UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended AprilJuly 30, 2017.

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number:001-14077

 

 

WILLIAMS-SONOMA, INC.

(Exact name of registrant as specified in its charter)

 

 

 

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)

Registrant’s telephone number, including area code:(415) 421-7900

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer 
Non-accelerated filer ☐ (Do not check if a smaller reporting company)  Smaller reporting company 

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of May 28,August 27, 2017, 86,636,79385,103,703 shares of the registrant’s Common Stock were outstanding.

 

 

 


WILLIAMS-SONOMA, INC.

REPORT ON FORM10-Q

FOR THE QUARTER ENDED APRILJULY 30, 2017

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

 

      PAGE 

Item 1.

  Financial Statements   1 

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations   12 

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk   1617 

Item 4.

  Controls and Procedures   17 
  PART II. OTHER INFORMATION  

Item 1.

  Legal Proceedings   1718 

Item 1A.

  Risk Factors   1718 

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds   1819 

Item 3.

  Defaults Upon Senior Securities   1819 

Item 4.

  Mine Safety Disclosures   1819 

Item 5.

  Other Information   1819 

Item 6.

  Exhibits   1920 


ITEM 1. FINANCIAL STATEMENTS

WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

 

  Thirteen Weeks Ended   Thirteen
Weeks Ended
   Twenty-six
Weeks Ended
 
In thousands, except per share amounts  

April 30,

2017

 

May 1,

2016

   

July 30,

2017

   

July 31,

2016

   

July 30,

2017

   

July 31,

2016

 

E-commerce net revenues

  $580,510  $576,234   $630,793   $599,683   $1,211,303   $1,175,917 

Retail net revenues

   530,997  521,583    570,813    559,346    1,101,810    1,080,929 

Net revenues

   1,111,507  1,097,817    1,201,606    1,159,029    2,313,113    2,256,846 

Cost of goods sold

   715,747  705,300    778,895    748,490    1,494,642    1,453,790 

Gross profit

   395,760  392,517    422,711    410,539    818,471    803,056 

Selling, general and administrative expenses

   333,286  328,992    341,127    327,263    674,413    656,255 

Operating income

   62,474  63,525    81,584    83,276    144,058    146,801 

Interest (income) expense, net

   (103 (68   483    167    380    99 

Earnings before income taxes

   62,577  63,593    81,101    83,109    143,678    146,702 

Income taxes

   23,022  23,996    28,184    31,324    51,206    55,320 

Net earnings

  $39,555  $39,597   $52,917   $51,785   $92,472   $91,382 

Basic earnings per share

  $0.45  $0.44   $0.61   $0.58   $1.07   $1.02 

Diluted earnings per share

  $0.45  $0.44   $0.61   $0.58   $1.06   $1.01 

Shares used in calculation of earnings per share:

           

Basic

   86,962  89,298    86,429    89,039    86,696    89,169 

Diluted

   87,710  90,514    86,848    89,736    87,238    90,098 

See Notes to Condensed Consolidated Financial Statements.

WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 Thirteen Weeks Ended   Thirteen
Weeks Ended
   Twenty-six
Weeks Ended
 
In thousands 

April 30,

2017

 

May 1,

2016

   

July 30,

2017

 

July 31,

2016

   

July 30,

2017

 

July 31,

2016

 

Net earnings

 $39,555  $39,597   $52,917  $51,785   $92,472  $91,382 

Other comprehensive income (loss):

        

Foreign currency translation adjustments

 (1,566 5,208    3,390  (3,005   1,824  2,203 

Change in fair value of derivative financial instruments, net of tax (tax benefit) of $237 and $(768)

 655  (2,165

Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax of $5 and $107

 (16 (302

Change in fair value of derivative financial instruments, net of tax (tax benefit) of $(422), $376, $(185) and $(392)

   (1,166 1,058    (511 (1,107

Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax (tax benefit) of $(2), $12, $3 and $119

   7  (38   (9 (340

Comprehensive income

 $38,628  $42,338   $55,148  $49,800   $93,776  $92,138 

See Notes to Condensed Consolidated Financial Statements.

WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

In thousands, except per share amounts  

April 30,

2017

 

January 29,

2017

 

May 1,

2016

   

July 30,

2017

 

January 29,

2017

 

July 31,

2016

 

ASSETS

        

Current assets

        

Cash and cash equivalents

  $93,975  $213,713  $99,217   $103,109  $213,713  $111,122 

Accounts receivable, net

   63,982  88,803  75,364    78,735  88,803  98,053 

Merchandise inventories, net

   1,037,107  977,505  944,632    1,072,976  977,505  962,943 

Prepaid catalog expenses

   23,066  23,625  29,916    23,830  23,625  27,097 

Prepaid expenses

   62,014  52,882  53,689    73,662  52,882  68,300 

Other assets

   10,901  10,652  9,844    12,066  10,652  11,589 

Total current assets

   1,291,045  1,367,180  1,212,662    1,364,378  1,367,180  1,279,104 

Property and equipment, net

   920,531  923,283  893,640    929,331  923,283  908,562 

Deferred income taxes, net

   124,977  135,238  131,597    130,212  135,238  134,721 

Other assets, net

   54,624  51,178  52,469    55,939  51,178  51,177 

Total assets

  $2,391,177  $2,476,879  $2,290,368   $2,479,860  $2,476,879  $2,373,564 

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities

        

Accounts payable

  $399,336  $453,710  $339,392   $429,700  $453,710  $391,597 

Accrued salaries, benefits and other liabilities

   91,038  130,187  96,577    100,550  130,187  103,040 

Customer deposits

   289,852  294,276  275,116    287,698  294,276  283,779 

Borrowings under revolving line of credit

   45,000   —    100,000    115,000   —   125,000 

Income taxes payable

   37,792  23,245  7,764    35,582  23,245  1,670 

Other liabilities

   49,647  59,838  52,907    51,540  59,838  53,331 

Total current liabilities

   912,665  961,256  871,756    1,020,070  961,256  958,417 

Deferred rent and lease incentives

   195,201  196,188  188,715    196,982  196,188  193,819 

Other long-term obligations

   73,160  71,215  67,041    74,284  71,215  66,516 

Total liabilities

   1,181,026  1,228,659  1,127,512    1,291,336  1,228,659  1,218,752 

Commitments and contingencies – See Note F

        

Stockholders’ equity

        

Preferred stock: $.01 par value; 7,500 shares authorized; none issued

   —     —     —      —    —    —  

Common stock: $.01 par value; 253,125 shares authorized; 86,883, 87,325 and 89,350 shares issued and outstanding at April 30, 2017,
January 29, 2017 and May 1, 2016, respectively

   869  873  894 

Common stock: $.01 par value; 253,125 shares authorized; 85,754, 87,325 and 88,738 shares issued and outstanding at July 30, 2017, January 29, 2017 and July 31, 2016, respectively

   858  873  888 

Additionalpaid-in capital

   549,281  556,928  534,414    556,702  556,928  542,711 

Retained earnings

   671,758  701,702  636,986    640,368  701,702  622,608 

Accumulated other comprehensive loss

   (10,830 (9,903 (7,875   (8,599 (9,903 (9,860

Treasury stock, at cost: 13, 20 and 23 shares as of April 30, 2017,
January 29, 2017 and May 1, 2016, respectively

   (927 (1,380 (1,563

Treasury stock, at cost: 12, 20 and 23 shares as of July 30, 2017, January 29, 2017 and July 31, 2016, respectively

   (805 (1,380 (1,535

Total stockholders’ equity

   1,210,151  1,248,220  1,162,856    1,188,524  1,248,220  1,154,812 

Total liabilities and stockholders’ equity

  $2,391,177  $2,476,879  $2,290,368   $2,479,860  $2,476,879  $2,373,564 

See Notes to Condensed Consolidated Financial Statements.

WILLIAMS-SONOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

      Thirteen Weeks Ended       Twenty-six
Weeks Ended
 
In thousands  April 30,
2017
 May 1,
2016
   July 30,
2017
 

July 31,

2016

 

Cash flows from operating activities:

      

Net earnings

  $39,555  $39,597   $92,472  $91,382 

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

      

Depreciation and amortization

   44,950  41,240    90,048  83,369 

Loss on disposal/impairment of assets

   519  880    845  1,520 

Amortization of deferred lease incentives

   (6,477 (5,987   (12,680 (12,550

Deferred income taxes

   (3,848 (5,796   (8,937 (10,472

Tax benefit related to stock-based awards

   13,742  20,087    14,511  21,864 

Excess tax benefit related to stock-based awards

   —    (3,824   —    (4,727

Stock-based compensation expense

   9,817  15,732    22,829  27,476 

Other

   (76 (418   102  (866

Changes in:

      

Accounts receivable

   24,610  3,781    10,658  (19,021

Merchandise inventories

   (60,246 37,424    (92,711 18,221 

Prepaid catalog expenses

   559  (997   (205 1,822 

Prepaid expenses and other assets

   (12,472 (7,683   (26,918 (22,724

Accounts payable

   (65,990 (113,510   (37,092 (71,614

Accrued salaries, benefits and other liabilities

   (47,235 (20,875   (36,036 (12,867

Customer deposits

   (4,154 (22,465   (6,795 (13,500

Deferred rent and lease incentives

   5,806  9,439    12,635  21,534 

Income taxes payable

   14,564  (59,285   12,409  (65,399

Net cash used in operating activities

   (46,376 (72,660

Net cash provided by operating activities

   35,135  33,448 

Cash flows from investing activities:

      

Purchases of property and equipment

   (32,153 (28,149   (82,727 (77,877

Other

   5  294    44  363 

Net cash used in investing activities

   (32,148 (27,855   (82,683 (77,514

Cash flows from financing activities:

      

Borrowings under revolving line of credit

   45,000  100,000    115,000  125,000 

Repurchases of common stock

   (38,350 (40,639   (93,361 (76,166

Payment of dividends

   (34,189 (34,423   (68,197 (67,571

Tax withholdings related to stock-based awards

   (13,780 (22,904   (14,117 (24,635

Excess tax benefit related to stock-based awards

   —    3,824    —    4,727 

Proceeds related to stock-based awards

   —    995    —    1,532 

Other

   —    (48   —    (47

Net cash provided by (used in) financing activities

   (41,319 6,805 

Net cash used in financing activities

   (60,675 (37,160

Effect of exchange rates on cash and cash equivalents

   105  (720   (2,381 (1,299

Net decrease in cash and cash equivalents

   (119,738 (94,430   (110,604 (82,525

Cash and cash equivalents at beginning of period

   213,713  193,647    213,713  193,647 

Cash and cash equivalents at end of period

  $93,975  $99,217   $103,109  $111,122 

See Notes to Condensed Consolidated Financial Statements.

WILLIAMS-SONOMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A. FINANCIAL STATEMENTS - BASIS OF PRESENTATION

These financial statements include Williams-Sonoma, Inc. and its wholly owned subsidiaries (“we,” “us” or “our”). The Condensed Consolidated Balance Sheets as of AprilJuly 30, 2017 and May 1,July 31, 2016, the Condensed Consolidated Statements of Earnings, the Condensed Consolidated Statements of Comprehensive Income for the thirteen and twenty-six weeks then ended, and the Condensed Consolidated Statements of Cash Flows for the thirteentwenty-six weeks then ended, have been prepared by us, without audit. In our opinion, the financial statements include all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at the balance sheet dates and the results of operations for the thirteen and twenty-six weeks then ended. Intercompany transactions and accounts have been eliminated. The balance sheet as of January 29, 2017, presented herein, has been derived from our audited Consolidated Balance Sheet included in our Annual Report on Form10-K for the fiscal year ended January 29, 2017.

The results of operations for the thirteen and twenty-six weeks ended AprilJuly 30, 2017 are not necessarily indicative of the operating results of the full year.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form10-K for the fiscal year ended January 29, 2017.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09,Revenue from Contracts with Customers, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. Generally Accepted Accounting Principles (“GAAP”) and International Financial Reporting Standards. In addition, in March 2016, the FASB issued ASU2016-08,Revenue from Contracts with Customers: Principal versus Agent Considerations. The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The FASB also issued ASU2016-10,Identifying Performance Obligations and Licensingin April 2016, which amends certain aspects of ASU2014-09 for identifying performance obligations and the implementation guidance on licensing. These ASUs are effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. We are currently assessing the impact of these ASUs on our Consolidated Financial Statements however,and related internal controls over financial reporting. Although we do not expect that the adoption of these standards will result in a material change to our Consolidated Financial Statements, the adoption will result in a change in the timing of revenue recognition for certain merchandise shipped to the customer, as well as a change in the timing of recognizing breakage income related to our gift cards.cards, as well as a change in timing of recognizing advertising expense related to direct response advertising.

In February 2016, the FASB issued ASU2016-02,Leases, which will require lessees to recognize aright-of-use asset and a lease liability for virtually all of their leases (other than short-term leases). This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. We are currently assessing the impact of this ASU on our Consolidated Financial Statements, but expect that it will result in a substantial increase in our long-term assets and liabilities.

In March 2016, the FASB issued ASU2016-09,Improvements to Employee Share-Based Payment Accounting, which simplifies the accounting for share-based payment transactions (including the accounting for income taxes and forfeitures, among other areas). The ASU requires entities to, among other things, recognize all excess tax benefits and deficiencies in the income statement, as a benefit or expense within income taxes, in the period in which they occur. The ASU also allows an entity to make an accounting policy election to either estimate expected forfeitures or account for them as they occur. We adopted this ASU in the first quarter of fiscal 2017, and accordingly, have recorded tax expense related to stock-based awards of approximately $1,400,000 within income taxes in our Condensed Consolidated Statement of Earnings. As of the first quarter of fiscal 2017,as a result, we no longer classify excess tax benefits related to stock-based awards as a financing cash inflow and an operating cash outflow. These classification requirements were adopted prospectively and, as such, our Condensed Consolidated Statement of Cash Flows for the first quarter of fiscaltwenty-six weeks ended July 31, 2016 has not been retrospectively adjusted. We continue to estimate expected forfeitures.

In October 2016, the FASB issued ASU2016-16,Intra-Entity Transfers of Assets Other than Inventory. The amendments remove the prohibition against the recognition of current and deferred income tax effects of intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We do not expect the adoption of this ASU to have a material impact on our financial condition, results of operations or cash flows.

In January 2017, the FASB issued ASU2017-04,Simplifying the Test for Goodwill Impairment, which simplifies the measurement of goodwill impairment by eliminating step two from the goodwill impairment test. The ASU requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019 and early adoption is permitted. We early adopted this ASU in the first quarter of fiscal 2017. The adoption of this ASU had no impact on our financial condition, results of operations or cash flows.

NOTE B. BORROWING ARRANGEMENTS

Credit Facility

We have a $500,000,000 unsecured revolving line of credit (“credit facility”) that may be used to borrow revolving loans or request the issuance of letters of credit. We may, upon notice to the administrative agent, request existing or new lenders to increase the credit facility by up to $250,000,000, at such lenders’ option, to provide for a total of $750,000,000 of unsecured revolving credit. As of AprilJuly 30, 2017, we were in compliance with our financial covenants under the credit facility and, based on current projections, we expect to remain in compliance throughout the next 12 months. The credit facility matures on November 19, 2019, at which time all outstanding borrowings must be repaid and all outstanding letters of credit must be cash collateralized.

We may elect interest rates calculated at (i) Bank of America’s prime rate (or, if greater, the average rate on overnight federal funds plusone-half of one percent, or a rate based on LIBOR plus one percent) plus a margin based on our leverage ratio or (ii) LIBOR plus a margin based on our leverage ratio. During the firstsecond quarter of fiscal 2017, we had borrowings of $45,000,000$70,000,000 under the credit facilityfacility. For year-to-date fiscal 2017, we borrowed $115,000,000 (at a weighted average interest rate of 2.01%2.24%), all of which was outstanding as of AprilJuly 30, 2017. During the firstsecond quarter of fiscal 2016, we had borrowings of $100,000,000borrowed $25,000,000 under the credit facilityfacility. For year-to-date fiscal 2016, we borrowed $125,000,000 (at a weighted average interest rate of 1.45%1.47%), all of which was outstanding as of May 1,July 31, 2016. Additionally, as of AprilJuly 30, 2017, $12,120,000$12,771,000 in issued but undrawn standby letters of credit was outstanding under the credit facility. The standby letters of credit were issued to secure the liabilities associated with workers’ compensation and other insurance programs.

Letter of Credit Facilities

We have three unsecured letter of credit reimbursement facilities for a total of $70,000,000. On August 25, 2017, we renewed all three of our letter of credit facilities for an aggregate of $70,000,000, and extended each of which matures onthese facilities’ maturity dates until August 26, 2017.25, 2018. The letter of credit facilities contain covenants that are consistent with our unsecured revolving line of credit. Interest on unreimbursed amounts under the letter of credit facilities accrues at the lender’s prime rate (or, if greater, the average rate on overnight federal funds plusone-half of one percent) plus 2.0%. As of AprilJuly 30, 2017, an aggregate of $6,831,000$5,303,000 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 23, 2018.22, 2019.

NOTE C. STOCK-BASED COMPENSATION

Equity Award Programs

Our Amended and Restated 2001 Long-Term Incentive Plan (the “Plan”) provides for grants of incentive stock options, nonqualified stock options, stock-settled stock appreciation rights (collectively, “option awards”), restricted stock awards, restricted stock units (including those that are performance-based), deferred stock awards (collectively, “stock awards”) and dividend equivalents up to an aggregate of 32,310,000 shares. As of AprilJuly 30, 2017, there were approximately 8,278,0005,970,000 shares available for future grant. Awards may be granted under the Plan to our officers, employees andnon-employee members of the board of directors (the “Board”) or those of any of our subsidiaries. Shares issued as a result of award exercises or releases are primarily funded with the issuance of new shares.

Option Awards

Annual grants of option awards are limited to 1,000,000 shares on a per person basis and have a maximum term of seven years. The exercise price of these option awards is not less than 100% of the closing price of our stock on the day prior to the grant date. Option awards granted to employees generally vest evenly over a period of four years for service-based awards. Certain option awards contain vesting acceleration clauses resulting from events including, but not limited to, retirement, merger or a similar corporate event.

Stock Awards

Annual grants of stock awards are limited to 1,000,000 shares on a per person basis and have a maximum term of seven years. Stock awards granted to employees generally vest evenly over a period of four years for service-based awards. Certain performance-based awards, which have variable payout conditions based on predetermined financial targets, vest three years from the date of grant. Certain stock awards and other agreements contain vesting acceleration clauses resulting from events including, but not limited to, retirement, merger or a similar corporate event. Stock awards granted tonon-employee Board members generally vest in one year.Non-employee Board members automatically receive stock awards on the date of their initial election to the Board and annually thereafter on the date of the annual meeting of stockholders (so long as they continue to serve as anon-employee Board member).

Stock-Based Compensation Expense

During the thirteen and twenty-six weeks ended AprilJuly 30, 2017, we recognized total stock-based compensation expense, as a component of selling, general and May 1,administrative expenses, of $13,012,000 and $22,829,000, respectively. During the thirteen and twenty-six weeks ended July 31, 2016, we recognized total stock-based compensation expense, as a component of selling, general and administrative expenses, of $9,817,000$11,744,000 and $15,732,000,$27,476,000, respectively.

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 of our common stock between the grant date and the conversion date for the number of shares converted.

The following table summarizes our stock-settled stock appreciation right activity during the thirteentwenty-six weeks ended AprilJuly 30, 2017:

 

    Shares 

Balance at January 29, 2017 (100% vested)

   411,710 

Granted

   —   

Converted into common stock

   (33,67451,021

Cancelled

   —   

Balance at AprilJuly 30, 2017 (100% vested)

   378,036360,689 

Restricted Stock Units

The following table summarizes our restricted stock unit activity during the thirteentwenty-six weeks ended AprilJuly 30, 2017:

 

    Shares 

Balance at January 29, 2017

   2,232,486 

Granted

   79,9041,375,135 

Released

   (568,999602,297

Cancelled

   (343,244582,556

Balance at AprilJuly 30, 2017

   1,400,1472,422,768 

Vested plus expected to vest at AprilJuly 30, 2017

   974,1751,772,666 

NOTE D. EARNINGS PER SHARE

Basic earnings per share is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed as net earnings divided by the weighted average number of common shares outstanding and 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 following is a reconciliation of net earnings and the number of shares used in the basic and diluted earnings per share computations:

 

In thousands, except per share amounts  Net Earnings   

Weighted

Average Shares

   

Earnings

Per Share

   Net Earnings   

Weighted

Average Shares

   

Earnings

Per Share

 

Thirteen weeks ended April 30, 2017

      

Thirteen weeks ended July 30, 2017

      

Basic

  $39,555    86,962   $0.45   $52,917    86,429   $0.61 

Effect of dilutive stock-based awards

     748        419   

Diluted

  $39,555    87,710   $0.45   $52,917    86,848   $0.61 

Thirteen weeks ended May 1, 2016

      

Thirteen weeks ended July 31, 2016

      

Basic

  $39,597    89,298   $0.44   $51,785    89,039   $0.58 

Effect of dilutive stock-based awards

     1,216        697   

Diluted

  $39,597    90,514   $0.44   $51,785    89,736   $0.58 

Twenty-six weeks ended July 30, 2017

      

Basic

  $92,472    86,696   $1.07 

Effect of dilutive stock-based awards

     542   

Diluted

  $92,472    87,238   $1.06 

Twenty-six weeks ended July 31, 2016

      

Basic

  $91,382    89,169   $1.02 

Effect of dilutive stock-based awards

     929   

Diluted

  $91,382    90,098   $1.01 

Stock-based awards of 215,5951,638,306 and 203,0001,048,547 were excluded from the computation of diluted earnings per share for the thirteen and twenty-six weeks ended AprilJuly 30, 2017, respectively, as their inclusion would be anti-dilutive. Stock-based awards of 909,000 and May 1,627,000 were excluded from the computation of diluted earnings per share for the thirteen and twenty-six weeks ended July 31, 2016, respectively, as their inclusion would be anti-dilutive.

NOTE E. SEGMENT REPORTING

We have two reportable segments,e-commerce and retail. Thee-commerce segment has the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams Sonoma Home, Rejuvenation and Mark and Graham, which sell our products through oure-commerce websites and direct mail catalogs. Oure-commerce merchandise strategies are operating segments, which have been aggregated into one reportable segment,e-commerce. The retail segment, which includes our franchise operations, has the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation, which sell our products through our retail stores. Our retail merchandise strategies are operating segments, which have been aggregated into one reportable segment, retail. Management’s expectation is that the overall economic characteristics of each of our operating segments will be similar over time based on management’s judgment that the operating segments have had similar historical economic characteristics and are expected to have similar long-term financial performance in the future.

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.

We use operating income to evaluate segment profitability. Operating income is defined as earnings (loss) before net interest income (expense) and income taxes. Unallocated costs before interest and income taxes include corporate employee-related costs, occupancy expenses (including depreciation expense), administrative costs and third-party service costs, primarily in our corporate administrative and systems departments. Unallocated assets include corporate cash and cash equivalents, prepaid expenses, the net book value of corporate facilities and related information systems, deferred income taxes and other corporate long-lived assets.

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   E-commerce   Retail   Unallocated Total 

Thirteen weeks ended April 30, 2017

       

Thirteen weeks ended July 30, 2017

       

Net revenues1

  $630,793   $570,813   $—    $1,201,606 

Depreciation and amortization expense

   6,788    22,385    15,925  45,098 

Operating income (loss)

   135,139    34,592    (88,147 81,584 

Capital expenditures

   8,119    23,288    19,167  50,574 

Thirteen weeks ended July 31, 2016

       

Net revenues1

  $599,683   $559,346   $—    $1,159,029 

Depreciation and amortization expense

   7,989    21,339    12,801  42,129 

Operating income (loss)

   132,733    33,217    (82,674 83,276 

Capital expenditures

   4,593    25,127    20,008  49,728 

Twenty-six weeks ended July 30, 2017

       

Net revenues1

  $580,510   $530,997   $—    $1,111,507   $1,211,303   $1,101,810   $—    $2,313,113 

Depreciation and amortization expense

   6,967    22,342    15,641  44,950    13,755    44,727    31,566  90,048 

Operating income (loss)2

   132,004    21,714    (91,244 62,474    267,143    56,306    (179,391 144,058 

Assets3

   653,898    1,067,169    670,110  2,391,177    672,522    1,129,925    677,413  2,479,860 

Capital expenditures

   2,870    16,497    12,786  32,153    10,989    39,785    31,953  82,727 

Thirteen weeks ended May 1, 2016

       

Twenty-six weeks ended July 31, 2016

       

Net revenues1

  $  576,234   $521,583   $—    $  1,097,817   $1,175,917   $1,080,929   $—   $2,256,846 

Depreciation and amortization expense

   7,614    20,749    12,877  41,240    15,603    42,088    25,678  83,369 

Operating income (loss)2

   131,545    30,125    (98,145 63,525    264,278    63,342    (180,819 146,801 

Assets3

   600,053      1,039,580      650,735  2,290,368    627,532    1,051,184    694,848  2,373,564 

Capital expenditures

   3,849    13,752    10,548  28,149    8,442    38,879    30,556  77,877 
1Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $69.4$80.6 million and $69.7$80.0 million for the thirteen weeks ended AprilJuly 30, 2017 and May 1,July 31, 2016, respectively, and $150.0 million and $149.7 million for the twenty-six weeks ended July 30, 2017 and July 31, 2016, respectively.
2Includes $5.7 million and $13.2 million of severance-related charges for the thirteentwenty-six weeks ended AprilJuly 30, 2017 and May 1,July 31, 2016, respectively, primarily in our corporate functions, which is recorded in selling, general and administrative expenses within the unallocated segment.
3Includes long-term assets related to our international operations of approximately $57.9$61.9 million and $64.4$60.7 million as of AprilJuly 30, 2017 and May 1,July 31, 2016, respectively.

NOTE F. COMMITMENTS AND CONTINGENCIES

We are involved in lawsuits, claims and proceedings incident to the ordinary course of our business. These disputes, which are not currently material, are increasing in number as our business expands and our company grows. We review the need for any loss contingency reserves and establish reserves when, in the opinion of management, it is probable that a matter would result in liability, and the amount of loss, if any, can be reasonably estimated. In view of the inherent difficulty of predicting the outcome of these matters, it may not be possible to determine whether any loss is probable or to reasonably estimate the amount of the loss until the case is close to resolution, in which case no reserve is established until that time. Any claims against us, whether meritorious or not, could result in costly litigation, require significant amounts of management time and result in the diversion of significant operational resources. The results of these lawsuits, claims and proceedings cannot be predicted with certainty. However, we believe that the ultimate resolution of these current matters will not have a material adverse effect on our Consolidated Financial Statements taken as a whole.

NOTE G. STOCK REPURCHASE PROGRAM AND DIVIDENDS

Stock Repurchase Program

During the thirteen weeks ended AprilJuly 30, 2017, we repurchased 764,5431,160,381 shares of our common stock at an average cost of $50.16$47.41 per share for a total cost of approximately $38,350,000 under$55,011,000. During the twenty-six weeks ended July 30, 2017, we repurchased 1,924,924 shares of our $500,000,000common stock repurchase authorization.at an average cost of $48.50 per share for a total cost of approximately $93,361,000. As of AprilJuly 30, 2017, we held treasury stock of $927,000$805,000 that represents the cost of shares available for issuance intended to satisfy future stock-based award settlements in certain foreign jurisdictions.

During the thirteen weeks ended May 1,July 31, 2016, we repurchased 727,629665,517 shares of our common stock at an average cost of $55.85$53.38 per share for a total cost of approximately $40,639,000. As of May 1,$35,527,000. During the twenty-six weeks ended July 31, 2016, we held treasuryrepurchased 1,393,146 shares of our common stock at an average cost of $1,563,000.$54.67 per share for a total cost of approximately $76,166,000.

Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice.

Dividends

We declared cash dividends of $0.39 and $0.37 per common share during the thirteen weeks ended AprilJuly 30, 2017 and May 1,July 31, 2016, respectively. We declared cash dividends of $0.78 and $0.74 per common share during the twenty-six weeks ended July 30, 2017 and July 31, 2016, respectively. Our quarterly cash dividend may be limited or terminated at any time.

NOTE H. DERIVATIVE FINANCIAL INSTRUMENTS

We have retail and/ore-commerce businesses in Canada, Australia and the United Kingdom, and operations throughout Asia and Europe, which expose us to market risk associated with foreign currency exchange rate fluctuations. Substantially all of our purchases and sales are denominated in U.S. dollars, which limits our exposure to this risk. However, some of our foreign operations have a functional currency other than the U.S. dollar. To mitigate this risk, we hedge a portion of our foreign currency exposure with foreign currency forward contracts in accordance with our risk management policies. We do not enter into such contracts for speculative purposes. The assets or liabilities associated with the derivative instruments are measured at fair value and recorded in either other current or long-term assets or other current or long-term liabilities. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on whether the derivative instrument is designated as a hedge and qualifies for hedge accounting in accordance with the FASB Accounting Standards Codification (“ASC”) 815,Derivatives and Hedging.

Cash Flow Hedges

We enter into foreign currency forward contracts designated as cash flow hedges (to sell Canadian dollars and purchase U.S. dollars) for forecasted inventory purchases in U.S. dollars by our foreign subsidiaries. These 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 selling, general and administrative expenses. Based on the rates in effect as of AprilJuly 30, 2017, we expect to reclassify a netpre-tax gain loss of approximately $944,000$634,000 from OCI to cost of goods sold over the next 12 months.

We also enter intonon-designated foreign currency forward contracts (to sell Australian dollars and purchase U.S. dollars) to reduce the exchange risk associated with our assets and liabilities denominated in a foreign currency. Any foreign exchange gains or losses related to these contracts are recognized in selling, general and administrative expenses.

As of AprilJuly 30, 2017 and May 1,July 31, 2016, we had foreign currency forward contracts outstanding (in U.S. dollars) with notional values as follows:

 

                          
In thousands    April 30, 2017     May 1, 2016   July 30, 2017 July 31, 2016 

Contracts designated as cash flow hedges

  $19,200   $27,150   $24,600   $28,450  

Contracts not designated as cash flow hedges

  $48,000   $43,000   $48,000  $44,000 

Hedge effectiveness is evaluated prospectively at inception, on an ongoing basis, as well as retrospectively using regression analysis. Any measureable ineffectiveness of the hedge is recorded in selling, general and administrative expenses. No gain or loss was recognized for cash flow hedges due to hedge ineffectiveness and all hedges were deemed effective for assessment purposes for the thirteen and twenty-six weeks ended AprilJuly 30, 2017 and May 1,July 31, 2016.

The effect of derivative instruments in our Condensed Consolidated Financial Statements during the thirteen and twenty-six weeks ended AprilJuly 30, 2017 and May 1,July 31, 2016,pre-tax, was as follows:

 

In thousands    April 30, 2017     May 1, 2016   Thirteen
Weeks Ended
July 30, 2017
 Thirteen
Weeks Ended
July 31, 2016
 Twenty-six
Weeks Ended
July 30, 2017
 Twenty-six
Weeks Ended
July 31, 2016
 

Net gain (loss) recognized in OCI

  $892   $(2,933  $(1,588 $1,434  $(696 $(1,499

Net gain (loss) reclassified from OCI to cost of goods sold

  $21   $409 

Net gain (loss) reclassified from OCI into cost of goods sold

  $(9 $50  $12  $459 

Net foreign exchange gain (loss) recognized in selling, general and administrative expenses:

         

Instruments designated as cash flow hedges 1

  $8   $23   $47  $(13 $55  $10 

Instruments not designated orde-designated

  $341   $(3,342  $—    $309  $341  $(3,033
      
1Changes in fair value of the forward contract related to interest charges (or forward points).

The fair values of our derivative financial instruments are presented below according to their classification in our Condensed Consolidated Balance Sheets. All fair values were measured using Level 2 inputs as defined by the fair value hierarchy described in Note I.

 

                          
In thousands    April 30, 2017   May 1, 2016   July 30, 2017 July 31, 2016 

Derivatives designated as cash flow hedges:

      

Other current assets

  $925  $—     $—    $309 

Other long-term assets

  $52  $—   

Other current liabilities

  $—    $(2,160  $(704 $(695

Other long-term liabilities

  $(90 $—   

Derivatives not designated as hedging instruments:

      

Other current liabilities

  $(83 $(287
   

Other current assets

  $6  $9 

We record all derivative assets and liabilities on a gross basis. They do not meet the balance sheet netting criteria as discussed in ASC 210,Balance Sheet, because we do not have master netting agreements established with our derivative counterparties that would allow for net settlement.

NOTE I. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We determine the fair value of financial andnon-financial assets and liabilities using the fair value hierarchy established by ASC 820,Fair Value Measurement, which defines three levels of inputs that may be used to measure fair value, as follows:

 

Level 1: inputs which include quoted prices in active markets for identical assets or liabilities;

 

Level 2: inputs which include observable inputs other than Level 1 inputs, such as quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability; and

 

Level 3: inputs which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The fair values of our cash and cash equivalents are based on Level 1 inputs, which include quoted prices in active markets for identical assets.

Foreign Currency Derivatives and Hedging Instruments

We use the income approach to value our derivatives using observable Level Level��2 market data at the measurement date and standard valuation techniques to convert future amounts to a single present value amount, assuming that participants are motivated but not compelled to transact. Level 2 inputs are limited to quoted prices that are observable for the assets and liabilities, which include interest rates and credit risk ratings. We usemid-market pricing as a practical expedient for fair value measurements. Key inputs for currency derivatives are the spot rates, forward rates, interest rates and credit derivative market rates.

The counterparties associated with our foreign currency forward contracts are large credit-worthy financial institutions, and the derivatives transacted with these entities are relatively short in duration, therefore, we do not consider counterparty concentration andnon-performance to be material risks at this time. Both we and our counterparties are expected to perform under the contractual terms of the instruments. None of the derivative contracts entered into are subject to credit risk-related contingent features or collateral requirements.

Property and Equipment

We review the carrying value of all long-lived assets for impairment, primarily at an individual store level, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We measure these assets at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. The fair value is based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital.

There were no transfers between Level 1, 2 or 3 categories during the thirteen and twenty-six weeks ended AprilJuly 30, 2017 or May 1,July 31, 2016.

NOTE J. ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in accumulated other comprehensive income (loss) by component, net of tax, are as follows:

 

In thousands  

Foreign Currency

Translation

 

Cash Flow

Hedges

 

Accumulated Other

Comprehensive

Income (Loss)

   Foreign Currency
Translation
 Cash Flow
Hedges
 Accumulated Other
Comprehensive
Income (Loss)
 

Balance at January 29, 2017

  $(9,957 $54  $(9,903  $(9,957 $54  $(9,903

Foreign currency translation adjustments

   (1,566  —    (1,566   (1,566  —   (1,566

Change in fair value of derivative financial instruments

   —    655  655    —   655  655 

Reclassification adjustment for realized (gain) loss on derivative financial instruments1

   —    (16 (16   —   (16 (16

Other comprehensive income (loss)

   (1,566 639  (927   (1,566 639  (927

Balance at April 30, 2017

   (11,523 693  (10,830   (11,523 693  (10,830

Foreign currency translation adjustments

   3,390   3,390 

Change in fair value of derivative financial instruments

   (1,166 (1,166

Reclassification adjustment for realized (gain) loss on derivative financial instruments1

   7  7 

Other comprehensive income (loss)

   3,390  (1,159 2,231 

Balance at July 30, 2017

  $(8,133 $(466 $(8,599
       

Balance at January 31, 2016

   (11,480 864  (10,616  $(11,480 $864  $(10,616

Foreign currency translation adjustments

   5,208   5,208    5,208   —   5,208 

Change in fair value of derivative financial instruments

   —    (2,165 (2,165   —   (2,165 (2,165

Reclassification adjustment for realized (gain) loss on derivative financial instruments1

   —    (302 (302   —   (302 (302

Other comprehensive income (loss)

   5,208  (2,467 2,741    5,208  (2,467 2,741 

Balance at May 1, 2016

  $(6,272 $(1,603 $(7,875   (6,272 (1,603 (7,875

Foreign currency translation adjustments

   (3,005  —   (3,005

Change in fair value of derivative financial instruments

   —   1,058  1,058 

Reclassification adjustment for realized (gain) loss on derivative financial instruments1

   —   (38 (38

Other comprehensive income (loss)

   (3,005 1,020  (1,985

Balance at July 31, 2016

  $(9,277 $(583 $(9,860
1Refer to Note H for additional disclosures about reclassifications out of accumulated other comprehensive income and their corresponding effects on the respective line items in the Condensed Consolidated Statements of Earnings.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or are proven incorrect, could cause our business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements related to: our merchandise strategies; our growth strategies for our brands; trends in Pottery Barn categories; our beliefs regarding the resolution of current lawsuits, claims and proceedings; our stock repurchase program; our expectations regarding our cash flow hedges and foreign currency risks; our planned use of cash; our compliance with the financial covenants contained in our credit facilities; our belief that our cashon-hand, in addition to our available credit facilities, will provide adequate liquidity for our business operations over the next 12 months; our beliefs regarding our exposure to foreign currency exchange rate fluctuations; and our beliefs regarding seasonal patterns associated with our business, as well as statements of belief and statements of assumptions underlying any of the foregoing. You can identify these and other forward-looking statements by the use of words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” or the negative of such terms, or other comparable terminology. The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in this document and our Annual Report on Form10-K for the fiscal year ended January 29, 2017, and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

OVERVIEW

Williams-Sonoma, Inc. is a specialty retailer of high-quality products for the home. These products, representing distinct merchandise strategies – Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams Sonoma Home, Rejuvenation, and Mark and Graham – are marketed throughe-commerce websites, direct mail catalogs and 628635 stores. We have retail and/ore-commerce businesses in the U.S., Puerto Rico, Canada, Australia and the United Kingdom, and ship our products to customers worldwide. Our catalogs reach customers throughout the U.S. and Australia. In addition, we have unaffiliated franchisees that operate stores and/ore-commerce websites in the Middle East, the Philippines, Mexico and Mexico. During fiscal 2016, we entered into a franchise agreement with an unaffiliated franchisee to operate stores ande-commerce websites in South Korea, beginning in fiscal 2017.Korea.

The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources for the thirteen weeks ended AprilJuly 30, 2017 (“firstsecond quarter of fiscal 2017”), as compared to the thirteen weeks ended May 1,July 31, 2016 (“firstsecond quarter of fiscal 2016)2016”) and the twenty-six weeks ended July 30, 2017 (“year-to-date fiscal 2017”), as compared to the twenty-six weeks ended July 31, 2016 (“year-to-date fiscal 2016”), should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto.

All explanations of changes in operational results are discussed in order of their magnitude.

FirstSecond Quarter of Fiscal 2017 Financial Results

Net revenues in the firstsecond quarter of fiscal 2017 increased by $13,690,000,$42,577,000, or 1.2%3.7%, compared to the firstsecond quarter of fiscal 2016, with comparable brand revenue growth of 0.1%2.8%. The increase in net revenues was driven by a 0.7%5.2% increase in oure-commerce net revenues (primarily driven by West Elm, and Williams Sonoma, partially offset by the Pottery Barn brands)Rejuvenation, Mark and Graham and our company-owned international operations), and a 1.8%2.1% increase in retail net revenues (primarily driven by West Elm and Pottery Barn), with particular strength in furniture. Net revenue growth in the firstsecond quarter of fiscal 2017 also included a 2%2.7% increase in retailstore leased square footage compared to the second quarter of fiscal 2016 primarily due to 49 net new stores.

In Pottery Barn, our largest brand, comparable brand revenues declined 1.4%increased 1.2% in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016. Despite this decline, the brand showed improved trendsThis growth was driven by our new furniture collections along with strength in furniture – specifically upholstery, bedroomdecorative accessories, entertaining and home office – and experienced growth in other categories such as decorating and entertaining.textiles. In Williams Sonoma, comparable brand revenues increased 3.2%1.9% in the firstsecond quarter of fiscal 2017 compared to the second quarter of fiscal 2016. This increase was driven by a strong summer season led by our outdoor categories, strong performance in our exclusive product offerings and continued growth in Williams Sonoma Home. In West Elm, comparable brand revenues increased 10.1% in the second quarter of fiscal 2017 on top of 3.5%15.8% in the first quarter of fiscal 2016. The brand launched several products and collaborations during the first quarter, and we saw particular strength across tabletop, electrics and cutlery. In West Elm, comparable brand revenues increased 6.0% in the first quarter of fiscal 2017 on top of 19.0% in the firstsecond quarter of fiscal 2016. This growth was driven by furniture and our outdoor collections. In Pottery Barn Kids, comparable brand revenues declined 5.7%3.9% in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016. GrowthStrength in our back-to-school, textile and furniture businessbusinesses was more than offset byout-of-stock lower in-stock inventory positions in certain key categories and softness in our textiles and accessories.categories. In PBteen, comparable brand revenues declined 14.3%increased 0.2% in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016, primarily due toout-of-stock inventorywith improvement across all major categories. We saw particular strength in key categories. Whilefurniture, textile and accessory categories, as well as our furniture categories showed improved trends during the quarter, we saw softness in textilesback to school and accessories. And in our emerging brands,dorm offerings. Our newer businesses, Rejuvenation and Mark and Graham, net revenues increased 29.8%delivered growth of over 25% in the firstsecond quarter of fiscal 2017.

In the firstsecond quarter of fiscal 2017, diluted earnings per share was $0.45 (which included severance-related charges of $0.04 and an unfavorable tax impact from the adoption of ASU2016-09,Improvements to Employee Share-Based Payment Accounting,of $0.02)$0.61 versus $0.44$0.58 in the firstsecond quarter of fiscal 2016, (which included severance-related reorganization charges of $0.09).2016. We also returned $72,539,000$89,019,000 to our stockholders through stock repurchases and dividends.

NET REVENUES

Net revenues consist ofe-commerce net revenues and retail net revenues.E-commerce net revenues include sales of merchandise to customers through oure-commerce websites and our catalogs, as well as shipping fees. Retail net revenues include sales of merchandise to customers at our retail stores and to our franchisees, as well as shipping fees on any products shipped to our customers’ homes. Shipping fees consist of revenue received from customers for delivery of merchandise to their homes. Revenues are presented net of sales returns and other discounts.

 

  Thirteen Weeks Ended   Thirteen Weeks Ended Twenty-six Weeks Ended 
In thousands  

April 30,

2017

   % Total 

May 1,

2016

   % Total   July 30,
2017
   % Total July 31,
2016
   % Total July 30,
2017
   % Total July 31,
2016
   % Total 

E-commerce net revenues

  $580,510    52.2 $576,234    52.5  $630,793    52.5 $599,683    51.7 $1,211,303    52.4 $1,175,917    52.1

Retail net revenues

   530,997    47.8 521,583    47.5   570,813    47.5 559,346    48.3 1,101,810    47.6 1,080,929    47.9

Net revenues

  $1,111,507    100.0 $1,097,817    100.0  $1,201,606    100.0 $1,159,029    100.0 $2,313,113    100.0 $2,256,846    100.0

Net revenues in the firstsecond quarter of fiscal 2017 increased by $13,690,000,$42,577,000, or 1.2%3.7%, compared to the firstsecond quarter of fiscal 2016, with comparable brand revenue growth of 0.1%2.8%. The increase in net revenues was driven by a 0.7%5.2% increase in oure-commerce net revenues (primarily driven by West Elm, and Williams Sonoma, partially offset by the Pottery Barn brands)Rejuvenation, Mark and Graham and our company-owned international operations), and a 1.8%2.1% increase in retail net revenues (primarily driven by West Elm and Pottery Barn), with particular strength in furniture. Net revenue growth in the firstsecond quarter of fiscal 2017 also included a 2%2.7% increase in retailstore leased square footage compared to the second quarter of fiscal 2016 primarily due to 49 net new stores.

Net revenues for year-to-date fiscal 2017 increased by $56,267,000 or 2.5%, compared to year-to-date fiscal 2016, with comparable brand revenue growth of 1.5%. The increase in net revenues was driven by a 3.0% increase in our e-commerce net revenues (primarily driven by West Elm, Williams Sonoma and Rejuvenation) and a 1.9% increase in our retail net revenues (primarily driven by West Elm and Pottery Barn), with particular strength in furniture. Net revenue growth for year-to-date fiscal 2017 also included a 2.7% increase in store leased square footage compared to year-to-date fiscal 2016 primarily due to 9 net new stores.

Comparable Brand Revenue

Comparable brand revenue includes retail comparable store sales ande-commerce sales, as well as shipping fees, sales returns and other discounts associated with current period sales. Outlet comparable store net revenues are included in their respective brands. Comparable brand revenue excludes sales from certain operations until such time that we believe those sales are meaningful to evaluating the performance of the brand. Sales to our international franchisees have also been excluded as their stores ande-commerce websites are not operated by us.

Comparable stores are defined as 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 e-commerce websites are not operated by us. Sales from certain operations are also excluded until such time that we believe those sales to be meaningful to evaluating performance. Additionally, comparable brand revenue growth for newer concepts is not separately disclosed until such time that we believe those sales to be meaningful to evaluating the performance of the brand.

 

  Thirteen Weeks Ended   Thirteen
Weeks Ended
 Twenty-six
Weeks Ended
 
Comparable brand revenue growth (decline)  

April 30,

2017

 

May 1,

2016

   July 30,
2017
 July 31,
2016
 July 30,
2017
 July 31,
2016
 

Pottery Barn

   (1.4%)  0.2   1.2 (4.8%)  (0.1%)  (2.4%) 

Williams Sonoma

   3.2 3.5   1.9 0.0 2.5 1.7

West Elm

   6.0 19.0   10.1 15.8 8.1 17.4

Pottery Barn Kids

   (5.7%)  1.7   (3.9%)  0.1 (4.8%)  0.9

PBteen

   (14.3%)  1.9   0.2 (5.2%)  (6.3%)  (2.1%) 

Total

   0.1 4.5

Total1

   2.8 0.6 1.5 2.5
1Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham.

RETAIL STORE DATA

 

  Store Count   Average Leased Square
Footage Per Store
   Store Count   Average Leased Square
Footage Per Store
 
  January 29,
2017
   Openings   Closings 

April 30,

2017

   

May 1,

2016

   

April 30,

2017

   

May 1,

2016

   

April 30,

2017

   Openings   Closings 

July 30,

2017

   

July 31,

2016

   

July 30,

2017

   

July 31,

2016

 

Williams Sonoma

   234    2    (3 233    241    6,600    6,600    233    1    —    234    241    6,600    6,600 

Pottery Barn

   201    1    (3 199    200    13,800    13,800    199    6    (1 204    201    13,800    13,800 

West Elm

   98    1    —    99    87    13,300    13,200    99    2    —    101    89    13,200    13,300 

Pottery Barn Kids

   89    —      —    89    90    7,400    7,500    89    —      (1 88    89    7,400    7,500 

Rejuvenation

   7    1    —    8    6    8,800    9,000    8    —      —    8    6    8,800    9,000 

Total

   629    5    (6 628    624    10,100    10,000    628    9    (2 635    626    10,100    10,000 

Store selling square footage atperiod-end

Store selling square footage atperiod-end

 

        3,942,000    3,867,000 

Store selling square footage at period-end

 

      3,998,000    3,894,000 

Store leased square footage atperiod-end

Store leased square footage atperiod-end

 

         6,341,000    6,218,000 

Store leased square footage at period-end

 

       6,428,000    6,262,000 

COST OF GOODS SOLD

 

  Thirteen Weeks Ended   Thirteen Weeks Ended Twenty-six Weeks Ended 
In thousands  

April 30,

2017

   

% Net

Revenues

 

May 1,

2016

   

% Net

Revenues

   

July 30,

2017

   

% Net

Revenues

 

July 31,

2016

   

% Net

Revenues

 

July 30,

2017

   

% Net

Revenues

 

July 31,

2016

   

% Net

Revenues

 

Cost of goods sold1

  $715,747    64.4 $705,300    64.2  $778,895    64.8 $748,490    64.6 $1,494,642    64.6 $1,453,790    64.4
1 Includes total occupancy expenses of $167,493,000$168,359,000 and $162,019,000$164,702,000 for the firstsecond quarter of fiscal 2017 and the firstsecond quarter of fiscal 2016, respectively, and $335,852,000 and $326,721,000 for year-to-date fiscal 2017 and year-to-date fiscal 2016, respectively.

Cost of goods sold includes cost of goods, occupancy expenses and shipping costs. Cost of goods consists of cost of merchandise, inbound freight expenses,freight-to-store expenses and other inventory related costs such as shrinkage, damages and replacements. Occupancy expenses consist of rent, depreciation and other occupancy costs, including common area maintenance, property taxes and utilities. Shipping costs consist of third-party delivery services and shipping materials.

Our classification of expenses in cost of goods sold may not be comparable to other public companies, as we do not includenon-occupancy related costs associated with our distribution network in cost of goods sold. These costs, which include distribution network employment, third-party warehouse management and other distribution related administrative expenses, are recorded in selling, general and administrative expenses.

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.

FirstSecond Quarter of Fiscal 2017 vs. FirstSecond Quarter of Fiscal 2016

Cost of goods sold increased by $10,447,000,$30,405,000, or 1.5%4.1%, in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016. Cost of goods sold as a percentage of net revenues increased to 64.4%64.8% in the firstsecond quarter of fiscal 2017 from 64.2%64.6% in the firstsecond quarter of fiscal 2016. This increase was primarily driven by higher occupancy costs to support our growth and operational initiatives,lower selling margins primarily resulting from reduced shipping income, partially offset by improvedthe leverage of occupancy costs.

In the e-commerce channel, cost of goods sold as a percentage of net revenues increased in the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016 driven by lower selling margins primarily resulting from reduced shipping and fulfillment related costs asincome, partially offset by a result of our focus on our supply chain initiatives.reduction in occupancy costs.

In thee-commerce retail channel, cost of goods sold as a percentage of net revenues decreased in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016 primarily driven by higher selling margins.

Year-to-Date Fiscal 2017 vs. Year-to-Date Fiscal 2016

Cost of goods sold increased by $40,852,000, or 2.8%, year-to-date fiscal 2017 compared to year-to-date fiscal 2016. Cost of goods sold as a percentage of net revenues increased to 64.6% year-to-date fiscal 2017 from 64.4% year-to-date fiscal 2016. This increase was driven by lower selling margins primarily resulting from reduced shipping and fulfillment-related costsincome.

In the e-commerce channel, cost of goods sold as a resultpercentage of our focus on our supply chain and inventory initiatives.net revenues decreased year-to-date fiscal 2017 compared to year-to-date fiscal 2016 primarily driven by a reduction in occupancy costs, partially offset by lower selling margins primarily resulting from reduced shipping income.

In the retail channel, cost of goods sold as a percentage of net revenues increased in the first quarter ofyear-to-date fiscal 2017 compared to the first quarter ofyear-to-date fiscal 2016 primarily driven by higher occupancy costs to support our growth and operational initiatives.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

  Thirteen Weeks Ended   Thirteen Weeks Ended Twenty-six Weeks Ended 
In thousands  

April 30,

2017

   

% Net

Revenues

 

May 1,

2016

   

% Net

Revenues

   

July 30,

2017

   % Net
Revenues
 

July 31,

2016

   % Net
Revenues
 

July 30,

2017

   % Net
Revenues
 

July 31,

2016

   % Net
Revenues
 

Selling, general and administrative expenses

  $333,286    30.0 $328,992    30.0  $341,127    28.4 $327,263    28.2 $674,413    29.2 $656,255    29.1

Selling, general and administrative expenses consist ofnon-occupancy related costs associated with our retail stores, distribution and manufacturing facilities, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions. These costs include employment, advertising, third partythird-party credit card processing and other general expenses.

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.

FirstSecond Quarter of Fiscal 2017 vs. FirstSecond Quarter of Fiscal 2016

Selling, general and administrative expenses increased by $4,294,000,$13,864,000, or 1.3%4.2%, in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016. Selling, general and administrative expenses as a percentage of net revenues were 30.0%increased to 28.4% in the firstsecond quarter of fiscal 2017 andcompared to 28.2% in the firstsecond quarter of fiscal 2016. AnThis increase inas a percentage of net revenues was primarily due to higher digital advertising expensescosts as a result of our focus on new customer acquisition, as well as an increase in employment costs associated with our growth initiatives waspartially offset by a decrease in severance-related charges within the unallocated segment ($5,705,000 in the first quarter of fiscal 2017 compared to $13,221,000 in the first quarter of fiscal 2016) and a decrease in general expenses.

In thee-commerce channel, selling, general and administrative expenses as a percentage of net revenues increased in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016 primarily driven by an increase inhigher digital advertising costs, partially offset by the leverage of employment costs and lower general expenses.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased in the firstsecond quarter of fiscal 2017 compared to the firstsecond quarter of fiscal 2016 primarily driven by an increase in employment costs associated withto support our growth initiatives.initiatives, partially offset by a decrease in general expenses.

Year-to-Date Fiscal 2017 vs. Year-to-Date Fiscal 2016

Selling, general and administrative expenses increased by $18,158,000, or 2.8%, year-to-date fiscal 2017 compared to year-to-date fiscal 2016. Selling, general and administrative expenses as a percentage of net revenues increased to 29.2% year-to-date fiscal 2017 compared to 29.1% year-to-date fiscal 2016. This increase as a percentage of net revenues was primarily due to higher digital advertising costs as a result of our focus on new customer acquisition, partially offset by a decrease in severance-related charges within the unallocated segment ($5,705,000 year-to-date fiscal 2017 compared to $13,221,000 year-to-date fiscal 2016) and a decrease in general expenses.

In the e-commerce channel, selling, general and administrative expenses as a percentage of net revenues increased year-to-date fiscal 2017 compared to year-to-date fiscal 2016 primarily driven by higher digital advertising costs, partially offset by the leverage of employment costs and general expenses.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues increased year-to-date fiscal 2017 compared to year-to-date fiscal 2016 primarily driven by an increase in employment costs to support our growth initiatives, partially offset by a decrease in general expenses.

INCOME TAXES

The effective tax rate was 36.8%35.6% for the first quarter ofyear-to-date fiscal 2017 and 37.7% for the first quarter ofyear-to-date fiscal 2016. The decrease in the effective tax rate in the first quarter offor year-to-date fiscal 2017 was primarily driven by the overall mix and level of earnings, as well as the improved profitability across our international operations, which are taxed at a lower tax rate, partially offset by an unfavorable impact from the adoption of ASU2016-09,Improvements to Employee Share-Based Payment Accounting.

LIQUIDITY AND CAPITAL RESOURCES

As of AprilJuly 30, 2017, we held $93,975,000$103,109,000 in cash and cash equivalents, the majority of which iswas held in demand deposit accounts and money market funds, and of which $49,048,000$62,577,000 was held by our foreign subsidiaries. As is consistent within our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

In fiscal 2017, we plan to use our cash resources to fund our inventory and inventory related purchases, advertising and marketing initiatives, property and equipment purchases, stock repurchases and dividend payments. In addition to our cash balances on hand, we have a $500,000,000 unsecured revolving line of credit (“credit facility”) that may be used to borrow revolving loans or to request the issuance of letters of credit. We may, upon notice to the administrative agent, request existing or new lenders to increase the credit facility by up to $250,000,000, at such lenders’ option, to provide for a total of $750,000,000 of unsecured revolving credit. During the first quarter ofFor year-to-date fiscal 2017, we borrowed $45,000,000$115,000,000 under the credit facility, all of which was outstanding as of AprilJuly 30, 2017. During the first quarter ofFor year-to-date fiscal 2016, we borrowed $100,000,000$125,000,000 under the credit facility, all of which was outstanding as of May 1,July 31, 2016.

As of AprilJuly 30, 2017, issued but undrawn standby letters of credit totaling $12,120,000$12,771,000 were outstanding under the credit facility. Additionally, as of AprilJuly 30, 2017, we had three unsecured letter of credit reimbursement facilities for a total of $70,000,000, of which $6,831,000$5,303,000 was outstanding. These letter of credit facilities represent only a future commitment to fund inventory purchases to which we had not taken legal title. We are currently in compliance with all of our financial covenants under the credit facility and the three unsecured letter of credit reimbursement facilities and, based on our current projections, we expect to remain in compliance throughout the next 12 months. We believe our cash on hand, in addition to our available credit facilities, will provide adequate liquidity for our business operations over the next 12 months.

Cash Flows from Operating Activities

For the first quarter ofyear-to-date fiscal 2017, net cash used inprovided by operating activities was $46,376,000$35,135,000 compared to $72,660,000$33,448,000 for the first quarter ofyear-to-date fiscal 2016. For the first quarter ofyear-to-date fiscal 2017, net cash used inprovided by operating activities was primarily attributable to net earnings adjusted for non-cash items, partially offset by merchandise inventories, accounts payable and accrued salaries, benefits and other liabilities, as well as merchandise inventories, partially offset by net earnings adjusted fornon-cash items.liabilities. Net cash used inprovided by operating activities decreasedincreased compared to the first quarter ofyear-to-date fiscal 2016 primarily due to a decrease in payments related to income taxes and accounts payable, partially offset by an increase in merchandise inventories.

Cash Flows from Investing Activities

For the first quarter ofyear-to-date fiscal 2017, net cash used in investing activities was $32,148,000$82,683,000 compared to $27,855,000$77,514,000 for the first quarter ofyear-to-date fiscal 2016, and was primarily attributable to purchases of property and equipment. Net cash used in investing activities increased compared to the first quarter ofyear-to-date fiscal 2016 primarily due to an increase in purchases of property and equipment.

Cash Flows from Financing Activities

For the first quarter ofyear-to-date fiscal 2017, net cash used in financing activities was $41,319,000$60,675,000 compared to net cash provided by financing activities of $6,805,000$37,160,000 for the first quarter ofyear-to-date fiscal 2016. For the first quarter ofyear-to-date fiscal 2017, net cash used in financing activities was primarily attributable to repurchases of common stock and the payment of dividends, partially offset by borrowings under our revolving line of credit. The decreaseNet cash used in cash flows from financing activities in the first quarter of fiscal 2017increased compared to the first quarter ofyear-to-date fiscal 2016 was primarily attributabledue to a decreasean increase in borrowings under our revolving linerepurchases of credit.common stock.

Stock Repurchase Program and Dividends

See Note G to our Condensed Consolidated Financial Statements,Stock Repurchase Program and Dividends,within Item 1 of this Quarterly Report on Form10-Q for further information.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates. During the firstsecond quarter of fiscal 2017, there have been no significant changes to the critical accounting policies discussed in our Annual Report on Form10-K for the fiscal year ended January 29, 2017.

Seasonality

Our business is subject to substantial seasonal variations in demand. Historically, a significant portion of our revenues and net earnings have been realized during the period from October through January, and levels of net revenues and net earnings have typically been lower during the period from February through September. We believe this is the general pattern associated with the retail industry. In preparation for and during our holiday selling season, we hire a substantial number of additional temporary employees, primarily in our retail stores, customer care centers and distribution facilities, and incur significant fixed catalog production and mailing costs.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, which include significant deterioration of the U.S. and foreign markets, changes in U.S. interest rates, foreign currency exchange rate fluctuations, and the effects of economic uncertainty which may affect the prices we pay our vendors in the foreign countries in which we do business. We do not engage in financial transactions for trading or speculative purposes.

Interest Rate Risk

Our revolving line of credit has a variable interest rate which, when drawn upon, subjects us to risks associated with changes in that interest rate. As of AprilJuly 30, 2017, we had borrowings of $45,000,000$115,000,000 outstanding under the credit facility. A hypothetical increase or decrease of one percentage point on our existing variable rate debt instrument would not materially affect our results of operations or cash flows.

In addition, we have fixed and variable income investments consisting of short-term investments classified as cash and cash equivalents, which are also affected by changes in market interest rates. As of AprilJuly 30, 2017, our investments, made primarily in demand deposit accounts and money market funds, are stated at cost and approximate their fair values.

Foreign Currency Risks

We purchase a significant amount of inventory from vendors outside of the U.S. in transactions that are denominated in U.S. dollars. Approximately 1% of our international purchase transactions are in currencies other than the U.S. dollar, primarily the euro. Any foreign currency impact related to these international purchase transactions was not significant to us during the firstsecond quarter of fiscal 2017 or the firstsecond quarter of fiscal 2016. Since we pay for the majority of our international purchases in U.S. dollars, however, a decline in the U.S. dollar relative to other foreign currencies would subject us to risks associated with increased purchasing costs from our vendors in their effort to offset any lost profits associated with any currency devaluation. We cannot predict with certainty the effect these increased costs may have on our financial statements or results of operations.

In addition, our retail and/ore-commerce businesses in Canada, Australia and the United Kingdom, and our operations throughout Asia and Europe, expose us to market risk associated with foreign currency exchange rate fluctuations. Substantially all of our purchases and sales are denominated in U.S. dollars, which limits our exposure to this risk. However, some of our foreign operations have a functional currency other than the U.S. dollar. While the impact of foreign currency exchange rate fluctuations was not material to us in the firstsecond quarter of fiscal 2017 or the firstsecond quarter of fiscal 2016, we have continued to see volatility in the exchange rates in the countries in which we do business. As we continue to expand globally, the foreign currency exchange risk related to our foreign operations may increase. To mitigate this risk, we hedge a portion of our foreign currency exposure with foreign currency forward contracts in accordance with our risk management policies (see Note H to our Condensed Consolidated Financial Statements).

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of AprilJuly 30, 2017, 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 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 required disclosures, and that such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required by this Item is contained in Note F to our Condensed Consolidated Financial Statements within Part I of thisForm 10-Q.

ITEM 1A. RISK FACTORS

See Part I, Item 1A of our Annual Report onForm 10-K for the fiscal year ended January 29, 2017 for a description of the risks and uncertainties associated with our business. There were no material changes to such risk factors in the current quarterly reporting period.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information as of AprilJuly 30, 2017 with respect to shares of common stock we repurchased during the firstsecond quarter of fiscal 2017 under our $500,000,000 stock repurchase authorization. For additional information, please see Note G to our Condensed Consolidated Financial Statements within Part I of this Form10-Q.

 

Fiscal period  

Total Number

of Shares

Purchased1

   

Average Price

Paid Per Share

   

Total Number of

Shares Purchased as

Part of a Publicly

Announced Program

   

Maximum Dollar Value

of Shares That May

Yet Be Purchased

Under the Program

 

January 30, 2017 – February 26, 2017

   241,970   $47.74    241,970   $399,026,000 

February 27, 2017 – March 26, 2017

   250,684   $48.57    250,684   $386,851,000 

March 27, 2017 – April 30, 2017

   271,889   $53.78    271,889   $372,227,000 
                     

Total

   764,543   $50.16    764,543   $372,227,000 
                     
Fiscal period  

Total Number

of Shares

Purchased1

   

Average Price

Paid Per Share

   

Total Number of

Shares Purchased as

Part of a Publicly

Announced Program

   

Maximum Dollar Value

of Shares That May

Yet Be Purchased

Under the Program

 

May 1, 2017 – May 28, 2017

   249,732   $51.22    249,732   $359,435,000 

May 29, 2017 – June 25, 2017

   294,882   $47.69    294,882   $345,373,000 

June 26, 2017 – July 30, 2017

   615,767   $45.73    615,767   $317,217,000 

Total

   1,160,381   $47.41    1,160,381   $317,217,000 
1Excludes shares withheld for employee taxes upon vesting of stock-based awards.

Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits

 

Exhibit

Number

  

Exhibit Description

    3.1Amended and Restated Bylaws of Williams-Sonoma, Inc., effective May 31, 2017 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on June 2, 2017, File No. 001-14077)
10.1+*  SeparationForm of Williams-Sonoma, Inc. 2001 Long Term Incentive Plan Retention Restricted Stock Unit Award Agreement and General Release with Sandra Stangl dated March 14, 2017for Grants to Employees
  31.1*  Certification of Chief Executive Officer, pursuant to Rule13a-14(a) and Rule15d-14(a) of the Securities Exchange Act, as amended
  31.2*  Certification of Chief Financial Officer, pursuant to Rule13a-14(a) and Rule15d-14(a) of the Securities Exchange Act, as amended
  32.1*  Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.2*  Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*  XBRL Instance Document
101.SCH*  XBRL Taxonomy Extension Schema Document
101.CAL*  XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*  XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*  XBRL Taxonomy Extension Label Linkbase Document
101.PRE*  XBRL Taxonomy Extension Presentation Linkbase Document

 

+Indicates a management contract or compensatory plan or arrangement.
*Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

WILLIAMS-SONOMA, INC.
By: 

/s/ Julie P. Whalen

 Julie P. Whalen
 Chief Financial Officer

Date: June 2,September 8, 2017

 

2021