☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2, 2020.
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94-2203880 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3250 Van Ness Avenue, San Francisco, CA | 94109 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class: | Trading Symbol(s): | Name of each exchange on which registered: | ||
Common Stock, par value $.01 per share | WSM | New York Stock Exchange, Inc. | ||
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to thisForm 10-K. ☒
☐
PAGE | ||||||||||
PART I | ||||||||||
Item 1. | 3 | |||||||||
Item 1A. | 6 | |||||||||
Item 1B. | 24 | |||||||||
Item 2. | 24 | |||||||||
Item 3. | 25 | |||||||||
Item 4. | 26 | |||||||||
PART II | ||||||||||
Item 5. | ||||||||||
27 | ||||||||||
Item 6. | 29 | |||||||||
Item 7. | 30 | |||||||||
Item 7A. | 40 | |||||||||
Item 8. | 41 | |||||||||
Item 9. | 68 | |||||||||
Item 9A. | ||||||||||
68 | ||||||||||
Item 9B. | 69 | |||||||||
PART III | ||||||||||
Item 10. | 70 | |||||||||
Item 11. | 70 | |||||||||
Item 12. | 70 | |||||||||
Item 13. | 70 | |||||||||
Item 14. | 70 | |||||||||
PART IV | ||||||||||
Item 15. | 71 | |||||||||
Item 16. | 76 |
ITEM 1. | BUSINESS |
PBteen
E-COMMERCE
Detailed financial information about
RETAIL STORES
As of February 3, 2019, thebrands. Our retail channel had the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elmstores serve as billboards for our brands, which we believe inspires our customers to also shop online and Rejuvenation,through our catalogs. We operate 614 stores, which operate 625 stores, comprising 579include 572 stores in 43 states, Washington, D.C. and Puerto Rico, 2420 stores in Canada, 19 stores in Australia and 3 stores in the United Kingdom. We also have multi-year franchise agreements with third parties in the Middle East, the Philippines, Mexico and South Korea that currently operate 108129 franchised stores as well as The retail channel complements thee-commerce channel by building brand awareness and attracting new customers to our brands. Our retail stores serve as billboards for our brands, which we believe inspires our customers to also shop online and through our catalogs.
Detailed financial information about the retail channel is found in Note K to our Consolidated Financial Statements.
“pbteen.com, “potterybarnteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,” “rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, patents, copyrights, trade dress rights and domain names that we hold are of material importance to us.
ITEM 1A. | RISK FACTORS |
security breach could also expose us to risks of data loss, litigation, regulatory investigations and other significant liabilities. Such a breach could also seriously disrupt, slow or hinder our operations and harm our reputation and customer relationships, any of which could harm our business.
In addition, states and the federal government are increasingly enacting laws and regulations to protect consumers against identity theft, and in the future we may be subject to state or federal data privacy laws, such as the California Consumer Privacy Act of 2018 (the “CCPA”) that will become effective in 2020. As our business expands globally, we are subject to data privacy and other similar laws in various foreign jurisdictions, such as the European Union. If we are the target of a cybersecurity attack resulting in unauthorized disclosure of our customer data, we may be required to undertake costly notification procedures. In addition, compliance with these laws will likely increase the costs of doing business, especially if we face differing regulatory requirements across multiple jurisdictions and/or a lack of adequate regulatory guidance. If we fail to implement appropriate safeguards, detect and provide prompt notice of unauthorized access as required by some of thesedata privacy laws, or otherwise comply with these laws, we could be subject to potential fines, claims for damages and other remedies, which could be significantly in excess of our insurance coverage and could harm our business.
shipments to us, or discontinue selling to us, any of which could ultimately reduce our sales or increase our costs. 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, 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, inclementadverse weather, natural disasters, public health issues,political unrest, war, acts of terrorism,
For example, if our vendors suffer prolonged work disruptions or stoppages, or transportation or other restrictions, due to public health conditions such as the recent
operations is uncertain and will depend upon various factors, including the demand for our products in new global markets. In addition, certain aspects of our franchise arrangements are not directly within our control, such as the ability of each franchisee to meet its projections regarding store openings and sales, and the impact of exchange rate fluctuations on their business. Moreover, while the agreements we have entered into may provide us with certain termination rights, to the extent that our franchisees do not operate their stores in a manner consistent with our requirements regarding our brand identities and customer experience standards, the reputation and value of our brands could be impaired. In addition, in connection with these franchise arrangements, we have and will continue to implement certain new processes that may subject us to additional regulations and laws, such as U.S. export regulations. Failure to comply with any applicable regulations or laws could have an adverse effect on our results of operations.
ensure that our employees and third-party agents comply with these laws. 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.
Approximately 45.7%
foreign exchange rates. Among other things, weather conditions have affected, and may continue to affect, comparable brand revenues by limiting our ability to deliver our products to our stores, altering consumer behavior, or requiring us to close certain stores temporarily, thus reducing store traffic. Even if stores are not closed, many customers may decide to avoid going to stores in bad weather. These factors have caused, and may continue to cause, our comparable brand revenue results to differ materially from prior periods and from earnings guidance we have provided. For example, the overall economic and general retail sales environment, as well as local and global economic conditions, has caused a significant decline in our comparable brand revenue results in the past.
In addition, public health conditions, such as the recent
and new businesses within Pottery Barn (Marketplace and Pottery Barn Apartment) may not grow as expected. The work involved with integrating new brands or businesses into our existing systems and operations could be time consuming, require significant amounts of management time and result in the diversion of substantial operational resources. Further, if we devote time and resources to new brands, acquired brands, brand extensions, brand repositioning, or new lines of business and those businesses are not as successful as we planned, then we risk damaging our overall business results or incurring impairment charges to write off any existing goodwill or intangible assets associated with previously acquired brands. As a result, we may not be able to introduce new brands in a manner that improves our overall business and/or operating results and may therefore be forced to close the brands or new lines of business, which may damage our reputation and/or negatively impact our operating results.
Recent tariffs
Recently, the
In addition, our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings or losses in countries with differing statutory tax rates or by changes to existing laws or regulations. For example, the Tax Act has not had an adverse effect on our results of operations and is not expected to have an adverse effect on our results of operations going forward, but it will materiallyhas had a material impact our effective tax rate.
platforms and similar devices that allow individuals access to a broad audience, these claims have had a significant negative impact on some businesses. Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel, and have suffered reputational harm that has negatively impacted their business.
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.
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.
We regularly review and evaluate our liquidity and capital needs. While we have a growing balance of cash that is held offshore, we currently believe that our available cash, cash equivalents and cash flow from operations will be sufficient to finance our operations and expected capital requirements for at least the next 12 months. However, we might experience periods during which we encounter additional cash needs and we might need additional external funding to support our operations. Although we were able to amend and increase our credit facility during fiscal 2017 on acceptable terms to provide for a $500,000,000 unsecured revolving line of credit and a $300,000,000 unsecured term loan facility, in the event we require additional liquidity from our lenders, such funds may not be available to us on acceptable terms, or at all. For example, in the event we were to breach any of our financial covenants, our banks would not be required to provide us with additional funding, or they may require us to renegotiate our existing credit facility on less favorable terms. In addition, we may not be able to renew our letters of credit that we use to help pay our suppliers on terms that are acceptable to us, or at all, as the availability of letter of credit facilities may become limited. Further, the providers of such credit may reallocate the available credit to other borrowers. If we are unable to access credit at the levels we require, or the cost of credit is greater than expected, it could adversely affect our operating results.
Should we need it, we also may not be able to obtain additional credit on terms which are acceptable to us, if at all.
in the future. This ability may be subject to certain economic, financial, competitive and other factors, including the impact of the
to replace. If any one of our key employees leaves, is seriously injured or unable to work, or fails to perform and we are unable to find a qualified replacement, we may be unable to execute our business strategy. In addition, our main offices are located in the San Francisco Bay Area, where competition for personnel with retail and technology skills can be intense. In addition, several of our strategic initiatives, including our technology and supply chain initiatives, require that we hire and/or develop employees with appropriate experience. We may not be successful in recruiting, retaining and motivating skilled personnel domestically or globally who have the requisite experience to achieve our global business goals, and failure to do so may harm our business. 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, as well as the significantly higher cost of living expenses in our markets.
ITEM | 1B. UNRESOLVED STAFF COMMENTS |
February 3, 2019.
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Location | Occupied Square Footage (Approximate) | |||
Distribution and Manufacturing Facilities | ||||
Mississippi | 2,165,000 | |||
New Jersey | 2,103,000 | |||
California | 2,030,000 | |||
Georgia | 1,075,000 | |||
Texas | 1,064,000 | |||
Tennessee | 603,000 | |||
North Carolina | 442,000 | |||
Ohio | 265,000 | |||
Massachusetts | 140,000 | |||
Florida | 135,000 | |||
| ||||
Oregon | 91,000 | |||
Colorado | 80,000 | |||
| ||||
| ||||
Corporate Facilities | ||||
California | 269,000 | |||
New York | 238,000 | |||
Oregon | 49,000 | |||
Customer Care Centers | ||||
Nevada | 36,000 | |||
Other | 32,000 |
relating related to these properties was not material to us and is not included in the occupied square footage reported above.
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
$36.37.
* | $100 invested on 2/ |
2/2/14 | 2/1/15 | 1/31/16 | 1/29/17 | 1/28/18 | 2/03/19 | |||||||
Williams-Sonoma, Inc. | 100.00 | 146.32 | 98.58 | 93.24 | 108.08 | 112.76 | ||||||
NYSE Composite Index | 100.00 | 108.27 | 101.44 | 122.00 | 151.10 | 140.18 | ||||||
S&P Retailing | 100.00 | 119.10 | 140.73 | 167.81 | 241.26 | 249.58 |
2/1/15 | 1/31/16 | 1/29/17 | 1/28/18 | 2/3/19 | 2/2/20 | ||||||||||||||||||||
Williams-Sonoma, Inc. | 100.00 | 67.37 | 63.72 | 73.87 | 77.06 | 102.95 | |||||||||||||||||||
NYSE Composite Index | 100.00 | 93.70 | 112.69 | 139.56 | 129.47 | 146.66 | |||||||||||||||||||
S&P Retailing | 100.00 | 118.07 | 140.98 | 203.43 | 210.40 | 253.71 |
A. | The lines represent monthly index levels derived from compounded daily returns that include all dividends. |
B. | The indices are |
C. | If the monthly interval, based on the fiscal |
Fiscal period | | Total Number of Shares Purchased1 | | Average Price Paid |
| | Total Number of Shares Purchased as Part of a Publicly Announced Program1 |
| | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program |
| |||||||
October 29, 2018 | – November 25, 2018 | 141,671 | $ 59.12 | 141,671 | $ 290,522,000 | |||||||||||||
November 26, 2018 | – December 30, 2018 | 1,074,046 | $ 48.96 | 1,074,046 | $ 237,934,000 | |||||||||||||
December 31, 2018 | – February 3, 2019 | 273,455 | $ 51.63 | 273,455 | $ 223,815,000 | |||||||||||||
Total | 1,489,172 | $ 50.42 | 1,489,172 | $ 223,815,000 |
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 | ||||||||||||||
November 4, 2019 | – December 1, 2019 | 160,918 | $ 69.90 | 160,918 | $ 599,853,000 | |||||||||||||
December 2, 2019 | – December 29, 2019 | 158,780 | $ 70.85 | 158,780 | $ 588,604,000 | |||||||||||||
December 30, 2019 | – February 2, 2020 | 183,262 | $ 74.33 | 183,262 | $ 574,982,000 | |||||||||||||
Total | 502,960 | $ 71.81 | 502,960 | $ 574,982,000 |
1 |
|
ITEM 6. | SELECTED FINANCIAL DATA |
Fiscal 20181 (53 Weeks) Fiscal 2017 (52 Weeks) Fiscal 2016 (52 Weeks) Fiscal 2015 (52 Weeks) Fiscal 2014 (52 Weeks) Results of Operations Net revenues Net revenue growth Comparable brand revenue growth2 Gross profit Gross margin Operating income Operating margin3 Net earnings Basic earnings per share Diluted earnings per share Shares used in calculation of earnings per share: Diluted Financial Position Working capital4 Total assets Return on assets Net cash provided by operating activities Capital expenditures Long-term debt and other long-term liabilities Stockholders’ equity Stockholders’ equity per share (book value) Return on equity Annual dividends declared per share E-commerce Net Revenues E-commerce net revenue growth E-commerce net revenues as a percent of net revenues Retail Net Revenues Retail net revenue growth (decline) Retail net revenues as a percent of net revenues Number of stores atyear-end Store selling square footage atyear-end Store leased square footage atyear-end Operating margin is defined as operating income as a percent of net revenues.In thousands, except percentages, per share amounts
and retail stores data $ 5,671,593 $ 5,292,359 $ 5,083,812 $ 4,976,090 $ 4,698,719 7.2% 4.1% 2.2% 5.9% 7.1% 3.7% 3.2% 0.7% 3.7% 7.1% $ 2,101,013 $ 1,931,711 $ 1,883,310 $ 1,844,214 $ 1,800,504 37.0% 36.5% 37.0% 37.1% 38.3% $ 435,953 $ 453,811 $ 472,599 $ 488,634 $ 502,265 7.7% 8.6% 9.3% 9.8% 10.7% $ 333,684 $ 259,545 $ 305,387 $ 310,068 $ 308,854 $ 4.10 $ 3.03 $ 3.45 $ 3.42 $ 3.30 $ 4.05 $ 3.02 $ 3.41 $ 3.37 $ 3.24
Basic 81,420 85,592 88,594 90,787 93,634 82,340 86,080 89,462 92,102 95,200 $ 619,531 $ 628,622 $ 405,924 $ 339,673 $ 515,975 $ 2,812,844 $ 2,785,749 $ 2,476,879 $ 2,417,427 $ 2,330,277 11.9% 9.9% 12.5% 13.1% 13.2% $ 585,986 $ 499,704 $ 524,709 $ 544,026 $ 461,697 $ 190,102 $ 189,712 $ 197,414 $ 202,935 $ 204,800 $ 380,944 $ 372,226 $ 71,215 $ 49,713 $ 62,698 $ 1,155,714 $ 1,203,566 $ 1,248,220 $ 1,198,226 $ 1,224,706 $ 14.66 $ 14.37 $ 14.29 $ 13.38 $ 13.33 28.3% 21.2% 25.0% 25.6% 24.9% $ 1.72 $ 1.56 $ 1.48 $ 1.40 $ 1.32 10.9% 5.5% 4.4% 6.4% 12.1% 54.3% 52.5% 51.8% 50.7% 50.5% 3.0% 2.6% (0.1% ) 5.4% 2.4% 45.7% 47.5% 48.2% 49.3% 49.5% 625 631 629 618 601 4,105,000 4,019,000 3,951,000 3,827,000 3,684,000 6,557,000 6,451,000 6,359,000 6,163,000 5,965,000 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Basic $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Accounting Standards Update ASU2015,2019, we prospectively adopted Accounting Standards Update2015-17, Balance Sheet Classification (“ASU”)Deferred Taxes,the adoption date. Amounts reported for fiscal 2018 and now present both deferred tax assets and deferred tax liabilities as noncurrent in our Consolidated Balance Sheets. Prior balance sheets wereprior years have not retrospectivelybeen adjusted, and as a result, working capital for fiscal 2014 may notcontinue to be comparablereported in accordance with previous lease accounting guidance. See Note A to other years.the Consolidated Financial Statements.
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
United Kingdom operations.
Across the business, fiscal 2018 was a year of delivering more compelling experiences for our customers. As part of our strategic priority of digital leadership, we enhanced the e-commerce experience through two differentiators: content and convenience. In fiscal 2018, we updated our shop path with more accurate and engaging content that is inspirational and drives conversion. We also enhanced our product information pages with a focus on product quality and reasons to buy. To provide our customers with omni-channel convenience, we launched Buy Online Pickup In Store in our brands and are in the process of scaling other fulfillment capabilities such as Buy Online Ship To Store and Buy Online Ship From Store. As a result, our e-commerce revenue growth almost doubled in fiscal 2018. With over 54% of our business conducted online, we are among the top 25 e-commerce retailers in North America.
We are usingscale. Our cross-brand initiatives to strengthen our position as the resource for all home furnishing, cooking and entertaining needs. In fiscal 2018, we continued to scale our loyalty program, The Key, where we have seen strongcontinues to be an impactful driver of revenues and customer acquisition as total membership growth overcontinued to grow during the past year, as well aswhile our complimentary design service, Design Crew.Crew, continued to be a significant revenue driver of sales in store. Fiscal 2019 was also a strong start for our new cross-brand Business to Business (B2B) division as we delivered several key wins, which establish an important foundation for our future growth and demonstrate the appeal of our differentiated value proposition to B2B clients.
During the year, we launched a machine-learning search engine that allows us to provide more relevant and personalized search results. We added more storytelling and selling content on our product information pages and further optimized our site navigation. We also improved our mobile site speed within search and product information pages through enhancements to our Progressive Web App platform. In addition, we implemented more functional improvements to our Outward-powered Design Crew room planner. In our supply chain, we continued to drive operational improvements which contributed to another year of strong growth and better customer service. Within our
In summary, 2018 was7.9% from 7.7% last year. We also delivered another year of solid financial and operational accomplishments resulting in earnings androbust operating cash flow, generation thatwhich allowed us to return approximately $435,629,000$299,474,000 to our stockholders through stock repurchasesdividends and dividends.
Overshare repurchases.
In thousands | Fiscal 2018 (53 Weeks) | % Total | Fiscal 2017 (52 Weeks) | % Total | Fiscal 2016 (52 Weeks) | % Total | ||||||||||||||||||
E-commerce net revenues | $ | 3,082,064 | 54.3% | $ | 2,778,457 | 52.5% | $ | 2,633,602 | 51.8% | |||||||||||||||
Retail net revenues | 2,589,529 | 45.7% | 2,513,902 | 47.5% | 2,450,210 | 48.2% | ||||||||||||||||||
Net revenues | $ | 5,671,593 | 100.0% | $ | 5,292,359 | 100.0% | $ | 5,083,812 | 100.0% |
private label and
Net revenues in fiscal 2017 increased by $208,547,000 or 4.1%, compared to fiscal 2016, with comparable brand revenue growth of 3.2%. This increase in net revenues was driven by a 5.5% increase ine-commerce net revenues (primarily driven by West Elm, Williams Sonoma and Rejuvenation) and a 2.6% increase in retail net revenues (primarily driven by Pottery Barn and West Elm), with particular strength in furniture. Total fiscal 2017 net revenue growth was partially attributable to a 1.4% increase in store leased square footage primarily due to 2 net new stores,our Canadian
In thousands | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
Pottery Barn | $ | 2,177,344 | $ | 2,066,302 | $ | 2,024,218 | ||||||
West Elm | 1,292,928 | 1,114,339 | 971,568 | |||||||||
Williams Sonoma | 1,056,125 | 1,022,434 | 1,002,194 | |||||||||
Pottery Barn Kids and Teen1 | 895,762 | 860,468 | 873,199 | |||||||||
Other2 | 249,434 | 228,816 | 212,633 | |||||||||
Total | $ | 5,671,593 | $ | 5,292,359 | $ | 5,083,812 |
In thousands | Fiscal 2019 (52 Weeks) | Fiscal 2018 (53 Weeks) | ||||||
Pottery Barn | $ | 2,214,397 | $ | 2,177,344 | ||||
West Elm | 1,466,537 | 1,292,928 | ||||||
Williams Sonoma | 1,032,368 | 1,056,125 | ||||||
Pottery Barn Kids and Teen | 908,561 | 895,762 | ||||||
Other 1 | 276,145 | 249,434 | ||||||
Total | $ | 5,898,008 | $ | 5,671,593 |
1 |
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retail comparable store sales and
permanent stores where gross square footage did not change by more than 20% in the previous 12 months and which have been open for at least 12 consecutive months without closure for seven or more consecutive days. Outlet comparable store net revenues are included in their respective brands. Sales to our international franchisees are excluded from comparable brand revenue as their stores and
Comparable brand revenue growth (decline)1 | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
Pottery Barn | 1.2% | 1.0% | (3.5% | ) | ||||||||
West Elm | 9.5% | 10.2% | 12.8% | |||||||||
Williams Sonoma | 1.7% | 3.2% | 1.3% | |||||||||
Pottery Barn Kids and Teen | 2.8% | (1.7% | ) | (2.8% | ) | |||||||
Total2 | 3.7% | 3.2% | 0.7% |
Comparable brand revenue growth 1 | Fiscal 2019 (52 Weeks) | Fiscal 2018 (53 Weeks) | ||||||
Pottery Barn | 4.1% | 1.2% | ||||||
West Elm | 14.4% | 9.5% | ||||||
Williams Sonoma | 0.4% | 1.7% | ||||||
Pottery Barn Kids and Teen | 4.5% | 2.8% | ||||||
Total 2 | 6.0% | 3.7% |
1 |
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2 | Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham. |
In thousands | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
Retail net revenues | $ | 2,589,529 | $ | 2,513,902 | $ | 2,450,210 | ||||||
Retail net revenue growth (decline) | 3.0% | 2.6% | (0.1% | ) | ||||||||
Store count – beginning of year | 631 | 629 | 618 | |||||||||
Store openings1 | 23 | 28 | 29 | |||||||||
Store closings1 | (29 | ) | (26 | ) | (18 | ) | ||||||
Store count – end of year | 625 | 631 | 629 | |||||||||
Store selling square footage atyear-end | 4,105,000 | 4,019,000 | 3,951,000 | |||||||||
Store leased square footage (“LSF”) atyear-end | 6,557,000 | 6,451,000 | 6,359,000 |
|
Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | ||||||||||||||||||||||
Store Count | Avg. LSF Per Store | Store Count | Avg. LSF Per Store | Store Count | Avg. LSF Per Store | |||||||||||||||||||
Williams Sonoma | 220 | 6,900 | 228 | 6,700 | 234 | 6,600 | ||||||||||||||||||
Pottery Barn | 205 | 14,200 | 203 | 13,900 | 201 | 13,900 | ||||||||||||||||||
West Elm | 112 | 13,100 | 106 | 13,100 | 98 | 13,300 | ||||||||||||||||||
Pottery Barn Kids | 78 | 7,500 | 86 | 7,400 | 89 | 7,400 | ||||||||||||||||||
Rejuvenation | 10 | 8,500 | 8 | 8,800 | 7 | 9,100 | ||||||||||||||||||
Total | 625 | 10,500 | 631 | 10,200 | 629 | 10,100 |
In thousands | Fiscal 2019 (52 Weeks) | Fiscal 2018 (53 Weeks) | ||||||
Store count – beginning of year | 625 | 631 | ||||||
Store openings | 14 | 23 | ||||||
Store closings | (25 | ) | (29 | ) | ||||
Store count – end of year | 614 | 625 | ||||||
Store selling square footage at year-end | 4,129,000 | 4,105,000 | ||||||
Store leased square footage (“LSF”) at year-end | 6,558,000 | 6,557,000 |
Fiscal 2019 | Fiscal 2018 | |||||||||||||||
Store Count | Avg. LSF Per Store | Store Count | Avg. LSF Per Store | |||||||||||||
Williams Sonoma | 211 | 6,900 | 220 | 6,900 | ||||||||||||
Pottery Barn | 201 | 14,400 | 205 | 14,200 | ||||||||||||
West Elm | 118 | 13,100 | 112 | 13,100 | ||||||||||||
Pottery Barn Kids | 74 | 7,700 | 78 | 7,500 | ||||||||||||
Rejuvenation | 10 | 8,500 | 10 | 8,500 | ||||||||||||
Total | 614 | 10,700 | 625 | 10,500 |
In thousands | Fiscal 2018 (53 Weeks) | % Net Revenues | Fiscal 2017 (52 Weeks) | % Net Revenues | Fiscal 2016 (52 Weeks) | % Net Revenues | ||||||||||||||||||
Cost of goods sold1 | $ | 3,570,580 | 63.0% | $ | 3,360,648 | 63.5% | $ | 3,200,502 | 63.0% |
In thousands | Fiscal 2019 (52 Weeks) | % Net Revenues | Fiscal 2018 (53 Weeks) | % Net Revenues | ||||||||||||
Cost of goods sold 1 | $ | 3,758,916 | 63.7% | $ | 3,570,580 | 63.0% |
1 |
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Within our reportable segments, thee-commerce channel does not incurfreight-to-store or store occupancy expenses, and typically operates with lower markdowns and inventory shrinkage than the retail channel. However, thee-commerce channel incurs higher customer shipping, damage and replacement costs than the retail channel.
2018
In thee-commerce channel, cost of goods sold as a percentage of net revenues decreased in fiscal 2018 compared to fiscal 2017, primarily driven by higher selling margins.
In the retail channel, cost of goods sold as a percentage of net revenues increased in fiscal 2018 compared to fiscal 2017, primarily driven by lower selling margins, partially offset by the leverage of occupancy costs.
Fiscal 2017 vs. Fiscal 2016
Cost of goods sold increased by $160,146,000, or 5.0%, in fiscal 2017 compared to fiscal 2016.2018. Cost of goods sold as a percentage of net revenues increased to 63.5%63.7% in fiscal 20172019 from 63.0% in fiscal 2016.2018. This increase was driven by lower merchandise margins, higher shipping costs and reduced shipping income, partially offset by reduced fulfillment-related costs in our supply chain and the leverage of occupancy costs.
In thee-commerce channel, cost of goods sold as a percentage of net revenues increased in fiscal 2017 compared to fiscal 2016 primarily driven by lower merchandise margins, reduced shipping income and higheryear-over-year occupancy leverage resulting from one less week of sales in fiscal 2019, increased shipping costs partially offset by reduced fulfillment-related costs in our supply chaindue to a larger mix of furniture and a reduction in occupancy costs.
In the retail channel, cost of goods sold as a percentage of net revenues increased in fiscal 2017 compareddrop-ship sales that are more expensive to fiscal 2016 primarily driven by lower selling margins,ship, as well as higher occupancy costs to support our growth initiatives.
In thousands | Fiscal 2018 (53 weeks)1 | % Net Revenues1 | Fiscal 2017 (52 weeks) | % Net Revenues | Fiscal 2016 (52 weeks) | % Net Revenues | ||||||||||||||||||
Selling, general and administrative expenses | $ | 1,665,060 | 29.4% | $ | 1,477,900 | 27.9% | $ | 1,410,711 | 27.7% |
|
In thousands | Fiscal 2019 (52 weeks) | % Net Revenues | Fiscal 2018 (53 weeks) | % Net Revenues | ||||||||||||
Selling, general and administrative expenses | $ | 1,673,218 | 28.4% | $ | 1,665,060 | 29.4% |
We experience differing employment and advertising costs as a percentage of net revenues within the retail ande-commerce channels due to their distinct distribution and marketing strategies. Employment costs represent a greater percentage of net revenues within the retail channel as compared to thee-commerce channel. However, advertising expenses are higher within thee-commerce channel than in the retail channel.
2018
In thee-commerce channel, selling, general and administrative expenses as a percentage of net revenues increased in fiscal 2018 compared to fiscal 2017, driven by an increase in general expenses primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues, the impact from our acquisition of Outward, as well as increased hourly wages and digital advertising from the reinvestment of tax savings, partially offset by the optimization of catalog advertising costs.
In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased in fiscal 2018 compared to fiscal 2017, driven by an increase in general expenses primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues as well as impairment and early lease termination charges related to underperforming retail stores.
Fiscal 2017 vs. Fiscal 2016
Selling, general and administrative expenses increased by $67,189,000, or 4.8%, in fiscal 2017 compared to fiscal 2016. Selling, general and administrative expenses as a percentage of net revenues increased to 27.9% in fiscal 2017 from 27.7% in fiscal 2016. This increase as a percentage of net revenues was primarily driven by higher digital advertising expenses resulting from our focus on new customer acquisition. This increase was partially offset by lower employment expenses within the unallocated segment.
In thee-commerce channel, selling, general and administrative expenses as a percentage of net revenues increased in fiscal 2017 compared to fiscal 2016 primarily driven by higher digital advertising expenses.
In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased in fiscal 2017 compared to fiscal 2016 primarily driven by an increase in employment expenses to support our growth initiatives.
Staff Accounting Bulletin No. 118 (“SAB 118”) issued by the SEC in December 2017 provided us with up to one year to finalize our measurement of the income tax effects of the Tax Act on our fiscal year ended January 28, 2018. As of January 28, 2018, we had made reasonable estimates of the income tax effects of the Tax Act, including the transition tax under Internal Revenue Code section 965.
As of February 3, 2019, we have completed the accounting for the income tax effects of the Tax Act based on our current interpretation of available notices and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service. As a result, during fiscal 2018 we recorded an immaterial adjustment to the fiscal 2017 provisional transition tax amount. In addition, during fiscal 2018, we booked a net tax benefit of approximately $10,576,000 from there-measurement of our deferred tax assets.
We have historically elected not to provide for U.S. income taxes with respect to the undistributed earnings of our foreign subsidiaries as we intended to utilize those earnings in our foreign operations for an indefinite period of time. Under Internal Revenue Code section 965 of the Tax Act, we are deemed to have distributed all the post-1986 earnings of our foreign subsidiaries to the U.S. as of December 31, 2017. In light of the Tax Act, were-evaluated our permanent reinvestment assertion with respect to unremitted foreign earnings, and we are now only permanently reinvested with respect to our foreign earnings in Canada beginning in fiscal 2018. As a result, we recorded approximately $1,493,000 of foreign withholding tax and additional state income tax in fiscal 2018. As of February 3, 2019, the post-fiscal 2017 earnings of our Canadian subsidiary are permanently reinvested. If we did not consider these earnings to be permanently reinvested, the deferred tax liability would have been immaterial as of February 3, 2019.
In fiscal 2018, we are subject to several provisions of the Tax Act, including GILTI, the base erosion anti-abuse tax and a deduction for foreign-derived intangible income. We have elected to account for GILTI as a periodic expense when the tax arises. The net impact due to these provisions was immaterial in fiscal 2018.
Our effective tax rate was 22.3% for fiscal 2018, 42.6% for fiscal 2017 and 35.3% for fiscal 2016. The decrease in the effective tax rate from fiscal 2017 was primarily due to the reduction of the U.S. corporate income tax rate from 35% to 21% as of January 1, 2018 as a result of the Tax Act, as well as the tax benefit from the true up of the remeasurement of our deferred tax assets under SAB 118.
2018.
were repaid in the fourth quarter of fiscal 2017. As of February 3, 2019,2, 2020, we had $300,000,000 outstanding under our term loan. The term loan matures on January 8, 2021, at which point all outstanding principal and any accrued interest must be repaid. Prior to maturity in fiscal 2020, we intend to renew and extend our $300,000,000 term loan. See Note P: Subsequent Events to our Consolidated Financial Statements. Additionally, as of February 3, 2019,2, 2020, a total of $11,732,000$12,187,000 in issued but undrawn standby letters of credit were outstanding under the credit facility. The standby letters of credit were issued to secure the liabilities associated with workers’ compensation and other insurance programs.
see “Risk Factors” in Item 1A and Note P: Subsequent Events to our Consolidated Financial Statements.
For fiscal 2017, net cash provided by operating activities was $499,704,000 compared to $524,709,000 in fiscal 2016. For fiscal 2017, net cash provided by operating activities was primarily attributable to net earnings adjusted fornon-cash items, an increase in income taxes payable, as well as deferred rent and lease incentives, partially offset by an increase in merchandise inventories. This represents a decrease in net cash provided by operating activities compared to fiscal 2016 primarily due to an increase in merchandise inventories and a decrease in net earnings,prepaid expenses, partially offset by an increase in payments for accounts payable and accrued expenses, and a decrease in income taxes paid in fiscal 2017 compared to fiscal 2016.
gift card and other deferred revenue.
For fiscal 2017, net cash used in investing activities was $269,760,000 compared to $196,975,000 in fiscal 2016, and was primarily attributable to purchases of property and equipment and the acquisition of Outward. Net cash used in investing activities compared to fiscal 2016 increased due to the acquisition of Outward.
For fiscal 2017, net cash used in financing activities was $51,707,000 compared to $305,806,000 in fiscal 2016. For fiscal 2017, net cash used in financing activities was primarily attributable to repurchases of common stock of $196,179,000 and the payment of dividends of $135,010,000, partially offset by proceeds from issuance of long-term debt of $300,000,000. Net cash used in financing activities compared to fiscal 2016 decreased primarily due to proceeds from the issuance of long-term debt, partially offset by an increase in repurchases of common stock.
Payments Due by Period1 | ||||||||||||||||||||
In thousands | Fiscal 2019 | Fiscal 2020 to Fiscal 2022 | Fiscal 2023 to Fiscal 2024 | Thereafter | Total | |||||||||||||||
Long-term debt 2 | $ | — | $ | 300,000 | $ | — | $ | — | $ | 300,000 | ||||||||||
Interest | 10,898 | 10,232 | — | — | 21,130 | |||||||||||||||
Operating leases3 | 292,387 | 678,447 | 298,086 | 422,024 | 1,690,944 | |||||||||||||||
Purchase obligations4 | 960,132 | 29,271 | 186 | — | 989,589 | |||||||||||||||
Total | $ | 1,263,417 | $ | 1,017,950 | $ | 298,272 | $ | 422,024 | $ | 3,001,663 |
Payments Due by Period 1 | ||||||||||||||||||||
In thousands | Fiscal 2020 | Fiscal 2021 to Fiscal 2023 | Fiscal 2024 to Fiscal 2025 | Thereafter | Total | |||||||||||||||
Current debt 2 | $ | 300,000 | $ | — | $ | — | $ | — | $ | 300,000 | ||||||||||
Interest | 9,634 | — | — | — | 9,634 | |||||||||||||||
Operating leases 3 | 281,995 | 637,867 | 284,461 | 333,413 | 1,537,736 | |||||||||||||||
Purchase obligations 4 | 857,106 | 28,420 | 83 | — | 885,609 | |||||||||||||||
Total | $ | 1,448,735 | $ | 666,287 | $ | 284,544 | $ | 333,413 | $ | 2,732,979 |
1 |
|
|
3 |
|
4 |
|
2, 2020.
Amount of Outstanding Commitment Expiration by Period1 | ||||||||||||||||||||
In thousands | Fiscal 2019 | Fiscal 2020 to Fiscal 2022 | Fiscal 2023 to Fiscal 2024 | Thereafter | Total | |||||||||||||||
Standby letters of credit | $ | 11,732 | $ | — | $ | — | $ | — | $ | 11,732 | ||||||||||
Letter of credit facilities | 6,820 | — | — | — | 6,820 | |||||||||||||||
Total | $ | 18,552 | $ | — | $ | — | $ | — | $ | 18,552 |
Amount of Outstanding Commitment Expiration by Period 1 | ||||||||||||||||||||
In thousands | Fiscal 2020 | Fiscal 2021 to Fiscal 2023 | Fiscal 2024 to Fiscal 2025 | Thereafter | Total | |||||||||||||||
Standby letters of credit | $ | 12,187 | $ | — | $ | — | $ | — | $ | 12,187 | ||||||||||
Letter of credit facilities | 6,462 | — | — | — | 6,462 | |||||||||||||||
Total | $ | 18,649 | $ | — | $ | — | $ | — | $ | 18,649 |
1 | See Note C to our Consolidated Financial Statements for discussion of our borrowing arrangements. |
environment, historical results and current inventory trends. If actual obsolescence or shrinkage estimates change from our original estimate, we will adjust our reserves accordingly throughout the year. We have made no material changes to our assumptions included in the calculations of the obsolescence and shrinkage reserves throughout the year. In addition, we do not believe a 10% change in our inventory reserves would have a material effect on our net earnings. As of February 2, 2020 and February 3, 2019, and January 28, 2018, our inventory obsolescence reserves were $13,424,000 and $13,580,000, and $12,649,000, respectively.
Property and Equipment
Consolidated Financial Statements). During fiscal 2018, we recorded asset impairment charges of approximately $9,639,000, related to property and equipment for our retail stores, which is recorded within selling, general and administrative expenses. During fiscal 2017,
leases are currently classified as operating leases.
unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future, such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.
2017.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
See Note P: Subsequent Events to our Consolidated Financial Statements.
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
(53 weeks) (52 weeks) (52 weeks) E-commerce net revenues Retail net revenues Net revenues Cost of goods sold Gross profit Selling, general and administrative expenses Operating income Interest (income) expense, net Earnings before income taxes Income taxes Net earnings Basic earnings per share Diluted earnings per share Shares used in calculation of earnings per share: Basic DilutedIn thousands, except per share amounts Fiscal 2018 Fiscal 2017 Fiscal 2016 $ 3,082,064 $ 2,778,457 $ 2,633,602 2,589,529 2,513,902 2,450,210 5,671,593 5,292,359 5,083,812 3,570,580 3,360,648 3,200,502 2,101,013 1,931,711 1,883,310 1,665,060 1,477,900 1,410,711 435,953 453,811 472,599 6,706 1,372 688 429,247 452,439 471,911 95,563 192,894 166,524 $ 333,684 $ 259,545 $ 305,387 $ 4.10 $ 3.03 $ 3.45 $ 4.05 $ 3.02 $ 3.41 81,420 85,592 88,594 82,340 86,080 89,462
In thousands, except per share amounts | Fiscal 2019 (52 weeks) | Fiscal 2018 (53 weeks) | Fiscal 2017 (52 weeks) | |||||||||
Net revenues | $ | 5,898,008 | $ | 5,671,593 | $ | 5,292,359 | ||||||
Cost of goods sold | 3,758,916 | 3,570,580 | 3,360,648 | |||||||||
Gross profit | 2,139,092 | 2,101,013 | 1,931,711 | |||||||||
Selling, general and administrative expenses | 1,673,218 | 1,665,060 | 1,477,900 | |||||||||
Operating income | 465,874 | 435,953 | 453,811 | |||||||||
Interest (income) expense, net | 8,853 | 6,706 | 1,372 | |||||||||
Earnings before income taxes | 457,021 | 429,247 | 452,439 | |||||||||
Income taxes | 100,959 | 95,563 | 192,894 | |||||||||
Net earnings | $ | 356,062 | $ | 333,684 | $ | 259,545 | ||||||
Basic earnings per share | $ | 4.56 | $ | 4.10 | $ | 3.03 | ||||||
Diluted earnings per share | $ | 4.49 | $ | 4.05 | $ | 3.02 | ||||||
Shares used in calculation of earnings per share: | ||||||||||||
Basic | 78,108 | 81,420 | 85,592 | |||||||||
Diluted | 79,225 | 82,340 | 86,080 |
In thousands | | Fiscal 2018 (53 weeks) |
| | Fiscal 2017 (52 weeks) |
| | Fiscal 2016 (52 weeks) |
| |||
Net earnings | $ 333,684 | $ 259,545 | $ 305,387 | |||||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | (5,032 | ) | 3,730 | 1,523 | ||||||||
Change in fair value of derivative financial instruments, net of tax (tax benefit) of $390, $(259) and $(327) | 1,098 | (715 | ) | (916 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax (tax benefit) of $122, $(38) and $(41) | (357 | ) | 106 | 106 | ||||||||
Comprehensive income | $ 329,393 | $ 262,666 | $ 306,100 |
In thousands | Fiscal 2019 (52 weeks) | Fiscal 2018 (53 weeks) | Fiscal 2017 (52 weeks) | |||||||||
Net earnings | $ | 356,062 | $ | 333,684 | $ | 259,545 | ||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | (3,334 | ) | (5,032 | ) | 3,730 | |||||||
Change in fair value of derivative financial instruments, net of tax (tax benefit) of $195, $390 and $(259) | 163 | 1,098 | (715 | ) | ||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax (tax benefit) of $261, $122 and $(38) | (343 | ) | (357 | ) | 106 | |||||||
Comprehensive income | $ | 352,548 | $ | 329,393 | $ | 262,666 |
In thousands, except per share amounts | Feb. 3, 2019 | Jan. 28, 2018 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 338,954 | $ | 390,136 | ||||
Accounts receivable, net | 107,102 | 90,119 | ||||||
Merchandise inventories, net | 1,124,992 | 1,061,593 | ||||||
Prepaid catalog expenses | — | 20,517 | ||||||
Prepaid expenses | 101,356 | 62,204 | ||||||
Other current assets | 21,939 | 11,876 | ||||||
Total current assets | 1,694,343 | 1,636,445 | ||||||
Property and equipment, net | 929,635 | 932,283 | ||||||
Deferred income taxes, net | 44,055 | 67,306 | ||||||
Goodwill | 85,382 | 18,838 | ||||||
Other long-term assets, net | 59,429 | 130,877 | ||||||
Total assets | $ | 2,812,844 | $ | 2,785,749 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 526,702 | $ | 457,144 | ||||
Accrued expenses | 163,559 | 134,207 | ||||||
Gift card and other deferred revenue | 290,445 | 300,607 | ||||||
Income taxes payable | 21,461 | 56,783 | ||||||
Other current liabilities | 72,645 | 59,082 | ||||||
Total current liabilities | 1,074,812 | 1,007,823 | ||||||
Deferred rent and lease incentives | 201,374 | 202,134 | ||||||
Long-term debt | 299,620 | 299,422 | ||||||
Other long-term liabilities | 81,324 | 72,804 | ||||||
Total liabilities | 1,657,130 | 1,582,183 | ||||||
Commitments and contingencies – See Note I | ||||||||
Stockholders’ equity | ||||||||
Preferred stock: $.01 par value; 7,500 shares authorized; none issued | — | — | ||||||
Common stock: $.01 par value; 253,125 shares authorized; 78,813 and 83,726 shares issued and outstanding at February 3, 2019 and January 28, 2018, respectively | 789 | 837 | ||||||
Additionalpaid-in capital | 581,900 | 562,814 | ||||||
Retained earnings | 584,333 | 647,422 | ||||||
Accumulated other comprehensive loss | (11,073 | ) | (6,782 | ) | ||||
Treasury stock – at cost: 2 and 11 shares as of February 3, 2019 and January 28, 2018, respectively | (235 | ) | (725 | ) | ||||
Total stockholders’ equity | 1,155,714 | 1,203,566 | ||||||
Total liabilities and stockholders’ equity | $ | 2,812,844 | $ | 2,785,749 |
In thousands, except per share amounts | Feb. 2, 2020 | Feb. 3, 2019 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 432,162 | $ | 338,954 | ||||
Accounts receivable, net | 111,737 | 107,102 | ||||||
Merchandise inventories, net | 1,100,544 | 1,124,992 | ||||||
Prepaid expenses | 90,426 | 101,356 | ||||||
Other current assets | 20,766 | 21,939 | ||||||
Total current assets | 1,755,635 | 1,694,343 | ||||||
Property and equipment, net | 929,038 | 929,635 | ||||||
Operating lease right-of-use assets | 1,166,383 | — | ||||||
Deferred income taxes, net | 47,977 | 44,055 | ||||||
Goodwill | 85,343 | 85,382 | ||||||
Other long-term assets, net | 69,666 | 59,429 | ||||||
Total assets | $ | 4,054,042 | $ | 2,812,844 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 521,235 | $ | 526,702 | ||||
Accrued expenses | 175,003 | 163,559 | ||||||
Gift card and other deferred revenue | 289,613 | 290,445 | ||||||
Income taxes payable | 22,501 | 21,461 | ||||||
Current debt | 299,818 | — | ||||||
Operating lease liabilities | 227,923 | — | ||||||
Other current liabilities | 73,462 | 72,645 | ||||||
Total current liabilities | 1,609,555 | 1,074,812 | ||||||
Deferred rent and lease incentives | 27,659 | 201,374 | ||||||
Long-term debt | — | 299,620 | ||||||
Long-term operating lease liabilities | 1,094,579 | — | ||||||
Other long-term liabilities | 86,389 | 81,324 | ||||||
Total liabilities | 2,818,182 | 1,657,130 | ||||||
Commitments and contingencies – See Note I | ||||||||
Stockholders’ equity | ||||||||
Preferred stock: $.01 par value; 7,500 shares authorized; NaN issued | — | — | ||||||
Common stock: $.01 par value; 253,125 shares authorized; 77,137 and 78,813 shares issued and outstanding at February 2, 2020 and February 3, 2019, respectively | 772 | 789 | ||||||
Additional paid-in capital | 605,822 | 581,900 | ||||||
Retained earnings | 644,794 | 584,333 | ||||||
Accumulated other comprehensive loss | (14,587 | ) | (11,073 | ) | ||||
Treasury stock – at cost: 14 and 2 shares as of February 2, 2020 and February 3, 2019, respectively | (941 | ) | (235 | ) | ||||
Total stockholders’ equity | 1,235,860 | 1,155,714 | ||||||
Total liabilities and stockholders’ equity | $ | 4,054,042 | $ | 2,812,844 |
Common Stock | Additional Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||||
In thousands | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 31, 2016 | 89,563 | $ | 896 | $ | 541,307 | $ | 668,545 | $ | (10,616) | $ | (1,906 | ) | $ | 1,198,226 | ||||||||||||||
Net earnings | — | — | — | 305,387 | — | — | 305,387 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 1,523 | — | 1,523 | |||||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | (916 | ) | — | (916 | ) | |||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | 106 | — | 106 | |||||||||||||||||||||
Exercise of stock-based awards and related tax effect | 39 | — | 4,762 | — | — | — | 4,762 | |||||||||||||||||||||
Conversion/release of stock-based awards1 | 594 | 6 | (26,805 | ) | — | — | (263 | ) | (27,062 | ) | ||||||||||||||||||
Repurchases of common stock | (2,871 | ) | (29 | ) | (12,684 | ) | (138,559 | ) | — | — | (151,272 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans1 | — | — | (706 | ) | (83 | ) | — | 789 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 51,054 | — | — | — | 51,054 | |||||||||||||||||||||
Dividends declared | — | — | — | (133,588 | ) | — | — | (133,588 | ) | |||||||||||||||||||
Balance at January 29, 2017 | 87,325 | 873 | 556,928 | 701,702 | (9,903 | ) | (1,380 | ) | 1,248,220 | |||||||||||||||||||
Net earnings | — | — | — | 259,545 | — | — | 259,545 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 3,730 | — | 3,730 | |||||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | (715 | ) | — | (715 | ) | |||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | 106 | — | 106 | |||||||||||||||||||||
Conversion/release of stock-based awards1 | 452 | 5 | (17,810 | ) | — | — | (325 | ) | (18,130 | ) | ||||||||||||||||||
Repurchases of common stock | (4,051 | ) | (41 | ) | (18,518 | ) | (177,620 | ) | — | — | (196,179 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans1 | — | — | (554 | ) | (426 | ) | — | 980 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 42,768 | — | — | — | 42,768 | |||||||||||||||||||||
Dividends declared | — | — | — | (135,779 | ) | — | — | (135,779 | ) | |||||||||||||||||||
Balance at January 28, 2018 | 83,726 | 837 | 562,814 | 647,422 | (6,782 | ) | (725 | ) | 1,203,566 | |||||||||||||||||||
Net earnings | — | — | — | 333,684 | — | — | 333,684 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (5,032 | ) | — | (5,032 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 1,098 | — | 1,098 | |||||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (357 | ) | — | (357 | ) | |||||||||||||||||||
Conversion/release of stock-based awards1 | 460 | 5 | (14,149 | ) | — | — | (291 | ) | (14,435 | ) | ||||||||||||||||||
Repurchases of common stock | (5,373 | ) | (53 | ) | (25,775 | ) | (269,476 | ) | — | — | (295,304 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans1 | — | — | (418 | ) | (363 | ) | — | 781 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 59,428 | — | — | — | 59,428 | |||||||||||||||||||||
Dividends declared | — | — | — | (144,609 | ) | — | — | (144,609 | ) | |||||||||||||||||||
Adoption of accounting pronouncements2 | — | — | — | 17,675 | — | — | 17,675 | |||||||||||||||||||||
Balance at February 3, 2019 | 78,813 | $ | 789 | $ | 581,900 | $ | 584,333 | $ | (11,073 | ) | $ | (235 | ) | $ | 1,155,714 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||||
In thousands | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 29, 2017 | 87,325 | $ | 873 | $ | 556,928 | $ | 701,702 | $ | (9,903 | ) | $ | (1,380 | ) | $ | 1,248,220 | |||||||||||||
Net earnings | — | — | — | 259,545 | — | — | 259,545 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | 3,730 | — | 3,730 | |||||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | (715 | ) | — | (715 | ) | |||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | 106 | — | 106 | |||||||||||||||||||||
Conversion/release of stock-based awards 1 | 452 | 5 | (17,810 | ) | — | — | (325 | ) | (18,130 | ) | ||||||||||||||||||
Repurchases of common stock | (4,051 | ) | (41 | ) | (18,518 | ) | (177,620 | ) | — | — | (196,179 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (554 | ) | (426 | ) | — | 980 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 42,768 | — | — | — | 42,768 | |||||||||||||||||||||
Dividends declared | — | — | — | (135,779 | ) | — | — | (135,779 | ) | |||||||||||||||||||
Balance at January 28, 2018 | 83,726 | 837 | 562,814 | 647,422 | (6,782 | ) | (725 | ) | 1,203,566 | |||||||||||||||||||
Net earnings | — | — | — | 333,684 | — | — | 333,684 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (5,032 | ) | — | (5,032 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 1,098 | — | 1,098 | |||||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (357 | ) | — | (357 | ) | |||||||||||||||||||
Conversion/release of stock-based awards 1 | 460 | 5 | (14,149 | ) | — | — | (291 | ) | (14,435 | ) | ||||||||||||||||||
Repurchases of common stock | (5,373 | ) | (53 | ) | (25,775 | ) | (269,476 | ) | — | — | (295,304 | ) | ||||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (418 | ) | (363 | ) | — | 781 | — | |||||||||||||||||||
Stock-based compensation expense | — | — | 59,428 | — | — | — | 59,428 | |||||||||||||||||||||
Dividends declared | — | — | — | (144,609 | ) | — | — | (144,609 | ) | |||||||||||||||||||
Adoption of accounting pronouncements 2 | — | — | — | 17,675 | — | — | 17,675 | |||||||||||||||||||||
Balance at February 3, 2019 | 78,813 | 789 | 581,900 | 584,333 | (11,073 | ) | (235 | ) | 1,155,714 | |||||||||||||||||||
Net earnings | — | — | — | 356,062 | — | — | 356,062 | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (3,334 | ) | — | (3,334 | ) | |||||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | — | — | — | — | 163 | — | 163 | |||||||||||||||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax | — | — | — | — | (343 | ) | — | (343 | ) | |||||||||||||||||||
Conversion/release of stock-based awards 1 | 649 | 6 | (27,624 | ) | — | — | (134 | ) | (27,752 | ) | ||||||||||||||||||
Repurchases of common stock | (2,325 | ) | (23 | ) | (11,658 | ) | (136,195 | ) | — | (958 | ) | (148,834 | ) | |||||||||||||||
Reissuance of treasury stock under stock-based compensation plans 1 | — | — | (386 | ) | — | — | 386 | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | 63,590 | — | — | — | 63,590 | |||||||||||||||||||||
Dividends declared | — | — | — | (156,103 | ) | — | — | (156,103 | ) | |||||||||||||||||||
Adoption of accounting pronouncements 3 | — | — | — | (3,303 | ) | — | — | (3,303 | ) | |||||||||||||||||||
Balance at February 2, 2020 | 77,137 | $ | 772 | $ | 605,822 | $ | 644,794 | $ | (14,587 | ) | $ | (941 | ) | $ | 1,235,860 |
1 |
|
2 |
|
In thousands | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings | $ | 333,684 | $ | 259,545 | $ | 305,387 | ||||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 188,808 | 183,077 | 173,195 | |||||||||
Loss on disposal/impairment of assets | 10,209 | 1,889 | 3,806 | |||||||||
Amortization of deferred lease incentives | (26,199 | ) | (25,372 | ) | (25,212 | ) | ||||||
Deferred income taxes | 23,639 | 63,381 | 7,114 | |||||||||
Tax benefit related to stock-based awards | — | — | 3,230 | |||||||||
Excess tax benefit related to stock-based awards | — | — | (4,894 | ) | ||||||||
Stock-based compensation expense | 59,802 | 42,988 | 51,116 | |||||||||
Other | (579 | ) | (135 | ) | (423 | ) | ||||||
Changes in: | ||||||||||||
Accounts receivable | (15,329 | ) | 149 | (9,794 | ) | |||||||
Merchandise inventories | (70,331 | ) | (80,235 | ) | 4,493 | |||||||
Prepaid catalog expenses | — | (1,019 | ) | 6,448 | ||||||||
Prepaid expenses and other assets | (54,691 | ) | (15,475 | ) | (7,521 | ) | ||||||
Accounts payable | 62,377 | 2,549 | 4,276 | |||||||||
Accrued expenses and other liabilities | 45,976 | 9,597 | 19,712 | |||||||||
Gift card and other deferred revenue | 38,899 | (3,002 | ) | 2,020 | ||||||||
Deferred rent and lease incentives | 24,929 | 28,226 | 35,559 | |||||||||
Income taxes payable | (35,208 | ) | 33,541 | (43,803 | ) | |||||||
Net cash provided by operating activities | 585,986 | 499,704 | 524,709 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property and equipment | (190,102 | ) | (189,712 | ) | (197,414 | ) | ||||||
Acquisition of Outward, Inc., net of cash received | — | (80,528 | ) | — | ||||||||
Other | 2,203 | 480 | 439 | |||||||||
Net cash used in investing activities | (187,899 | ) | (269,760 | ) | (196,975 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Repurchases of common stock | (295,304 | ) | (196,179 | ) | (151,272 | ) | ||||||
Payment of dividends | (140,325 | ) | (135,010 | ) | (133,539 | ) | ||||||
Borrowings under revolving line of credit | 60,000 | 170,000 | 125,000 | |||||||||
Repayments of borrowings under revolving line of credit | (60,000 | ) | (170,000 | ) | (125,000 | ) | ||||||
Tax withholdings related to stock-based awards | (14,437 | ) | (18,130 | ) | (27,062 | ) | ||||||
Proceeds from issuance of long-term debt | — | 300,000 | — | |||||||||
Excess tax benefit related to stock-based awards | — | — | 4,894 | |||||||||
Proceeds related to stock-based awards | — | — | 1,532 | |||||||||
Debt issuance costs | — | (1,191 | ) | (359 | ) | |||||||
Other | — | (1,197 | ) | — | ||||||||
Net cash used in financing activities | (450,066 | ) | (51,707 | ) | (305,806 | ) | ||||||
Effect of exchange rates on cash and cash equivalents | 797 | (1,814 | ) | (1,862 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | (51,182 | ) | 176,423 | 20,066 | ||||||||
Cash and cash equivalents at beginning of year | 390,136 | 213,713 | 193,647 | |||||||||
Cash and cash equivalents at end of year | $ | 338,954 | $ | 390,136 | $ | 213,713 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the year for interest | $ | 11,424 | $ | 2,915 | $ | 2,202 | ||||||
Cash paid during the year for income taxes, net of refunds | $ | 107,951 | $ | 99,062 | $ | 203,426 | ||||||
Non-cash investing activities: | ||||||||||||
Purchases of property and equipment not yet paid for at end of year | $ | 2,773 | $ | 1,257 | $ | 625 |
In thousands | Fiscal 2019 (52 Weeks) | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | |||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings | $ | 356,062 | $ | 333,684 | $ | 259,545 | ||||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 187,759 | 188,808 | 183,077 | |||||||||
Loss on disposal/impairment of assets | 1,755 | 10,209 | 1,889 | |||||||||
Amortization of deferred lease incentives | (7,714 | ) | (26,199 | ) | (25,372 | ) | ||||||
Non-cash lease expense | 215,810 | — | — | |||||||||
Deferred income taxes | (2,557 | ) | 23,639 | 63,381 | ||||||||
Stock-based compensation expense | 64,163 | 59,802 | 42,988 | |||||||||
Other | (26 | ) | (579 | ) | (135 | ) | ||||||
Changes in: | ||||||||||||
Accounts receivable | (5,034 | ) | (15,329 | ) | 149 | |||||||
Merchandise inventories | 24,219 | (70,331 | ) | (80,235 | ) | |||||||
Prepaid catalog expenses | — | — | (1,019 | ) | ||||||||
Prepaid expenses and other assets | (3,189 | ) | (54,691 | ) | (15,475 | ) | ||||||
Accounts payable | (11,051 | ) | 62,377 | 2,549 | ||||||||
Accrued expenses and other liabilities | 13,259 | 45,976 | 9,597 | |||||||||
Gift card and other deferred revenue | (640 | ) | 38,899 | (3,002 | ) | |||||||
Deferred rent and lease incentives | — | 24,929 | 28,226 | |||||||||
Operating lease liabilities | (226,257 | ) | — | — | ||||||||
Income taxes payable | 735 | (35,208 | ) | 33,541 | ||||||||
Net cash provided by operating activities | 607,294 | 585,986 | 499,704 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property and equipment | (186,276 | ) | (190,102 | ) | (189,712 | ) | ||||||
Acquisition of Outward, Inc., net of cash received | — | — | (80,528 | ) | ||||||||
Other | 728 | 2,203 | 480 | |||||||||
Net cash used in investing activities | (185,548 | ) | (187,899 | ) | (269,760 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Payment of dividends | (150,640 | ) | (140,325 | ) | (135,010 | ) | ||||||
Repurchases of common stock | (148,834 | ) | (295,304 | ) | (196,179 | ) | ||||||
Borrowings under revolving line of credit | 100,000 | 60,000 | 170,000 | |||||||||
Repayments of borrowings under revolving line of credit | (100,000 | ) | (60,000 | ) | (170,000 | ) | ||||||
Tax withholdings related to stock-based awards | (27,752 | ) | (14,437 | ) | (18,130 | ) | ||||||
Proceeds from issuance of long-term debt | — | — | 300,000 | |||||||||
Debt issuance costs | — | — | (1,191 | ) | ||||||||
Other | — | — | (1,197 | ) | ||||||||
Net cash used in financing activities | (327,226 | ) | (450,066 | ) | (51,707 | ) | ||||||
Effect of exchange rates on cash and cash equivalents | (1,312 | ) | 797 | (1,814 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 93,208 | (51,182 | ) | 176,423 | ||||||||
Cash and cash equivalents at beginning of year | 338,954 | 390,136 | 213,713 | |||||||||
Cash and cash equivalents at end of year | $ | 432,162 | $ | 338,954 | $ | 390,136 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the year for interest | $ | 12,682 | $ | 11,424 | $ | 2,915 | ||||||
Cash paid during the year for income taxes, net of refunds | $ | 113,344 | $ | 107,951 | $ | 99,062 | ||||||
Non-cash investing activities: | ||||||||||||
Purchases of property and equipment not yet paid for at end of year | $ | 2,386 | $ | 2,773 | $ | 1,257 |
Reclassifications
Certain amounts reported in our Consolidated Balance Sheet as of January 28, 2018 and our Consolidated Statements of Cash Flows for thefifty-two weeks ended January 28, 2018 and January 29, 2017 have been reclassified in order to conform to the current period presentation. These reclassifications impacted prepaid catalog expenses, prepaid expenses, goodwill, other long-term assets, accounts payable, accrued expenses, gift card and other deferred revenue and other current liabilities. There was no change to total current assets, total assets, total current liabilities, or cash flows as a result of these reclassifications.
2018.
2019.
we consider current and anticipated demand, customer preferences and age of the merchandise. The significant estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory and lower of cost or market reserves) and estimates of inventory shrinkage. We reserve for obsolescence based on historical trends aging reports,of inventory sold below cost and specific identification and our estimatesidentification.
Property and Equipment
| ||
Leasehold improvements | Shorter of estimated useful life or lease term (generally 5 – 22 years) | |
Fixtures and equipment | 2 – 20 years | |
Buildings and building improvements | 10 – 40 years | |
Capitalized software | 2 |
tax, reduction to the opening balance of retained earnings resulting from the impairment of certain long-lived assets upon adoption of Accounting
leases contain renewal and early termination options. The option periods are generally not included in the lease term used to measure our lease liabilities and
impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated
unit
2017.
Deferred Rent and Lease Incentives
For leases that contain fixed escalations of the minimum annual lease payment during the original term of the lease, we recognize rent expense on a straight-line basis over the lease term, including the construction period, and record the difference between rent expense and the amount currently payable as deferred rent. Deferred lease incentives include construction allowances received from landlords, which are amortized on a straight-line basis over the lease term, including the construction period.
For any store or facility closure where a lease obligation still exists, we record the estimated future liability associated with the rental obligation on the cease use date.
merchandise is transferred to the customer. Merchandise can either be picked up in our stores, or delivered to the customer. For merchandise picked up in the store, control is transferred at the time of the sale to the customer. For merchandise delivered to the customer, control is transferred either when delivery has been completed, or when we have a present right to payment which, for certain merchandise, occurs upon conveyance of the merchandise to the carrier for delivery. We exclude from revenue any taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and are concurrent with revenue-generating activities. Our payment terms are primarily at the point of sale for merchandise sales and for most services. We have elected to account for shipping and handling as fulfillment activities, and not as a separate performance obligation.
Prior to the adoption
We enter into agreements with credit card issuers in connection with our private label and
average number of common shares outstanding plus common stock equivalents for the period. Common stock equivalents consist of shares subject to stock-based awards with exercise prices less than or equal to the average market price of our common stock for the period, to the extent their inclusion would be dilutive.
the reclassification from selling, general and administrative expenses into net revenues for certain incentives received from credit card issuers,
the reclassification of breakage income related to our unredeemed stored-value cards from selling, general and administrative expenses into net revenues, as well as the acceleration in the timing of recognizing breakage income,
the acceleration in the timing of revenue recognition for certain merchandise shipped to our customers, and
the recording of a right of return asset for merchandise we expect to receive back from customers.
In addition, prepaid catalog advertising costs, which were capitalized and amortized over their expected period of future benefit prior to adoption, and are now expensed as incurred. Prior period balances were not retrospectively adjusted as a result of adopting the ASU.
The following summarizes the impact of adopting ASU2014-09 on our Consolidated Statement of Earnings for the fiscal year ended February 3, 2019:
In thousands | As Reported | ASU 2014-09 Adjustment | As Adjusted | |||||||||
Net revenue | $ | 5,671,593 | $ | (61,106 | ) | $ | 5,610,487 | |||||
Cost of goods sold | 3,570,580 | (6,059 | ) | 3,564,521 | ||||||||
Gross profit | 2,101,013 | (55,047 | ) | 2,045,966 | ||||||||
Selling, general and administrative expenses | 1,665,060 | (48,766 | ) | 1,616,294 | ||||||||
Operating income | $ | 435,953 | $ | (6,281 | ) | $ | 429,672 |
Other than the presentation of our sales returns liability and a right of return asset, which resulted in a reclassification of liabilities into other current assets, all other impacts to our Consolidated Balance Sheet from the adoption of this ASU were not material either individually or in the aggregate as of February 3, 2019. The adoption of this ASU had no net impact to our Consolidated Statement of Cash Flows for the fiscal year ended February 3, 2019.
In February 2016, the FASB issued ASU2016-02,Leases,which requires lessees to recognize a
In October 2016, the FASB issued ASU2016-16,Intra-Entity Transfers of Assets Other than Inventory
In January 2017, the FASB issued ASU2017-04,Simplifying the Test for Goodwill Impairment,which simplifies the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. We adopted this ASU in the first quarter of fiscal 2018. The adoption of this ASU had no impact on our Consolidated Financial Statements.
In thousands | Feb. 3, 2019 | Jan. 28, 2018 | ||||||
Leasehold improvements | $ | 950,259 | $ | 950,024 | ||||
Fixtures and equipment | 836,400 | 800,003 | ||||||
Capitalized software | 733,941 | 621,730 | ||||||
Land and buildings | 175,181 | 173,457 | ||||||
Corporate systems projects in progress | 39,416 | 65,283 | ||||||
Construction in progress1 | 7,205 | 8,615 | ||||||
Total | 2,742,402 | 2,619,112 | ||||||
Accumulated depreciation | (1,812,767 | ) | (1,686,829 | ) | ||||
Property and equipment, net | $ | 929,635 | $ | 932,283 |
In thousands | Feb. 2, 2020 | Feb. 3, 2019 | ||||||
Leasehold improvements | $ | 946,880 | $ | 950,259 | ||||
Fixtures and equipment | 830,650 | 836,400 | ||||||
Capitalized software | 788,635 | 733,941 | ||||||
Land and buildings | 177,088 | 175,181 | ||||||
Corporate systems projects in progress | 62,059 | 39,416 | ||||||
Construction in progress 1 | 7,076 | 7,205 | ||||||
Total | 2,812,388 | 2,742,402 | ||||||
Accumulated depreciation | (1,883,350 | ) | (1,812,767 | ) | ||||
Property and equipment, net | $ | 929,038 | $ | 929,635 |
1 |
|
approval
See Risk Factors in Item 1A.
Item 1A
the credit facility, plus an applicable margin based on our leverage ratio. As of February 3, 2019,2, 2020, an aggregate of $6,820,000$6,462,000 was outstanding under the letter of credit facilities, which represents only a future commitment to fund inventory purchases to which we had not taken legal title. The latest expiration possible for any future letters of credit issued under the facilities is January 21, 2020.
2021.
The 2017 Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. Among other things, the Tax Act reduced thecorporate income tax rate to 21.0% as of January 1, 2018, introduced a new tax on global intangiblelow-taxed income (“GILTI”), and implemented a modified territorial tax system that includes aone-time transition tax on deemed repatriated earnings of foreign subsidiaries.
Staff Accounting Bulletin No. 118 (“SAB 118”) issued by the SEC in December 2017 provided us up to one year to finalize our measurement of the income tax effects of the 2017 Tax Cuts and Jobs Act (“the Tax Act”) on our fiscal year ended January 28, 2018. As of January 28, 2018, we had made reasonable estimates of the income tax effects of the Tax Act, including the transition tax under Internal Revenue Code section 965.
As of February 3, 2019, we have completed the accounting for the income tax effects of the Tax Act based on our current interpretation of available notices and regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service. As a result, during fiscal 2018, we recorded an immaterial adjustment to the fiscal 2017 provisional transition tax amount. In addition, during fiscal 2018, we booked a net tax benefit of approximately $10,576,000 from there-measurement of our deferred tax assets.
In thousands | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
United States | $ 333,594 | $ 379,000 | $ 425,517 | |||||||||
Foreign | 95,653 | 73,439 | 46,394 | |||||||||
Total earnings before income taxes | $ 429,247 | $ 452,439 | $ 471,911 |
Dollars in thousands | Fiscal 2019 | Fiscal 2018 | Fiscal 2017 | |||||||||
United States | $ | 353,215 | $ | 333,594 | $ | 379,000 | ||||||
Foreign | 103,806 | 95,653 | 73,439 | |||||||||
Total | $ | 457,021 | $ | 429,247 | $ | 452,439 |
In thousands | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
Current | ||||||||||||
Federal | $ 43,745 | $ 97,202 | $ 125,760 | |||||||||
State | 15,357 | 19,552 | 26,197 | |||||||||
Foreign | 12,822 | 12,759 | 7,453 | |||||||||
Total current | 71,924 | 129,513 | 159,410 | |||||||||
Deferred | ||||||||||||
Federal | 23,507 | 62,893 | 8,307 | |||||||||
State | 1,562 | 460 | (807 | ) | ||||||||
Foreign | (1,430 | ) | 28 | (386 | ) | |||||||
Total deferred | 23,639 | 63,381 | 7,114 | |||||||||
Total provision | $ 95,563 | $ 192,894 | $ 166,524 |
Dollars in thousands | Fiscal 2019 | Fiscal 2018 | Fiscal 2017 | |||||||||
Current | ||||||||||||
Federal | $ | 76,873 | $ | 43,745 | $ | 97,202 | ||||||
State | 14,205 | 15,357 | 19,552 | |||||||||
Foreign | 12,438 | 12,822 | 12,759 | |||||||||
Total Current | $ | 103,516 | $ | 71,924 | $ | 129,513 | ||||||
Deferred | ||||||||||||
Federal | $ | (606 | ) | $ | 23,507 | $ | 62,893 | |||||
State | (870 | ) | 1,562 | 460 | ||||||||
Foreign | (1,081 | ) | (1,430 | ) | 28 | |||||||
Total Deferred | $ | (2,557 | ) | $ | 23,639 | $ | 63,381 | |||||
Total provision | $ | 100,959 | $ | 95,563 | $ | 192,894 |
only permanently reinvested with respect to our foreign earnings in Canada beginning in fiscal 2018. As a result, we recorded approximately $1,493,000
Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | ||||||||||
Federal income taxes at the statutory rate | 21.0% | 33.9% | 35.0% | |||||||||
Re-measurement of deferred tax assets and liabilities | (2.2% | ) | 6.7% | — | ||||||||
Transition tax | (0.6% | ) | 2.9% | — | ||||||||
State income tax rate | 3.8% | 2.5% | 3.5% | |||||||||
Change in uncertain tax positions | 4.1% | (1.6% | ) | 2.8% | ||||||||
Rate differential | (2.3% | ) | (2.9% | ) | (5.7% | ) | ||||||
Research and development credits | (2.1% | ) | — | — | ||||||||
Other | 0.6% | 1.1% | (0.3% | ) | ||||||||
Effective tax rate | 22.3% | 42.6% | 35.3% |
Fiscal 2019 | Fiscal 2018 | Fiscal 2017 | ||||||||||
Federal income taxes at the statutory rate | 21.0% | 21.0% | 33.9% | |||||||||
Re-measurement of deferred tax assets and liabilities | — | (2.2% | ) | 6.7% | ||||||||
Transition tax | — | (0.6% | ) | 2.9% | ||||||||
State income tax rate | 2.9% | 3.8% | 2.5% | |||||||||
Officer’s compensation under Sec.162(m) | 1.0% | — | — | |||||||||
Deferred true up | (1.3% | ) | — | — | ||||||||
Change in uncertain tax positions | 0.5% | 4.1% | (1.6% | ) | ||||||||
Rate differential | (1.8% | ) | (2.3% | ) | (2.9% | ) | ||||||
Research and development credits | (0.7% | ) | (2.1% | ) | — | |||||||
Other | 0.5% | 0.6% | 1.1% | |||||||||
Total | 22.1% | 22.3% | 42.6% |
Deferred tax assets (liabilities), in thousands | Feb. 3, 2019 | Jan. 28, 2018 | ||||||
Deferred rent | $ 18,942 | $ 18,387 | ||||||
Merchandise inventories | 18,703 | 23,314 | ||||||
Customer deposits | 14,345 | 23,601 | ||||||
Stock-based compensation | 14,281 | 9,024 | ||||||
Accrued liabilities | 13,470 | 13,626 | ||||||
Compensation | 11,251 | 14,127 | ||||||
State taxes | 7,435 | 5,099 | ||||||
Executive deferred compensation | 5,739 | 5,886 | ||||||
Federal and state net operating loss | 4,223 | 6,026 | ||||||
Depreciation | (31,557 | ) | (17,361 | ) | ||||
Deferred lease incentives | (26,032 | ) | (24,854 | ) | ||||
Other | (4,797 | ) | (3,116 | ) | ||||
Valuation allowance | (3,542 | ) | (1,067 | ) | ||||
Prepaid catalog expenses | (936 | ) | (5,386 | ) | ||||
Total deferred income tax assets, net | $ 41,525 | $ 67,306 |
Deferred tax asset (liabilities), Dollars in thousands | Fiscal 2019 | Fiscal 2018 | ||||||
Operating lease liabilities | $ | 347,693 | $ | — | ||||
Merchandise inventories | 22,311 | 18,703 | ||||||
Customer deposits | 19,520 | 14,345 | ||||||
Compensation | 14,350 | 11,251 | ||||||
Stock-based compensation | 9,860 | 14,281 | ||||||
Accrued liabilities | 8,440 | 13,470 | ||||||
State taxes | 7,546 | 7,435 | ||||||
Executive deferred compensation | 7,543 | 5,739 | ||||||
Federal and state net operating loss | 3,443 | 4,223 | ||||||
Deferred rent | — | 18,942 | ||||||
Operating lease right-of-use assets | (309,801 | ) | — | |||||
Deferred lease incentives | (46,701 | ) | (26,032 | ) | ||||
Property and equipment | (37,309 | ) | (31,557 | ) | ||||
Prepaid catalog expenses | (394 | ) | (936 | ) | ||||
Other | 2,369 | (4,797 | ) | |||||
Valuation allowance | (3,648 | ) | (3,542 | ) | ||||
Total deferred tax assets, net | $ | 45,222 | $ | 41,525 |
In thousands | Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | |||||||||
Balance at beginning of year | $ 18,051 | $ 25,864 | $ 13,290 | |||||||||
Increases related to current year’s tax positions | 4,694 | 3,345 | 11,772 | |||||||||
Increases related to prior years’ tax positions | 14,905 | 808 | 3,456 | |||||||||
Decreases related to prior years’ tax positions | (1,279 | ) | (10,610 | ) | (818 | ) | ||||||
Lapses in statute of limitations | (786 | ) | (1,356 | ) | (1,122 | ) | ||||||
Settlements | (376 | ) | — | (714 | ) | |||||||
Balance at end of year | $ 35,209 | $ 18,051 | $ 25,864 |
Dollars in thousands | Fiscal 2019 | Fiscal 2018 | Fiscal 2017 | |||||||||
Beginning Balance | $ | 35,209 | $ | 18,051 | $ | 25,864 | ||||||
Increases related to current year tax positions | 3,438 | 4,694 | 3,345 | |||||||||
Increases for tax positions for prior years | 1,405 | 14,905 | 808 | |||||||||
Decrease for tax positions for prior years | (308 | ) | (1,279 | ) | (10,610 | ) | ||||||
Settlements | — | (376 | ) | — | ||||||||
Lapse in statute of limitations | (3,106 | ) | (786 | ) | (1,356 | ) | ||||||
Ending Balance | $ | 36,638 | $ | 35,209 | $ | 18,051 |
$11,757,000.
2016.
Operating Leases
We
I n | Fiscal 2019 (52 Weeks) | |||
Operating lease costs | $ | 267,883 | ||
Variable lease costs | 129,018 | |||
Total lease costs | $ | 396,901 |
Total rent expense for all operating leases was as follows:
In thousands | Fiscal 2018 (53 Weeks) | Fiscal 2017 (52 Weeks) | Fiscal 2016 (52 Weeks) | |||||||||
Rent expense | $ 271,522 | $ 263,409 | $ 251,066 | |||||||||
Contingent rent expense | 26,414 | 24,918 | 26,980 | |||||||||
Rent expense before deferred lease incentive income | 297,936 | 288,327 | 278,046 | |||||||||
Deferred lease incentive income | (26,189 | ) | (25,293 | ) | (25,298 | ) | ||||||
Less: sublease rental income | (522 | ) | (578 | ) | (558 | ) | ||||||
Total rent expense1 | $ 271,225 | $ 262,456 | $ 252,190 |
|
In thousands | Fiscal 2019 (52 Weeks) | |||
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 285,678 | ||
Net additions to right-of-use assets | $ | 150,401 | ||
The aggregate contractual future minimum annual cash rental payments undernon-cancellable operating
Weighted average remaining lease term (years) | 7.3 | |||
Weighted average incremental borrowing rate | 3.8 | % | ||
| ||||
| ||||
| ||||
| ||||
| ||||
|
|
$ ) ) $
In thousands | ||||
Fiscal 2019 | $ | 292,387 | ||
Fiscal 2020 | 262,429 | |||
Fiscal 2021 | 225,755 | |||
Fiscal 2022 | 190,263 | |||
Fiscal 2023 | 160,308 | |||
Thereafter | 559,802 | |||
Total | $ | 1,690,944 |
In thousands, except per share amounts | Net Earnings | Weighted Average Shares | Earnings Per Share | |||||||||
Fiscal 2018 (53 Weeks) | ||||||||||||
Basic | $ | 333,684 | 81,420 | $ | 4.10 | |||||||
Effect of dilutive stock-based awards | 920 | |||||||||||
Diluted | $ | 333,684 | 82,340 | $ | 4.05 | |||||||
Fiscal 2017 (52 Weeks) | ||||||||||||
Basic | $ | 259,545 | 85,592 | $ | 3.03 | |||||||
Effect of dilutive stock-based awards | 488 | |||||||||||
Diluted | $ | 259,545 | 86,080 | $ | 3.02 | |||||||
Fiscal 2016 (52 Weeks) | ||||||||||||
Basic | $ | 305,387 | 88,594 | $ | 3.45 | |||||||
Effect of dilutive stock-based awards | 868 | |||||||||||
Diluted | $ | 305,387 | 89,462 | $ | 3.41 |
In thousands, except per share amounts | Net Earnings | Weighted Average Shares | Earnings Per Share | |||||||||
Fiscal 2019 (52 Weeks) | ||||||||||||
Basic | $ | 356,062 | 78,108 | $ | 4.56 | |||||||
Effect of dilutive stock-based awards | 1,117 | |||||||||||
Diluted | $ | 356,062 | 79,225 | $ | 4.49 | |||||||
Fiscal 2018 (53 Weeks) | ||||||||||||
Basic | $ | 333,684 | 81,420 | $ | 4.10 | |||||||
Effect of dilutive stock-based awards | 920 | |||||||||||
Diluted | $ | 333,684 | 82,340 | $ | 4.05 | |||||||
Fiscal 2017 (52 Weeks) | ||||||||||||
Basic | $ | 259,545 | 85,592 | $ | 3.03 | |||||||
Effect of dilutive stock-based awards | 488 | |||||||||||
Diluted | $ | 259,545 | 86,080 | $ | 3.02 |
Stock-Settled Stock Appreciation Rights
A stock-settled stock appreciation right is an award that allows the recipient to receive common stock equal to the appreciation in the fair market value
The following table summarizes our stock-settled stock appreciation right activity during fiscal 2018:
Shares | Weighted Average Conversion | |||||||
Balance at January 28, 2018 (100% vested) | 167,737 | $ | 30.91 | |||||
Granted | — | — | ||||||
Converted into common stock | (166,447 | ) | 30.83 | |||||
Cancelled | (1,290 | ) | 40.87 | |||||
Balance at February 3, 2019 | — | $ | — |
|
No stock-settled stock appreciation rights were granted in fiscal 2018, fiscal 2017 or fiscal 2016. The total intrinsic value of awards converted to common stock was $4,394,000 for fiscal 2018, $7,287,000 for fiscal 2017 and $5,237,000 for fiscal 2016. Intrinsic value for conversions is based on the excess of the market value on the date of conversion over the conversion price.
Weighted Fair Value Weighted Average Contractual Term Intrinsic Value1 Balance at January 28, 2018 Granted Granted, with vesting subject to performance conditions Released Cancelled Balance at February 3, 2019 Vested plus expected to vest at February 3, 20192018:2019: Shares
Average
Grant Date
Remaining (Years) 2,358,137 $ 58.18 1,432,954 49.72 256,350 48.76 (677,251 ) 59.47 (357,267 ) 60.48 3,012,923 $ 52.88 3.03 $ 162,698,000 2,389,343 $ 52.74 3.10 $ 129,025,000 Shares Weighted Average
Grant Date Fair
Value
Remaining (Years) $ ) ) $ $ $ $ $54.00)$70.08).
2 | Excludes 105,436 incremental shares released due to achievement of performance conditions above target. |
Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | ||||||||||
Weighted average grant date fair value per share of awards granted | $ | 49.57 | $ | 52.76 | $ | 59.17 | ||||||
Intrinsic value of awards released1 | $ | 34,213,000 | $ | 35,508,000 | $ | 56,405,000 |
Fiscal 2019 (52 weeks) | Fiscal 2018 (53 weeks) | Fiscal 2017 (52 weeks) | ||||||||||
Weighted average grant date fair value per share of awards granted | $ | 58.18 | $ | 49.57 | $ | 52.76 | ||||||
Intrinsic value of awards released 1 | $ | 65,403,000 | $ | 34,213,000 | $ | 35,508,000 |
1 |
|
In accordance with ASU2016-09, Improvements to Employee Share-Based Payment Accounting, weBenefit
and fiscal 2016, proceeds related to stock-based awards were $0, $0 and $1,532,000, respectively, and the current tax benefit related to stock-based awards totaled $13,793,000, $9,927,000, and $16,066,000, and $24,129,000, respectively.
2, 2020, there was approximately $223,815,000$574,982,000 remaining under our current stock repurchase program. In March 2019, our Board of Directors authorized an increase in our current stock repurchase program by an additional $500,000,000. As of February 3, 2019,2, 2020, we held treasury stock of $235,000$941,000 that represents the cost of shares available for issuance intended to satisfy future stock-based award settlements in certain foreign jurisdictions.
$
These reportable segments are strategic business units that offer similar products for the home. They are managed separately because the business units utilize two distinct distribution and marketing strategies. Based on management’s best estimate, our operating segments include allocations of certain expenses, including advertising and employment costs, to the extent they have been determined to benefit both channels. These operating segments are aggregated at the channel level for reporting purposes due to the fact that our brands are interdependent for economies of scale and we do not maintain fully allocated income statements at the brand level. As a result, material financial decisions related to the brands are made at the channel level. Furthermore, it is not practicable for us to report revenue by product group. segment.
Income taxes are calculated at an entity level and are not allocated to our reportable segments.
Segment Information
In thousands | E-commerce | Retail | Unallocated | Total | ||||||||||||
Fiscal 2018 (53 Weeks) | ||||||||||||||||
Net revenues1 | $ 3,082,064 | $ 2,589,529 | $ — | $ 5,671,593 | ||||||||||||
Depreciation and amortization expense | 36,294 | 89,419 | 63,095 | 188,808 | ||||||||||||
Operating income (loss) 2 | 643,592 | 217,070 | (424,709 | ) | 435,953 | |||||||||||
Assets3 | 914,452 | 1,183,604 | 714,788 | 2,812,844 | ||||||||||||
Capital expenditures | 45,151 | 82,840 | 62,111 | 190,102 | ||||||||||||
Fiscal 2017 (52 Weeks) | ||||||||||||||||
Net revenues1 | $ 2,778,457 | $ 2,513,902 | $ — | $ 5,292,359 | ||||||||||||
Depreciation and amortization expense | 28,977 | 90,625 | 63,475 | 183,077 | ||||||||||||
Operating income (loss) 4 | 599,491 | 224,608 | (370,288 | ) | 453,811 | |||||||||||
Assets3 | 776,569 | 1,114,726 | 894,454 | 2,785,749 | ||||||||||||
Capital expenditures | 39,273 | 83,750 | 66,689 | 189,712 | ||||||||||||
Fiscal 2016 (52 Weeks) | ||||||||||||||||
Net revenues1 | $ 2,633,602 | $ 2,450,210 | $ — | $ 5,083,812 | ||||||||||||
Depreciation and amortization expense | 31,135 | 86,228 | 55,832 | 173,195 | ||||||||||||
Operating income (loss)4 | 606,286 | 231,929 | (365,616 | ) | 472,599 | |||||||||||
Assets3 | 614,213 | 1,077,593 | 785,073 | 2,476,879 | ||||||||||||
Capital expenditures | 21,479 | 102,859 | 73,076 | 197,414 |
In thousands | Fiscal 2019 (52 weeks) | Fiscal 2018 (53 weeks) | Fiscal 2017 (52 weeks) | |||||||||
Pottery Barn | $ | 2,214,397 | $ | 2,177,344 | $ | 2,066,302 | ||||||
West Elm | 1,466,537 | 1,292,928 | 1,114,339 | |||||||||
Williams Sonoma | 1,032,368 | 1,056,125 | 1,022,434 | |||||||||
Pottery Barn Kids and Teen | 908,561 | 895,762 | 860,468 | |||||||||
Other 1 | 276,145 | 249,434 | 228,816 | |||||||||
Total 2 | $ | 5,898,008 | $ | 5,671,593 | $ | 5,292,359 |
1 |
|
2 | Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $365.6 million , $346.8 million and $328.2 million for fiscal 2019, fiscal 2018 and fiscal 2017, . |
In thousands | Feb. 2, 2020 1 | Feb. 3, 2019 1 | ||||||
U.S. | $ | 2,132,635 | $ | 1,068,196 | ||||
International | 165,772 | 50,305 | ||||||
Total | $ | 2,298,407 | $ | 1,118,501 |
1 In fiscal |
|
|
|
hedges have terms of up to 18 months. All hedging relationships are formally documented, and the forward contracts are designed to mitigate foreign currency exchange risk on hedged transactions. We record the effective portion of changes in the fair value of our cash flow hedges in other comprehensive income (“OCI”) until the earlier of when the hedged forecasted inventory purchase occurs or the respective contract reaches maturity. Subsequently, as the inventory is sold to the customer, we reclassify amounts previously recorded in OCI to cost of goods sold. Changes in the fair value of the forward contract related to interest charges (or forward points) are excluded from the assessment and measurement of hedge effectiveness and are recorded immediately
In thousands | Feb. 3, 2019 | Jan. 28, 2018 | ||||||
Contracts designated as cash flow hedges | $ | 16,600 | $ | 28,200 | ||||
Contracts not designated as cash flow hedges | $ | 5,300 | $ | 46,000 |
In thousands | Feb. 2, 2020 | Feb. 3, 2019 | ||||||
Contracts designated as cash flow hedges | $ | 17,200 | $ | 16,600 | ||||
Contracts not designated as cash flow hedges | $ | — | $ | 5,300 |
2017.
In thousands | Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | |||||||||
Net gain (loss) recognized in OCI | $ | 1,488 | $ | (974 | ) | $ | (1,243 | ) | ||||
Net gain (loss) reclassified from OCI to cost of goods sold | $ | 478 | $ | (144 | ) | $ | (147 | ) | ||||
Net foreign exchange gain (loss) recognized in selling, general and administrative expenses: | ||||||||||||
Instruments designated as cash flow hedges1 | $ | 57 | $ | 88 | $ | (4 | ) | |||||
Instruments not designated orde-designated | $ | 3,967 | $ | (3,286 | ) | $ | (3,569 | ) |
|
Fiscal 2019 | Fiscal 2018 | Fiscal 2017 | ||||||||||||||||||||||
In thousands | Cost of goods sold | Selling, general and administrative expenses | Cost of goods sold | Selling, general and administrative expenses | Cost of goods sold | Selling, general and administrative expenses | ||||||||||||||||||
Line items presented in the Condensed Consolidated Statement of Earnings in which the effects of derivatives are recorded | $ | 3,758,916 | $ | 1,673,218 | $ | 3,570,580 | $ | 1,665,060 | $ | 3,360,648 | $ | 1,477,900 | ||||||||||||
Gain (loss) recognized in income | ||||||||||||||||||||||||
Derivatives designated as cash flow hedges | $ | 604 | $ | — | $ | 478 | $ | 57 | $ | (144 | ) | $ | 88 | |||||||||||
Derivatives not designated as hedging instruments | $ | — | $ | 28 | $ | — | $ | 3,967 | $ | — | $ | (3,286 | ) |
In thousands | Feb. 3, 2019 | Jan. 28, 2018 | ||||||
Derivatives designated as cash flow hedges: | ||||||||
Other current assets | $ | 358 | $ | — | ||||
Other current liabilities | $ | — | $ | (635 | ) | |||
Other long-term liabilities | $ | — | $ | (54 | ) | |||
Derivatives not designated as hedging instruments: | ||||||||
Other current assets | $ | 4 | $ | — | ||||
Other current liabilities | $ | — | $ | (299 | ) |
In thousands | Fiscal 2019 | Fiscal 2018 | ||||||
Derivatives designated as cash flow hedges: | ||||||||
Other current assets | $ | 138 | $ | 358 | ||||
Derivatives not designated as hedging instruments: | ||||||||
Other current assets | $ | — | $ | 4 |
Long-term Debt
Property and Equipment
commensurate with the risk.
(
In thousands | Foreign Currency Translation | Cash Flow Hedges | Accumulated Other Comprehensive Income (Loss) | |||||||||
Balance at January 31, 2016 | $ | (11,480) | $ | 864 | $ | (10,616) | ||||||
Foreign currency translation adjustments | 1,523 | — | 1,523 | |||||||||
Change in fair value of derivative financial instruments | — | (916 | ) | (916 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | 106 | 106 | |||||||||
Other comprehensive income (loss) | 1,523 | (810 | ) | 713 | ||||||||
Balance at January 29, 2017 | (9,957 | ) | 54 | (9,903 | ) | |||||||
Foreign currency translation adjustments | 3,730 | — | 3,730 | |||||||||
Change in fair value of derivative financial instruments | — | (715 | ) | (715 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | 106 | 106 | |||||||||
Other comprehensive income (loss) | 3,730 | (609 | ) | 3,121 | ||||||||
Balance at January 28, 2018 | (6,227 | ) | (555 | ) | (6,782 | ) | ||||||
Foreign currency translation adjustments | (5,032 | ) | — | (5,032 | ) | |||||||
Change in fair value of derivative financial instruments | — | 1,098 | 1,098 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments1 | — | (357 | ) | (357 | ) | |||||||
Other comprehensive income (loss) | (5,032 | ) | 741 | (4,291 | ) | |||||||
Balance at February 3, 2019 | $ | (11,259 | ) | $ | 186 | $ | (11,073 | ) |
In thousands | Foreign Currency Translation | Cash Flow Hedges | Accumulated Other Comprehensive Income (Loss) | |||||||||
Balance at January 29, 2017 | $ | (9,957 | ) | $ | 54 | $ | (9,903 | ) | ||||
Foreign currency translation adjustments | 3,730 | — | 3,730 | |||||||||
Change in fair value of derivative financial instruments | — | (715 | ) | (715 | ) | |||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments 1 | — | 106 | 106 | |||||||||
Other comprehensive income (loss) | 3,730 | (609 | ) | 3,121 | ||||||||
Balance at January 28, 2018 | (6,227 | ) | (555 | ) | (6,782 | ) | ||||||
Foreign currency translation adjustments | (5,032 | ) | — | (5,032 | ) | |||||||
Change in fair value of derivative financial instruments | — | 1,098 | 1,098 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments 1 | — | (357 | ) | (357 | ) | |||||||
Other comprehensive income (loss) | (5,032 | ) | 741 | (4,291 | ) | |||||||
Balance at February 3, 2019 | (11,259 | ) | 186 | (11,073 | ) | |||||||
Foreign currency translation adjustments | (3,334 | ) | — | (3,334 | ) | |||||||
Change in fair value of derivative financial instruments | — | 163 | 163 | |||||||||
Reclassification adjustment for realized (gain) loss on derivative financial instruments 1 | — | (343 | ) | (343 | ) | |||||||
Other comprehensive income (loss) | (3,334 | ) | (180 | ) | (3,514 | ) | ||||||
Balance at February 2, 2020 | $ | (14,593 | ) | $ | 6 | $ | (14,587 | ) |
1 | Refer to Note L for additional disclosures about reclassifications out of accumulated other comprehensive income and their corresponding effects on the respective line items in the Consolidated Statements of Earnings. |
In thousands | ||||
Working capital and other assets | $ | 718,000 | ||
Property and equipment, net | 2,049,000 | |||
Intangible assets | 18,300,000 | |||
Liabilities | (6,886,000 | ) | ||
Total identifiable net assets acquired | $ | 14,181,000 | ||
Goodwill | 66,631,000 | |||
Total purchase consideration | $ | 80,812,000 |
During the second quarter of fiscal 2018, we finalized the valuation of intangible
In thousands | ||||
Working capital and other assets | $ | 718 | ||
Property and equipment, net | 2,049 | |||
Intangible assets | 18,300 | |||
Liabilities | (6,886 | ) | ||
Total identifiable net assets acquired | $ | 14,181 | ||
Goodwill | 66,631 | |||
Total purchase consideration | $ | 80,812 |
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
o | Evaluated that the methodology used by management was reasonable to approximate the Company’s incremental borrowing rate |
o | Assessed the reasonableness of the credit rating, base rate, spreads and adjustments for the effects of collateral applied in determining the IBR by comparing to Company specific benchmarks, comparable companies, and other market information. |
o | Evaluated the accuracy of the models and calculations used to estimate the IBR, including validating the inputs used. |
April 4, 2019
In thousands, except per share amounts | ||||||||||||||||||||
Fiscal 2018 (53 Weeks) | | First Quarter |
| | Second Quarter |
| | Third Quarter |
| | Fourth Quarter1 |
| | Full Year |
| |||||
Net revenues | $1,203,000 | $ | 1,275,174 | $ | 1,356,983 | $ | 1,836,436 | $ | 5,671,593 | |||||||||||
Gross profit | 432,164 | 463,942 | 494,984 | 709,923 | 2,101,013 | |||||||||||||||
Operating income,2,3,4 | 66,550 | 74,166 | 94,384 | 200,853 | 435,953 | |||||||||||||||
Net earnings5,6 | 45,168 | 51,713 | 81,465 | 155,338 | 333,684 | |||||||||||||||
Basic earnings per share7 | $ 0.54 | $ | 0.63 | $ | 1.01 | $ | 1.95 | $ | 4.10 | |||||||||||
Diluted earnings per share7 | $ 0.54 | $ | 0.62 | $ | 1.00 | $ | 1.93 | $ | 4.05 | |||||||||||
Fiscal 2017 (52 Weeks) | | First Quarter |
| | Second Quarter |
| | Third Quarter |
| | Fourth Quarter1 |
| | Full Year |
| |||||
Net revenues | $1,111,507 | $ | 1,201,606 | $ | 1,299,336 | $ | 1,679,910 | $ | 5,292,359 | |||||||||||
Gross profit | 395,760 | 422,711 | 467,067 | 646,173 | 1,931,711 | |||||||||||||||
Operating income2,3 | 62,474 | 81,584 | 110,813 | 198,940 | 453,811 | |||||||||||||||
Net earnings5,6 | 39,555 | 52,917 | 71,313 | 95,760 | 259,545 | |||||||||||||||
Basic earnings per share7 | $ 0.45 | $ | 0.61 | $ | 0.84 | $ | 1.14 | $ | 3.03 | |||||||||||
Diluted earnings per share7 | $ 0.45 | $ | 0.61 | $ | 0.84 | $ | 1.13 | $ | 3.02 |
In thousands, except per share amounts | ||||||||||||||||||||
Fiscal 2019 (52 Weeks) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter 1 | Full Year | |||||||||||||||
Net revenues | $ | 1,241,132 | $ | 1,370,814 | $ | 1,442,472 | $ | 1,843,590 | $ | 5,898,008 | ||||||||||
Gross profit | 444,331 | 483,861 | 518,172 | 692,728 | 2,139,092 | |||||||||||||||
Operating income ,2,3 | 74,132 | 86,165 | 101,891 | 203,686 | 465,874 | |||||||||||||||
Net earnings 6 | 52,656 | 62,648 | 74,713 | 166,045 | 356,062 | |||||||||||||||
Basic earnings per share 7 | $ | 0.67 | $ | 0.80 | $ | 0.96 | $ | 2.15 | $ | 4.56 | ||||||||||
Diluted earnings per share 7 | $ | 0.66 | $ | 0.79 | $ | 0.94 | $ | 2.10 | $ | 4.49 | ||||||||||
Fiscal 2018 (53 Weeks) | First Quarter | Second Quarter | Third Quarter | �� | Fourth Quarter 1 | Full Year | ||||||||||||||
Net revenues | $ | 1,203,000 | $ | 1,275,174 | $ | 1,356,983 | $ | 1,836,436 | $ | 5,671,593 | ||||||||||
Gross profit | 432,164 | 463,942 | 494,984 | 709,923 | 2,101,013 | |||||||||||||||
Operating income ,2,3,4 | 66,550 | 74,166 | 94,384 | 200,853 | 435,953 | |||||||||||||||
Net earnings 5,6 | 45,168 | 51,713 | 81,465 | 155,338 | 333,684 | |||||||||||||||
Basic earnings per share 7 | $ | 0.54 | $ | 0.63 | $ | 1.01 | $ | 1.95 | $ | 4.10 | ||||||||||
Diluted earnings per share 7 | $ | 0.54 | $ | 0.62 | $ | 1.00 | $ | 1.93 | $ | 4.05 | ||||||||||
1 |
|
2 |
|
3 | Fiscal 2019 includes approximately $6.5 million in for employment-related expenses. |
Fiscal 2018 |
4 |
|
5 |
|
6 |
|
7 |
|
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for timely discussions regarding required3, 2019,2, 2020, an evaluation was performed by management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our management, including our CEO and CFO, concluded that
ITEM 9B. | OTHER INFORMATION |
On April 3, 2019, the Company’s Compensation Committee adopted the Amended and Restated 2012 EVP Level Management Retention Plan (the “MRP”). The terms
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a | )(1) | Financial Statements: | ||||||||
The following Consolidated Financial Statements of Williams-Sonoma, Inc. and subsidiaries and the related notes are filed as part of this report pursuant to Item 8: | ||||||||||
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(a | )(2) | Financial Statement Schedules: Schedules have been omitted because they are not required, are not applicable, or because the required information, where material, is included in the financial statements, notes, or supplementary financial information. | ||||||||
(a | )(3) | Exhibits: The exhibits listed in the below Exhibit Index are filed or incorporated by reference as part of this Form 10-K | ||||||||
(b | ) | Exhibits: The exhibits listed in the below Exhibit Index are filed or incorporated by reference as part of this Form 10-K | ||||||||
(c | ) | Financial Statement Schedules: Schedules have been omitted because they are not required or are not applicable. |
3.1 3.2 4.1
4.2 | * |
FINANCING AGREEMENTS | ||||
10.1 | ||||
10.2 | ||||
10.3 | ||||
10.4 | ||||
10.5 | ||||
10.6 | ||||
10.7 | ||||
10.8 | ||||
10.9 | ||||
10.10 | ||||
10.11 |
10.13 | ||||
10.14 | ||||
10.15 | ||||
10.16 | ||||
10.17 | ||||
10.18 | ||||
10.19 | ||||
10.20 | ||||
10.21 | ||||
10.22 |
10.24+ | ||||
10.25+ | ||||
10.26+ | ||||
10.27+ | ||||
OTHER INCENTIVE PLANS | ||||
10.28+ | ||||
10.29+ | ||||
10.30+ | ||||
PROPERTIES | ||||
10.31 | ||||
10.32 |
10.34 | ||||
10.35 | ||||
EMPLOYMENT AGREEMENTS | ||||
10.36+ | ||||
10.37+ | ||||
10.38+ | Amended and Restated 2012 EVP Level Management Retention Plan (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2019 as filed with the Commission on April 4, 2019, File No. 001-14077) | |||
OTHER AGREEMENTS | ||||
10.39+ | ||||
OTHER EXHIBITS | ||||
21.1 | * | |||
23.1 | * | |||
CERTIFICATIONS | ||||
31.1 | * | |||
31.2 | * | |||
32.1 | * | |||
32.2 | * |
XBRL | ||||||
101 | ||||||
The following financial statements from the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2020, formatted in Inline XBRL: (i) Consolidated Statements of Earnings, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags | ||||||
104 | * | Cover Page Interactive Data File (formatted as Inline XBRL |
* | Filed herewith. |
+ | Indicates a management contract or compensatory plan or arrangement. |
ITEM 16. |
|
WILLIAMS-SONOMA, INC. | ||||||||||
Date: March 27, 2020 | By | /s/ LAURA ALBER | ||||||||
|
| |||||||||
Chief Executive Officer |
Date: March 27, 2020 | /s/ ADRIAN BELLAMY | |
Adrian Bellamy | ||
Chairman of the Board of Directors | ||
Date: March 27, 2020 | /s/ LAURA ALBER | |
Laura Alber | ||
Chief Executive Officer and Director | ||
(principal executive officer) | ||
Date: March 27, 2020 | /s/ JULIE WHALEN | |
Julie Whalen | ||
Chief Financial Officer | ||
(principal financial officer and principal accounting officer) | ||
Date: March 27, 2020 | /s/ | |
Scott Dahnke | ||
Director | ||
Date: March 27, 2020 | /s/ | |
Anne Mulcahy | ||
Director | ||
Date: March 27, 2020 | /s/ | |
Grace Puma | ||
Director | ||
Date: March 27, 2020 | /s/ | |
William Ready | ||
Director | ||
Date: March 27, 2020 | /s/ | |
Sabrina Simmons | ||
Director | ||
Date: March 27, 2020 | /s/ | |
Frits van Paasschen | ||
Director | ||
| ||
| ||
|
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