Australia 187,000 Corporate Facilities New York 238,000 California 124,000 Oregon 63,000 Customer Care Centers Nevada 36,000 Other 24,000 In addition to the above leased properties, we enter into agreements for other offsite storage needs for our distribution facilities and our retail store locations, as necessary.
We believe that all of our facilities are adequate for our current needs and that suitable additional or substitute space will be available in the future to replace our existing facilities, or to accommodate the expansion of our operations, if necessary. 24 Table of Contents
We believe that all of our facilities are adequate for our current needs and that suitable additional or substitute space will be available in the future to replace our existing facilities, or to accommodate the expansion of our operations, if necessary. 30 Table of Contents
As of January 29, 2023, the total leased space related to these properties was not material to us and is not included in the occupied square footage reported above. Owned Properties As of January 29, 2023, we owned 471,000 square feet of space, primarily in California, for our corporate headquarters and certain data center operations.
As of January 28, 2024, the total leased space related to these properties was not material to us and is not included in the occupied square footage reported above. Owned Properties As of January 28, 2024, we owned 471,000 square feet of space, primarily in California, for our corporate headquarters and certain data center operations.
Leased Properties The following table summarizes the location and size of our leased facilities occupied by us as of January 29, 2023: Location Occupied Square Footage (Approximate) Distribution and Manufacturing Facilities U.S.
Leased Properties The following table summarizes the location and size of our leased facilities occupied by us as of January 28, 2024: Location Occupied Square Footage (Approximate) Distribution and Manufacturing Facilities U.S.
For our store locations, our gross leased store space as of January 29, 2023 totaled approximately 5,962,000 square feet for 530 stores compared to approximately 6,004,000 square feet for 544 stores as of January 30, 2022.
For our store locations, our gross leased store space as of January 28, 2024 totaled approximately 5,890,000 square feet for 518 stores compared to approximately 5,962,000 square feet for 530 stores as of January 29, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes our repurchases of shares of our common stock during the fourth quarter of fiscal 2022 under our stock repurchase program: Fiscal period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program 1 Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program October 31, 2022 – November 27, 2022 — — — $ 729,044,000 November 28, 2022 – December 25, 2022 341,935 $ 114.30 341,935 $ 689,962,000 December 26, 2022 – January 29, 2023 — — — $ 689,962,000 Total 341,935 $ 114.30 341,935 $ 689,962,000 1 Excludes shares withheld for employee taxes upon vesting of stock-based awards Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate.
Biggest changeThe following table summarizes our repurchases of shares of our common stock during the fourth quarter of fiscal 2023 under our stock repurchase program: Fiscal period Total Number of Shares Purchased 1 Average Price Paid Per Share Total Number of Shares Purchased as Part of a Publicly Announced Program 1 Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program October 30, 2023 - November 26, 2023 — — — $ 686,999,000 November 27, 2023 - December 24, 2023 — — — $ 686,999,000 December 25, 2023 - January 28, 2024 — — — $ 686,999,000 Total — — — $ 686,999,000 1 Excludes shares withheld for associate taxes upon vesting of stock-based awards.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol WSM. The closing price of our common stock on the NYSE on March 19, 2023 was $116.86.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol WSM. The closing price of our common stock on the NYSE on March 17, 2024 was $283.77.
STOCKHOLDERS The number of stockholders of record of our common stock as of March 19, 2023 was 286. This number excludes stockholders whose stock is held in nominee or street name by brokers.
STOCKHOLDERS The number of stockholders of record of our common stock as of March 17, 2024 was 273. This number excludes stockholders whose stock is held in nominee or street name by brokers.
As of January 29, 2023, there was $690.0 million remaining under our current stock repurchase program. In March 2023, our Board of Directors authorized a new stock repurchase program for $1 billion, which replaced our existing program.
In March 2024, our Board of Directors authorized a new stock repurchase program for $1.0 billion, which replaced our existing program.
The graph shows historical stock price performance, including reinvestment of dividends, and is not necessarily indicative of future performance. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* Among Williams-Sonoma, Inc., the NYSE Composite Index, and S&P Retailing * $100 invested on January 28, 2018 in stock or index, including reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* Among Williams-Sonoma, Inc., the NYSE Composite Index, and S&P 500 Consumer Discretionary Distribution and Retail * $100 invested on February 3, 2019 in stock or index, including reinvestment of dividends.
The indices are re-weighted daily, using the market capitalization on the previous trading day. C.
The indices are re-weighted daily, using the market capitalization on the previous trading day. C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice.
Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions.
Fiscal year ended January 29, 2023. 1/28/18 2/3/19 2/2/20 1/31/21 1/30/22 1/29/23 Williams-Sonoma, Inc. $100.00 $104.33 $139.37 $262.59 $320.43 $268.67 NYSE Composite Index $100.00 $94.38 $107.18 $116.13 $137.22 $135.37 S&P Retailing $100.00 $108.42 $127.45 $180.19 $195.77 $160.10 Notes: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B.
Fiscal year ended January 28, 2024. 2/3/19 2/2/20 1/31/21 1/30/22 1/29/23 1/28/24 Williams-Sonoma, Inc. $100.00 $133.59 $251.70 $307.13 $257.52 $434.39 NYSE Composite Index $100.00 $113.57 $123.05 $145.40 $143.43 $155.04 S&P 500 Consumer Discretionary Distribution and Retail $100.00 $117.54 $166.19 $180.56 $147.66 $190.67 Notes: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B.
PERFORMANCE GRAPH This graph compares the cumulative total stockholder return for our common stock with those of the NYSE Composite Index and S&P Retailing, our peer group index. The cumulative total return listed below assumed an initial investment of $100 and reinvestment of dividends.
The cumulative total return listed below assumed an initial investment of $100 and reinvestment of dividends. The graph shows historical stock price performance, including reinvestment of dividends, and is not necessarily indicative of future performance.
If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. 26 Table of Contents STOCK REPURCHASE PROGRAM During fiscal 2022, we repurchased 6,423,643 shares of our common stock at an average cost of $137.00 per share and a total cost of $880.0 million under our $1.5 billion stock repurchase program approved in March 2022.
STOCK REPURCHASE PROGRAM During fiscal 2023, we repurchased 2,621,861 shares of our common stock at an average cost of $119.38 per share and a total cost of $313.0 million under our $1.0 billion stock repurchase program approved in March 2023. As of January 28, 2024, there was $687.0 million remaining under our current stock repurchase program.
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The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice. 32 Table of Contents PERFORMANCE GRAPH This graph compares the cumulative total stockholder return for our common stock with those of the NYSE Composite Index and S&P 500 Consumer Discretionary Distribution and Retail, our peer group index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis increase was primarily driven by (i) higher input costs as we absorbed higher product costs, ocean freight, detention and demurrage due to the impact of supply chain disruption and global inflation pressures, (ii) higher outbound customer shipping costs due to out-of-market shipping and shipping multiple times for multi-unit orders, and (iii) higher occupancy costs resulting from incremental costs from our new distribution centers on the east and west coasts to support our long-term growth, which was partially offset by our retail store optimization initiatives. 31 Table of Contents SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (In thousands) Fiscal 2022 % Net Revenues Fiscal 2021 % Net Revenues Selling, general and administrative expenses $ 2,179,311 25.1 % $2,178,847 26.4 % SG&A consists of non-occupancy-related costs associated with our retail stores, distribution and manufacturing facilities, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions.
Biggest changeThe 160 basis point decline in gross margin was driven by deterioration in selling margin due to (i) lower merchandise margins from higher input costs as we absorbed higher product costs, ocean freight, detention and demurrage due to the impact of supply chain disruption and global inflation pressures, (ii) higher outbound customer shipping costs due to out-of-market shipping and shipping multiple times for multi-unit orders, and (iii) higher occupancy costs resulting from incremental costs from our new distribution centers on the East and West Coasts to support our long-term growth, which was partially offset by (iv) our retail store optimization initiatives.
Additionally, comparable brand revenue growth for newer concepts is not separately disclosed until such time that we believe those sales are meaningful to evaluating the performance of the brand.
Additionally, comparable brand revenue for newer concepts is not separately disclosed until such time that we believe those sales are meaningful to evaluating the performance of the brand.
For information on risks, please see “Risk Factors” in Part I, Item 1A . 29 Table of Contents Results of Operations NET REVENUES Net revenues consist of sales of merchandise to our customers through our e-commerce websites, retail stores and direct-mail catalogs, and include shipping fees received from customers for delivery of merchandise to their homes.
For information on risks, please see “Risk Factors” in Part I, Item 1A . 36 Table of Contents Results of Operations NET REVENUES Net revenues consist of sales of merchandise to our customers through our e-commerce websites, retail stores and direct-mail catalogs, and include shipping fees received from customers for delivery of merchandise to their homes.
Our three key differentiators - our in-house design, our digital-first channel strategy, and our values - continued to distinguish us as the world’s largest digital-first, design-led and sustainable home retailer. Our in-house design capabilities and vertically integrated sourcing organization allow us to deliver high-quality, sustainable products at competitive prices.
Our three key differentiators - our in-house design, our digital-first channel strategy, and our values - continue to distinguish us as the world’s largest digital-first, design-led and sustainable home retailer. Our in-house design capabilities and vertically integrated sourcing organization allow us to deliver high-quality, sustainable products at competitive prices.
Liquidity Outlook We believe our cash on hand, cash flows from operations, and our available credit facilities will provide adequate liquidity for our business operations as well as capital expenditures, dividends, share repurchases, and other liquidity requirements associated with our business operations over the next 12 months.
Liquidity Outlook We believe our cash on hand, cash flows from operations, and our available credit facilities will provide adequate liquidity for our business operations as well as dividends, capital expenditures, stock repurchases, and other liquidity requirements associated with our business operations over the next 12 months.
Global trends, including inflationary pressures, are weakening customer sentiment, negatively impacting consumer spending behavior and slowing down consumer demand for our products. However, our unique operating model and pricing power helped mitigate these increased costs during fiscal 2022. We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future.
Global trends, including inflationary pressures, are weakening consumer sentiment, negatively impacting consumer spending behavior and slowing down consumer demand for our products. However, our unique operating model and pricing power helped mitigate these increased costs during fiscal 2023. We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future.
In fiscal 2023, we plan to use our cash resources to fund our inventory and inventory-related purchases, employment related-costs, advertising and marketing initiatives, rental payments on our leases, stock repurchases and dividend payments, property and equipment purchases, and the payment of income taxes.
In fiscal 2024, we plan to use our cash resources to fund our inventory and inventory-related purchases, employment related-costs, advertising and marketing initiatives, rental payments on our leases, stock repurchases and dividend payments, the payment of income taxes and property and equipment purchases.
We review and update the estimates used in the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax examination, upon expiration of statutes of limitation, or upon occurrence of other events.
We review and update the estimates used in the accrual for uncertain tax positions as more definitive information becomes available from taxing authorities, upon completion of tax examinations, upon expiration of statutes of limitation, or upon occurrence of other events.
If a long-lived asset is found to be impaired, the amount recognized for impairment is equal to the excess of the asset or asset group’s net carrying value over its estimated fair value.
If a long-lived asset is found to be 42 Table of Contents impaired, the amount recognized for impairment is equal to the excess of the asset or asset group’s net carrying value over its estimated fair value.
See Note E to our Consolidated Financial Statements for amount outstanding as of January 29, 2023 related to operating leases. • Our purchase obligations consist primarily of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.
See Note E to our Consolidated Financial Statements for amount outstanding as of January 28, 2024 related to operating leases. • Our purchase obligations consist primarily of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business.
Comparable stores that were temporarily closed during fiscal 2021 due to COVID-19 were not excluded from the comparable brand revenue calculation. Outlet comparable store net revenues are included in their respective brands. Business-to-business revenues are included in comparable brand revenue for each of our brands.
Comparable stores that were temporarily closed during fiscal 2021 due to the pandemic were not excluded from the comparable brand revenue calculation. Outlet comparable store revenues are included in their respective brands. Business-to-business revenues are included in comparable brand revenue for each of our brands.
Additionally, as of January 29, 2023, issued but undrawn standby letters of credit of $11.2 million were outstanding under our Revolver. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.
Additionally, as of January 28, 2024, issued but undrawn standby letters of credit of $11.2 million were outstanding under our Revolver. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.
Our estimate of 34 Table of Contents undiscounted future cash flows over the lease term is based upon our experience, the historical operations and estimates of future profitability and economic conditions.
Our estimate of undiscounted future cash flows over the lease term is based upon our experience, the historical operations and estimates of future profitability and economic conditions.
A 50 basis point increase or decrease in the incremental borrowing rate would not have a material impact on the value of our new or remeasured right-of-use assets and lease liabilities. As of fiscal 2022 and fiscal 2021, our incremental borrowing rates were 3.4% and 3.2%, respectively. Many of our leases contain renewal and early termination options.
A 50 basis point increase or decrease in the incremental borrowing rate would not have a material impact on the value of our new or remeasured right-of-use assets and lease liabilities. As of fiscal 2023 and fiscal 2022, our weighted-average incremental borrowing rates were 3.8% and 3.4%, respectively. Many of our leases contain renewal and early termination options.
We ended the year with a cash balance of $367.3 million and generated positive operating cash flow of $1.1 billion. In addition to our strong cash balance, we also ended the year with no outstanding borrowings under our revolving line of credit.
We ended the year with a cash balance of $1.3 billion and generated positive operating cash flow of $1.7 billion. In addition to our cash balance, we also ended the year with no outstanding borrowings under our revolving line of credit.
Due to the potential resolution of tax issues, it is reasonably possible that the balance of our gross unrecognized tax benefits could decrease within the next twelve months by a range of $0 to $6.2 million.
Due to the potential resolution of tax issues, it is reasonably possible that the balance of our gross unrecognized tax benefits could decrease within the next twelve months by a range of $0 to $5.8 million.
A discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 30, 2022 (“fiscal 2021”), compared to the 52 weeks ended January 31, 2021 (“fiscal 2020”), can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2021, filed with the SEC on March 28, 2022, which is available on the SEC’s website at www.sec.gov and under the Financial Reports section of our Investor Relations website.
A discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 29, 2023 (“fiscal 2022”), compared to the 52 weeks ended January 30, 2022 (“fiscal 2021”), can be found under Item 7 in our Annual Report on Form 10-K for fiscal 2022, filed with the SEC on March 24, 2023, which is available on the SEC’s website at www.sec.gov and under the Financial Reports section of our Investor Relations website.
One of the letter of credit facilities totaling $5 million matures on September 30, 2026, which is also the latest expiration date possible for future letters of credit issued under the facility. 33 Table of Contents Cash Flows from Operating Activities For fiscal 2022, net cash provided by operating activities was $1.1 billion compared to $1.4 billion in fiscal 2021.
One of the letter of credit facilities totaling $5 million matures on September 30, 2026, which is also the latest expiration date possible for future letters of credit issued under the facility. Cash Flows from Operating Activities For fiscal 2023, net cash provided by operating activities was $1.7 billion compared to $1.1 billion in fiscal 2022.
As of January 29, 2023, we were in compliance with our financial covenants under our credit facilities and, based on our current projections, we expect to remain in compliance throughout the next 12 months. Letter of Credit Facilities We have three unsecured letter of credit reimbursement facilities for a total of $35 million.
As of January 28, 2024, we were in compliance with our financial covenants under our credit facility and, based on our current projections, we expect to remain in compliance throughout the next 12 months. Letter of Credit Facilities We have three unsecured letter of credit facilities for a total of $35 million.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 29, 2023 (“fiscal 2022”), and the 52 weeks ended January 30, 2022 (“fiscal 2021”) should be read in conjunction with our Consolidated Financial Statements and notes thereto.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended January 28, 2024 (“fiscal 2023”), and the 52 weeks ended January 29, 2023 (“fiscal 2022”) should be read in conjunction with our Consolidated Financial Statements and notes thereto.
Cash Flows from Financing Activities For fiscal 2022, net cash used in financing activities was $1.2 billion compared to $1.5 billion in fiscal 2021 and was primarily attributable to the repurchases of common stock and payment of dividends.
Cash Flows from Financing Activities For fiscal 2023, net cash used in financing activities was $0.6 billion compared to $1.2 billion in fiscal 2022 and was primarily attributable to the repurchases of common stock and payment of dividends.
Cash Flows from Investing Activities For fiscal 2022, net cash used in investing activities was $354.0 million compared to $226.2 million in fiscal 2021 and was primarily attributable to purchases of property and equipment related to technology and supply chain enhancements.
Cash Flows from Investing Activities For fiscal 2023, net cash used in investing activities was $188.3 million compared to $354.0 million in fiscal 2022 and was primarily attributable to purchases of property and equipment related to technology and supply chain enhancements.
As of January 29, 2023 and January 30, 2022, our inventory obsolescence reserves were $24.7 million and $14.0 million, respectively. Long-lived Assets Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
As of January 28, 2024 and January 29, 2023, our inventory obsolescence reserves were $23.6 million and $24.7 million, respectively. Long-lived Assets Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets.
Two of the letter of credit facilities totaling $30 million mature on August 19, 2023, and the latest expiration date possible for future letters of credit issued under these facilities is January 16, 2024.
Two of the letter of credit facilities totaling $30 million mature on August 18, 2024, and the latest expiration date possible for future letters of credit issued under these facilities is January 15, 2025.
Leases The significant estimates used in accounting for our leases relate to the incremental borrowing rate used in the present value of lease obligations calculation. As our leases generally do not provide information about the rate implicit in the lease, we utilize an estimated incremental borrowing rate to calculate the present value of our future lease obligations.
As our leases generally do not provide information about the rate implicit in the lease, we utilize an estimated incremental borrowing rate to calculate the present value of our future lease obligations.
As of January 29, 2023, the aggregate amount outstanding under our letter of credit facilities was $0.5 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. On August 19, 2022, we renewed all three of our letter of credit facilities on substantially similar terms.
As of January 28, 2024, the aggregate amount outstanding under our letter of credit facilities was $0.1 million, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. On August 18, 2023, we renewed two of our letter of credit facilities on substantially similar terms.
Cost of goods sold includes cost of goods, occupancy expenses and shipping costs. Cost of goods consists of cost of merchandise, inbound freight expenses, freight-to-store expenses and other inventory related costs such as replacements, damages, obsolescence and shrinkage. Occupancy expenses consist of rent, other occupancy costs (including property taxes, common area maintenance and utilities) and depreciation.
Cost of goods sold includes (i) cost of goods, which consists of cost of merchandise, inbound freight expenses, freight-to-store expenses and other inventory related costs such as replacements, damages, obsolescence and shrinkage; (ii) occupancy expenses, which consists of rent, other occupancy costs (including property taxes, common area maintenance and utilities) and depreciation; and (iii) shipping costs, which consists of third-party delivery services and shipping materials.
As of January 29, 2023, we had $37.1 million of gross unrecognized tax benefits, of which $31.0 million would, if recognized, affect the effective tax rate. Additionally, we accrue interest and penalties related to these unrecognized tax benefits in the provision for income taxes.
As of January 28, 2024, we had $31.6 million of gross unrecognized tax benefits, of which $25.8 million would, if recognized, affect the effective tax rate. Additionally, we accrue interest and penalties related to these unrecognized tax benefits in the provision for income taxes.
As of January 29, 2023 and January 30, 2022, our accruals for the payment of interest and penalties totaled $6.1 million and $5.7 million, respectively.
As of January 28, 2024 and January 29, 2023, our accruals for the payment of interest and penalties totaled $5.3 million and $6.1 million, respectively.
During fiscal 2022, we recognized impairment charges of $3.3 million related to the impairment of property and equipment and $2.6 million related to the impairment of operating lease right-of-use assets, due to lower projected revenues and fair market rental values resulting from underperforming stores in Australia, and we also recognized impairment charges of $9.7 million related to the impairment of property and equipment associated with Aperture, a division of our Outward, Inc. subsidiary, due to these assets not being recoverable in light of projected future cash flows, all of which is recognized within SG&A.
During fiscal 2022, we recognized impairment charges of $15.6 million, which consisted of: (i) $3.3 million related to the impairment of property and equipment and $2.6 million related to the impairment of operating lease right-of-use assets resulting from underperforming stores in Australia and (ii) $9.7 million related to the impairment of property and equipment associated with Aperture due to these assets not being recoverable in light of projected future cash flows, all of which is recognized within SG&A.
Our material cash requirements as of January 29, 2023 include the following contractual obligations and commitments arising in the normal course of business: • Our operating leases had fixed lease payment obligations, including imputed interest, of $1.7 billion, with $308.3 million payable within 12 months.
Our material cash requirements as of January 28, 2024 include the following contractual obligations and commitments arising in the normal course of business: 39 Table of Contents • Our operating leases had fixed lease payment obligations, including imputed interest, of $1.6 billion, with $320.1 million payable within 12 months.
These costs include employment, advertising, third-party credit card processing and other general expenses. Fiscal 2022 vs. Fiscal 2021 SG&A increased $0.5 million and remained relatively flat compared to fiscal 2021. SG&A as a percentage of net revenues decreased to 25.1% from 26.4% for fiscal 2021.
These costs include employment, advertising, third-party credit card processing, impairment and other general expenses. Fiscal 2023 vs. Fiscal 2022 SG&A decreased $119.9 million or 5.5%, compared to fiscal 2022. SG&A as a percentage of net revenues increased to 26.6% from 25.1% for fiscal 2022.
We may, upon notice to the administrative agent, request existing or new lenders, at such lenders’ option, to increase the Revolver by up to $250 million to provide for a total of $750 million of unsecured revolving credit.
We may, upon notice to the administrative agent, request existing 40 Table of Contents or new lenders, at such lenders’ option, to increase the Revolver by up to $250 million to provide for a total of $750 million of unsecured revolving credit. During fiscal 2023, we had no borrowings under our Revolver.
OVERVIEW Williams-Sonoma, Inc. is a specialty retailer of high-quality sustainable products for the home. Our products, representing distinct merchandise strategies — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, and Mark and Graham — are marketed through e-commerce websites, direct-mail catalogs and retail stores.
OVERVIEW Williams-Sonoma, Inc. is an omni-channel specialty retailer of high-quality, sustainable products for the home. Our products in our portfolio of nine brands — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow — are marketed through e-commerce websites, direct-mail catalogs and our retail stores.
Our revenues also include sales to our business-to-business customers and franchisees, incentives received from credit card issuers in connection with our private label and co-branded credit cards, and breakage income related to our stored-value cards. Net revenues in fiscal 2022 increased $428.5 million, or 5.2%, with company comp growth of 6.5%.
Our revenues also include sales to our business-to-business customers and franchisees, incentives received from credit card issuers in connection with our private label and co-branded credit cards, and breakage income related to our stored-value cards. Net revenues in fiscal 2023 decreased $923.8 million or 10.6%, with company comp decline of 9.9%.
As of January 29, 2023, our purchase obligations were approximately $981.0 million, with $910.0 million expected to be settled within 12 months. In addition, we had $37.1 million of unrecognized tax benefits recorded in our accompanying Consolidated Balance Sheet as of January 29, 2023, for which we cannot make a reasonably reliable estimate of the amount and period of payment.
As of January 28, 2024, our purchase obligations were approximately $911.9 million, with $854.5 million expected to be settled within 12 months. In addition, we had $31.6 million of unrecognized tax benefits recorded in our accompanying Consolidated Balance Sheet as of January 28, 2024, for which we cannot make a reasonably reliable estimate of the amount and period of payment.
Our effective tax rates for fiscal 2022 and fiscal 2021 were 24.8% and 22.4%, respectively. 35 Table of Contents
Our effective tax rates for fiscal 2023 and fiscal 2022 were 25.4% and 24.8%, respectively. 43 Table of Contents
Sources of Liquidity As of January 29, 2023, we held $367.3 million in cash and cash equivalents, the majority of which was held in interest-bearing demand deposit accounts and money market funds, and of which $81.2 million was held by our international subsidiaries.
Sources of Liquidity As of January 28, 2024, we held $1.3 billion in cash and cash equivalents, the majority of which was held in interest-bearing demand deposit accounts and money market funds, and of which $86.0 million was held by our international subsidiaries.
We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations.
We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations. See Note I to our Consolidated Financial Statements for further information related to our commitments and contingencies.
Comparable brand revenue growth (decline) Fiscal 2022 1 Fiscal 2021 1 Pottery Barn 14.9 % 23.9 % West Elm 2.5 33.1 Williams Sonoma (1.7) 10.5 Pottery Barn Kids and Teen 0.4 11.6 Total 2 6.5 % 22.0 % 1 Comparable brand revenue includes business-to-business revenues within each brand. 2 Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham. 30 Table of Contents RETAIL STORE DATA Fiscal 2022 Fiscal 2021 1 Store count – beginning of year 544 581 Store openings 15 12 Store closings (29) (49) Store count – end of year 530 544 Store selling square footage at year-end 3,813,000 3,821,000 Store leased square footage (“LSF”) at year-end 5,962,000 6,004,000 1 Retail store data for fiscal 2021 includes stores temporarily closed due to COVID-19.
Comparable brand revenue growth (decline) Fiscal 2023 1 Fiscal 2022 1 Pottery Barn (9.7 %) 14.9 % West Elm (18.8) 2.5 Williams Sonoma (0.7) (1.7) Pottery Barn Kids and Teen (5.5) 0.4 Total 2 (9.9 %) 6.5 % 1 Comparable brand revenue includes business-to-business revenues within each brand. 2 Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham. 37 Table of Contents RETAIL STORE DATA Fiscal 2023 Fiscal 2022 Store count – beginning of year 530 544 Store openings 13 15 Store closings (25) (29) Store count – end of year 518 530 Store selling square footage at year-end 3,805,000 3,813,000 Store leased square footage (“LSF”) at year-end 5,890,000 5,962,000 Fiscal 2023 Fiscal 2022 Store Count Avg.
Compared to fiscal 2021, the increase in the tax rate is primarily due to less excess tax benefit from stock-based compensation in fiscal 2022, the return to provision difference between the two fiscal years, the expiration of the statutes of limitation related to uncertain tax positions in fiscal 2021 and the change in permanent reinvestment assertion on Canadian earnings in fiscal 2022.
Compared to fiscal 2022, the increase in the tax rate is primarily due to less excess tax benefit from stock-based compensation and the tax effect of the earnings mix change between the two fiscal years, partially offset by the expiration of the statutes of limitation related to uncertain tax positions in fiscal 2023.
The following table summarizes our net revenues by brand for fiscal 2022 and fiscal 2021: (In thousands) Fiscal 2022 1 Fiscal 2021 1 Pottery Barn $ 3,555,521 $ 3,120,687 West Elm 2,278,131 2,234,548 Williams Sonoma 1,286,651 1,345,851 Pottery Barn Kids and Teen 1,132,937 1,139,893 Other 2 421,177 404,957 Total $ 8,674,417 $ 8,245,936 1 Includes business-to-business net revenues within each brand. 2 Primarily consists of net revenues from Rejuvenation, our international franchise operations and Mark and Graham.
The following table summarizes our net revenues by brand for fiscal 2023 and fiscal 2022: (In thousands) Fiscal 2023 1 Fiscal 2022 1 Pottery Barn $ 3,206,167 $ 3,555,521 West Elm 1,854,811 2,278,131 Williams Sonoma 1,260,045 1,286,651 Pottery Barn Kids and Teen 1,060,470 1,132,937 Other 2 369,159 421,177 Total $ 7,750,652 $ 8,674,417 1 Includes business-to-business net revenues within each brand. 2 Primarily consists of net revenues from Rejuvenation, our international franchise operations, Mark and Graham, and GreenRow.
Shipping costs consist of third-party delivery services and shipping materials. Our classification of expenses in cost of goods sold may not be comparable to other public companies, as we do not include non-occupancy-related costs associated with our distribution network in cost of goods sold.
Selling margin is our gross profit before occupancy costs. Our classification of expenses in gross profit may not be comparable to other public companies, as we do not include non-occupancy-related costs associated with our distribution network in cost of goods sold.
Stock Repurchase Program See section titled “Stock Repurchase Program” within Part II, Item 5 of this Annual Report on Form 10-K for further information.
Our quarterly cash dividend may be limited or terminated at any time. Stock Repurchase Program See section titled “Stock Repurchase Program” within Part II, Item 5 of this Annual Report on Form 10-K for further information.
IMPACT OF INFLATION While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have experienced varying levels of inflation, resulting in part from various supply chain disruptions, increased shipping and transportation costs, increased product costs, increased labor costs in the supply chain and other disruptions caused by the COVID‐19 pandemic and the uncertain economic environment.
Net cash used in financing activities for fiscal 2023 decreased compared to fiscal 2022, primarily due to a decrease in repurchases of common stock. 41 Table of Contents IMPACT OF INFLATION While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have experienced varying levels of inflation, resulting in part from various supply chain disruptions, increased shipping and transportation costs, increased product costs, increased labor costs in the supply chain and other disruptions caused by the pandemic and the uncertain economic environment.
This strong liquidity position allowed us to fund the operations of the business by investing $354.1 million in capital expenditures during fiscal 2022, and to provide shareholder returns of approximately $1.1 billion in fiscal 2022 through share repurchases and dividends.
This strong liquidity position allowed us to provide stockholder returns of $545.5 million through stock repurchases and dividends, and to fund the operations of the business by investing $188.5 million in capital expenditures.
We are also proud to be a leader in our industry with our Environmental, Social and Governance (“ESG”) efforts. During fiscal 2021 and continuing through fiscal 2022, global supply chain disruptions, including COVID-19 related factory closures and increased port congestion, caused delays in inventory receipts and backorder delays, increased raw material costs, and higher shipping-related charges.
We are also proud to be a leader in our industry with our values-based culture and commitment to achieving our sustainability goals. Beginning in fiscal 2021 and continuing through fiscal 2022, global supply chain disruptions caused delays in inventory receipts and backorder delays, increased raw material costs, and higher shipping-related charges.
LSF Per Store Pottery Barn 188 14,800 188 14,500 Williams Sonoma 165 6,800 174 6,800 West Elm 122 13,200 121 13,200 Pottery Barn Kids 46 7,700 52 7,700 Rejuvenation 9 8,000 9 9,400 Total 530 11,200 544 11,000 COST OF GOODS SOLD (In thousands) Fiscal 2022 % Net Revenues Fiscal 2021 % Net Revenues Cost of goods sold 1 $ 4,996,684 57.6 % $ 4,613,973 56.0 % 1 Includes occupancy expenses of $785.4 million and $728.0 million in fiscal 2022 and fiscal 2021, respectively.
LSF Per Store Pottery Barn 184 15,000 188 14,800 Williams Sonoma 156 6,900 165 6,800 West Elm 121 13,200 122 13,200 Pottery Barn Kids 46 7,800 46 7,700 Rejuvenation 11 8,100 9 8,000 Total 518 11,400 530 11,200 GROSS PROFIT (In thousands) Fiscal 2023 % Net Revenues Fiscal 2022 % Net Revenues Fiscal 2021 % Net Revenues Gross profit 1 $ 3,303,601 42.6 % $ 3,677,733 42.4 % $ 3,631,963 44.0 % 1 Includes occupancy expenses of $814.3 million, $785.4 million and $728.0 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively.
Looking Ahead to 2023 As we look forward to the year ahead, we believe our key differentiators – our in-house design, our digital-first channel strategy, and our values, our growth initiatives and our unique operating model will set us apart from our competition and allow us to drive long-term growth and profitability.
As we look forward to the year ahead, we believe these key priorities will set us apart from our competition and allow us to drive long-term growth and profitability.
These costs, which include distribution network employment, third-party warehouse management and other distribution-related administrative expenses, are recorded in selling, general and administrative expenses ("SG&A"). Fiscal 2022 vs. Fiscal 2021 Cost of goods sold increased $382.7 million, or 8.3%, compared to fiscal 2021. Cost of goods sold as a percentage of net revenues increased to 57.6% from 56.0% in fiscal 2021.
These costs, which include distribution network employment, third-party warehouse management and other distribution-related administrative expenses, are recorded in selling, general and administrative expenses ("SG&A"). Fiscal 2023 vs. Fiscal 2022 Gross profit decreased $374.1 million, or 10.2%, compared to fiscal 2022. Gross margin increased to 42.6% from 42.4% in fiscal 2022.
Our largest cross-brand growth driver is business-to-business, which positions us to furnish our customers everywhere - from restaurants to hotels, from football stadiums to office spaces. Another successful growth initiative is our expansion into global markets.
Returning to Growth Our growth will be driven by our business strategies in each of our core businesses, our emerging brands, our business-to-business program and our global business. Our largest cross-brand growth driver is business-to-business, which positions us to furnish our customers everywhere - from restaurants to hotels, from football stadiums to office spaces.
In fiscal 2022, diluted earnings per share was $16.32 (which included a $0.21 impact from the impairment of Aperture, a division of our Outward, Inc. subsidiary) versus $14.75 in fiscal 2021 (which included a $0.10 impact from acquisition-related expenses of Outward, Inc.).
In fiscal 2023, diluted earnings per share was $14.55 (which included (i) a $0.20 impact related to exit costs associated with the closure of our West Coast manufacturing facility and the exiting of Aperture, a division of our Outward subsidiary, and (ii) a $0.09 impact related to reduction-in-force initiatives, primarily in our corporate functions) versus $16.32 in fiscal 2022 (which included a $0.21 impact from the impairment of Aperture).
The Inflation Reduction Act, enacted on August 16, 2022, includes a new 15% minimum tax on “adjusted financial statement income” beginning with the Company’s fiscal year 2023, and a new 1% excise tax on stock repurchases after December 31, 2022, which will be included in the acquisition cost of treasury stock recorded within stockholders' equity.
The Inflation Reduction Act, enacted on August 16, 2022, includes a new 15% minimum tax on “adjusted financial statement income” effective for tax years beginning after December 31, 2022. The Company was not subject to the minimum tax for fiscal 2023.
In March 2023, our Board of Directors authorized a 15% increase in our quarterly cash dividend, from $0.78 to $0.90 per common share, subject to capital availability. Our quarterly cash dividend may be limited or terminated at any time.
Dividends In fiscal 2023 and fiscal 2022, total cash dividends declared were approximately $236.8 million, or $3.60 per common share, and $216.3 million, or $3.12 per common share, respectively. In March 2024, our Board of Directors authorized a 26% increase in our quarterly cash dividend, from $0.90 to $1.13 per common share, subject to capital availability.
For fiscal 2022, net cash provided by operating activities was primarily attributable to net earnings adjusted for non-cash items, partially offset by higher spending on merchandise inventories as a result of our efforts to improve our in-stock position as well as accounts payable.
For fiscal 2023, net cash provided by operating activities was primarily attributable to (i) net earnings adjusted for non-cash items, (ii) merchandise inventories as a result of decreasing customer demand, and (iii) accounts payable and gift card and other deferred revenue as a result of ongoing working capital enhancements.
Our emerging brands, Rejuvenation and Mark and Graham, have also provided incremental growth. These two brands service the white space needs of customers. At Rejuvenation, we’re expanding into remodel categories related to kitchen and bathroom, including vanities, cabinet hardware and custom wall lighting.
Our emerging brands, including Rejuvenation and Mark and Graham, are expected to also provide incremental growth. These two brands service the white space needs of customers and demonstrate our ability to develop new businesses and expand our portfolio.
LIQUIDITY AND CAPITAL RESOURCES Material Cash Requirements We are party to contractual obligations involving commitments to make payments to third parties in the future. Certain contractual obligations are reflected on our Consolidated Balance Sheet as of January 29, 2023, while others are considered future obligations.
We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, and monitoring legislative developments by other countries, especially in the regions that we operate. LIQUIDITY AND CAPITAL RESOURCES Material Cash Requirements We are party to contractual obligations involving commitments to make payments to third parties in the future.
On the sustainability front, we take great pride in the progress we are making within our impact initiatives and ESG leadership across the home furnishings industry. These commitments are reflected in the high quality, durable, sustainable products that we offer our customers, and continues to distinguish our company and our brands.
Our continued retail optimization efforts have transformed our store fleet to be positioned in the most profitable, inspiring, and strategic locations. On the sustainability front, we take great pride in the progress we are making within our impact initiatives and sustainability leadership across the home furnishings industry.
However, the current uncertain macroeconomic environment with the weak housing market, layoffs, inflationary pressure and possible recession may impact our results. Additionally, we continue to experience increased costs across our global supply chain, including higher product costs, higher freight and incremental distribution center costs for additional space to support our overall growth.
However, the current uncertain macroeconomic environment with the weak housing market, elevated interest rates, layoffs, inflationary pressure, political uncertainty and global geopolitical tension may continue to impact our results.
This decrease in rate was primarily driven by the leverage of employment costs and advertising expenses from overall cost discipline and adjusted incentive compensation commensurate with business performance. INCOME TAXES The effective income tax rate was 24.8% for fiscal 2022 and 22.4% for fiscal 2021.
This increase in rate was primarily driven by (i) the deleverage of employment costs from higher performance-based incentive compensation in fiscal 2023 compared to fiscal 2022 commensurate with business performance, partially offset by (ii) managed variable employment costs in line with top-line trends, (iii) the cost savings from reduction-in-force actions taken in the first half of fiscal 2023 and (iv) the leverage of advertising expenses.
We have improved several product-finding and purchasing experiences on our websites, including improved room styling, native registry applications, and the removal of friction in the checkout process. Additionally, we are focused on continued optimization and automation in our distribution centers and logistics networks to improve our service times.
Additionally, we are focused on continued optimization and automation in our distribution centers and logistics networks to improve our service times. Driving Earnings The supply chain improvements contributing to elevating our world-class customer service are expected to continue to contribute meaningfully to our profitability.
At Mark and Graham, our high-quality gift and personalization business is resonating with our customers, and we saw outsized growth in the travel space including luggage and accessories. As a digital-first company, we are in continuous pursuit of incremental improvement to our customers’ shopping journey online.
As a digital-first company, we are in continuous pursuit of incremental improvement to our customers’ shopping journey online. Our ongoing investment in our proprietary e-commerce technology continues to improve our online experience. We are focused on offering customers inspiring content and dynamic tools to assist with design projects.
Net cash provided by operating activities compared to fiscal 2021 decreased primarily due to decreases in accounts payable and accrued expenses and other liabilities.
Net cash provided by operating activities compared to fiscal 2022 increased primarily due to (i) lower spending on merchandise inventories, (ii) an increase in accounts payable, (iii) an increase in accrued expenses and other liabilities due to higher performance-based incentive compensation and (iv) an increase in gift card and other deferred revenue, partially offset by (v) a decrease in net earnings adjusted for non-cash items.
Removed
We expect the impact of higher product costs, ocean freight, detention and demurrage to continue into fiscal 2023, which could negatively impact our business. Fiscal 2022 Financial Results Net revenues in fiscal 2022 increased $428.5 million, or 5.2%, with company comparable brand revenue ("company comp") growth of 6.5%. This was driven by strong order fulfillment and growth initiatives.
Added
These disruptions improved in the fourth quarter of fiscal 2022. However, the costs from these supply chain challenges impacted our Consolidated Statement of Earnings in the first half of fiscal 2023. Fiscal 2023 Financial Results Net revenues in fiscal 2023 decreased $923.8 million, or 10.6%, with company comparable brand revenue ("company comp") decline of 9.9%.
Removed
On a two-year basis, company comp growth was 28.5%. Pottery Barn, our largest brand, delivered 14.9% comparable brand revenue ("brand comp") growth driven by our growth initiatives such as our accessible home, apartment and our market-place assortment. On a 3-year basis, Pottery Barn delivered 54.0% brand comp growth.
Added
Our full year revenues reflect a challenging environment for home furnishings. This decrease was driven by continuing customer hesitancy towards furniture purchases and our strategy to reduce promotional activity, partially offset by strength in certain non-furniture categories. Company comp decreased 3.4% on a two-year basis and increased 35.6% on a four-year basis.
Removed
In West Elm, brand comp growth was 2.5% with strong operating margins, on top of 33.1% brand comp growth the prior year, resulting in a 35.6% brand comp growth on a two-year basis. On a 3-year basis West Elm generated 50.8% brand comp growth. West Elm is our brand most affected by the current tough macroeconomic environment.
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Comparable brand revenue ("brand comp") for Pottery Barn, our largest brand, decreased 9.7%, increased 5.2% on a two-year basis and increased 44.3% on a four-year basis. The fiscal 2023 decline was driven by reduced furniture demand and our strategy to reduce promotional activity, partially offset by relative strength from our seasonal decorating, entertaining and home textiles categories.
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Our Williams Sonoma brand had a brand comp decrease of 1.7% as we continued recovery in our in-stock inventory position and increased our focus on product exclusivity and innovation. On a 3-year basis, Williams Sonoma generated 32.6% brand comp growth.
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Brand comp for the Pottery Barn Kids and Teen businesses decreased 5.5%, decreased 5.1% on a two-year basis and increased 23.1% on a four-year basis. The fiscal 2023 decline resulted from pressure in certain of our children's furniture categories, but saw relative strength from our baby and seasonal offerings and new product collaborations.
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In our Pottery Barn Kids and Teen businesses, we saw brand comp growth of 0.4% driven by growth in baby and dorm as in-stock inventory improved. Finally, our emerging brands, Rejuvenation and Mark and Graham, combined, delivered 9.6% brand comp growth.
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Brand comp for West Elm decreased 18.8%, decreased 16.3% on a two-year basis and increased 32.0% on a four-year basis.
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Through our e-commerce platform, our in-house customer relationship management and data analytic teams optimize our digital spend and customer connections. Our stores serve as design centers and omni-fulfillment hubs. Along with our key differentiators, our success and profitability are driven by our growth initiatives that are cross-brand and/or outside of our core brands.
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The fiscal 2023 decline was driven by West Elm continuing to be the brand most affected by the customer pull back in furniture as a result of the brand's high percentage of its assortment in the furniture category and our strategy to reduce promotional activity, partially offset by relative strength from new designs across all categories including furniture, textiles and decorative accessories.
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We have expanded our franchise business into India with an exclusive and differentiated product line, and our three stores and websites are outperforming our expectations in a market where we 28 Table of Contents see tremendous opportunity. In Canada, we relaunched our websites and saw improvements in conversion and average unit retail across brands.
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Brand comp for the Williams Sonoma brand decreased 0.7%, decreased 2.4% brand on a two-year basis and increased 31.9% on a four-year basis.
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It is hard to predict with certainty when these supply chain and macroeconomic challenges will be fully resolved and we currently expect these challenges to negatively impact our results into fiscal 2023. In the back half of fiscal 2023, we believe these gross margin pressures may become tailwinds that support our profitability.
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The fiscal 2023 decline resulted from our home business, partially offset by strength in the kitchen business driven by electrics, seasonal, cookware and bakeware categories as well as new product collaborations. 34 Table of Contents Finally, our emerging brands, Rejuvenation and Mark and Graham, combined, delivered low single-digit brand comp growth.
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Despite these challenges, we believe our key differentiators, our growth initiatives and our unique operating model leave us well-positioned to mitigate these challenges in both the short- and long- term.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo mitigate this risk, we hedge a portion of our foreign currency exposure with foreign currency forward contracts in accordance with our risk management policies (see Note L to our Consolidated Financial Statements). 36 Table of Contents
Biggest changeTo mitigate this risk, we may hedge a portion of our foreign currency exposure with foreign currency forward contracts in accordance with our risk management policies (see Note L to our Consolidated Financial Statements).
Since we pay for the majority of our international purchases in U.S. dollars, however, a decline in the U.S. dollar relative to other foreign currencies would subject us to risks associated with increased purchasing costs from our vendors in their effort to offset any lost profits associated with any currency devaluation.
Since we pay for the majority of our international purchases in U.S. dollars, however, a decline in the U.S. dollar relative to other foreign currencies would subject us to risks associated with increased purchasing costs from our suppliers in their effort to offset any lost profits associated with any currency devaluation.
We do not engage in financial transactions for trading or speculative purposes. Interest Rate Risk Our Revolver has a variable interest rate which, when drawn upon, subjects us to risks associated with changes in that interest rate. During fiscal 2022, we had no borrowings under the Revolver.
We do not engage in financial transactions for trading or speculative purposes. Interest Rate Risk Our Revolver has a variable interest rate which, when drawn upon, subjects us to risks associated with changes in that interest rate. During fiscal 2023, we had no borrowings under the Revolver.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks, which include significant deterioration of the U.S. and foreign markets, changes in U.S. interest rates, foreign currency exchange rate fluctuations and the effects of economic uncertainty which may affect the prices we pay our vendors in the foreign countries in which we do business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks, which include significant deterioration of the U.S. and foreign markets, changes in U.S. interest rates, foreign currency exchange rate fluctuations, inflation and the effects of economic uncertainty which may affect the prices we pay our suppliers in the foreign countries in which we do business.
While the impact of foreign currency exchange rate fluctuations was not material to us in fiscal 2022, we have continued to see volatility in the exchange rates in the countries in which we do business.
While the impact of foreign currency exchange rate fluctuations was not material to us in fiscal 2023, we have continued to see volatility in the exchange rates in the countries in which we do business.
In addition, we have fixed and variable income investments consisting of short-term investments classified as cash and cash equivalents, which are also affected by changes in market interest rates. As of January 29, 2023, our investments, made primarily in interest bearing demand deposit accounts and money market funds, are stated at cost and approximate their fair values.
In addition, we have fixed and variable income investments consisting of short-term investments classified as cash and cash equivalents, which are also affected by changes in market interest rates. As of January 28, 2024, our investments, made primarily in interest bearing demand deposit accounts and money market funds, are stated at cost and approximate their fair values.
Foreign Currency Risks We purchase the majority of our inventory from vendors outside of the U.S. in transactions that are primarily denominated in U.S. dollars and, as such, any foreign currency impact related to these international purchase transactions was not significant to us during fiscal 2022 or fiscal 2021.
Foreign Currency Risks We purchase the majority of our inventory from suppliers outside of the U.S. in transactions that are primarily denominated in U.S. dollars and, as such, any foreign currency impact related to these international purchase transactions was not significant to us during fiscal 2023 or fiscal 2022.
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Inflation While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have experienced varying levels of inflation, resulting in part from various supply chain disruptions, increased shipping and transportation costs, increased product costs, increased labor costs in the supply chain and other disruptions caused by the pandemic and the uncertain economic environment.
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We believe the effects of inflation, if any, on our financial statements and results of operations have been immaterial to date. However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future, including by the heightened levels of inflation experienced globally during fiscal 2023 and fiscal 2022.
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Global trends, including inflationary pressures, are weakening customer sentiment, negatively impacting consumer spending behavior and slowing down consumer demand for our products. However, our unique operating model and pricing power helped mitigate these increased costs during fiscal 2023 and fiscal 2022.
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Our inability or failure to offset the impact of inflation could harm our business, financial condition and results of operations. 44 Table of Contents

Other WSM 10-K year-over-year comparisons