Williams-Sonoma (WSM) 10-K risk factor changes: FY2019 vs FY2018

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending, including general economic conditions, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, inclement weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate [added: increases, inflation, consumer confidence in future economic and political conditions, and consumer perceptions of personal well-being and security.]

[removed: Consumer] [added: As a result, consumer] preferences cannot be predicted with certainty and may change between selling seasons.

[removed: Changes] [added: Additionally, changes] in customer preferences and buying trends may also affect our brands differently.

If we misjudge either the market for our merchandise or our customers’ purchasing habits, our sales may decline significantly or may be delayed while we work to fill [added: related] backorders.

[removed: We] [added: Alternatively, we] may be required to mark down certain products to sell any excess inventory or to sell such inventory through our outlet stores or other liquidation channels at prices which are significantly lower than our retail prices, any of which would negatively impact our business and operating results.

[added: The techniques used to obtain] unauthorized access to systems change frequently and are not often recognized until after they have been launched.

[removed: Any] security breach could also expose us to risks of data loss, litigation, regulatory investigations and other significant liabilities.

In addition, states and the federal government are increasingly enacting laws and regulations to protect consumers against identity [removed: theft.][added: 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.]

In addition, compliance with these laws will likely increase the costs of doing [removed: business.][added: business, especially if we face differing regulatory requirements across multiple jurisdictions and/or a lack of adequate regulatory guidance.]

We are also vulnerable to certain additional risks and uncertainties associated with our e-commerce and mobile websites and digital marketing efforts, including: changes in required technology interfaces; website downtime and other technical failures; internet connectivity issues; costs and technical issues as we upgrade our website software; computer viruses; vendor reliability; changes in applicable federal and state [removed: regulations;] [added: regulations, such as the CCPA, and related compliance costs;] security breaches; and consumer privacy concerns.

We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology, evolving creative user interfaces, and other e-commerce marketing trends such as paid search, re-targeting, [added: loyalty programs] and the proliferation of mobile usage, among others.

Our failure to successfully respond to these risks and uncertainties might adversely affect the sales or margin in our e-commerce business, [removed: as well as] [added: require us to impair certain assets, and] damage our reputation and brands.

Approximately [removed: 65%] [added: 66%] of our merchandise purchases in fiscal [removed: 2017] [added: 2018] were sourced from foreign vendors [removed: in 43 countries,] predominantly in [removed: Europe] [added: Asia] and [removed: Asia.][added: Europe.]

Although [removed: approximately 99%] [added: substantially all] of our foreign purchases of merchandise are negotiated and paid for in U.S. dollars, declines in foreign currencies and currency exchange rates might negatively affect the profitability and business prospects of one or more of our foreign vendors.

[added: This, in turn, might cause such foreign] vendors to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise [removed: shipments to us, or discontinue selling to us, any of which could ultimately reduce our sales or increase our costs.]

We cannot predict whether any of the countries from which our raw materials or products are sourced, or in which our products are currently manufactured or may be manufactured in the future, will be subject to trade restrictions imposed by the U.S. or foreign [removed: governments] [added: governments, such as the tariffs recently levied by the U.S. against China,] or the likelihood, type or effect of any such restrictions.

Any event causing a disruption or delay of imports from foreign vendors, including labor disputes resulting in work disruption (such as the disruptions at the [removed: west coast] [added: U.S. West Coast] ports in early 2015), the imposition of additional import restrictions, restrictions on the transfer of funds and/or increased tariffs or quotas, or both, could increase the cost, reduce the supply of merchandise available to us, or result in excess inventory if merchandise is received after the planned or appropriate selling season, all of which could adversely affect our business, financial condition and operating results.

Our global operations in Asia, Australia and Europe could also be affected by changing economic and political conditions in foreign countries, [removed: either of] [added: such as the decision by British voters to exit the European Union,] which could have a negative effect on our business, financial condition and operating results.

We may not be able to develop relationships with new vendors or third-party agents, [added: and products from alternative sources, if any, may be of a lesser quality and/or more expensive than those we currently purchase.]

If our global growth initiatives are not successful, or if we or any of our third-party vendors fail to comply with any applicable regulations or laws, [added: we may be forced to close stores or cease operations in certain countries, which may result in significant financial harm,] the value of our brands may be harmed and our future opportunities for global growth may be negatively affected.

Further, because we do not hedge against all of our foreign currency [removed: exposure] [added: exposure,] our business will continue to be susceptible to foreign currency fluctuations.

We continue to expand our franchise operations with our existing franchisees as well as seek [removed: out and] [added: to] identify new [added: franchise partnerships for] select [added: countries.]

[removed: The effect of these franchise arrangements on our business and results of] operations is uncertain and will depend upon various factors, including the demand for our products in new global markets.

[removed: We must] ensure that our employees and third-party agents comply with these laws.

Approximately [removed: 47.5%] [added: 45.7%] of our net revenues are generated by our retail stores.

We compete with national, regional and local businesses that utilize a similar retail store strategy, as well as traditional furniture stores, department [removed: stores] [added: stores, direct-to-consumer businesses] and specialty stores.

The substantial sales growth in the e-commerce industry within the last decade has encouraged the entry of many new competitors, [added: including discount retailers selling similar products at reduced prices,] new business models, and an increase in competition from established companies, many of whom are willing to spend significant funds and/or reduce pricing in order to gain market share.

As a result of our dependence on all of these third-party providers, we are subject to risks, including labor disputes (such as the disruptions at the [removed: west coast] [added: U.S. West Coast] ports in early 2015), union organizing activity, inclement weather, natural disasters, the closure of such carriers’ offices or a reduction in operational hours due to an economic slowdown or the inability to sufficiently ramp up operational hours during an economic recovery or upturn, availability of adequate trucking or railway providers, possible acts of terrorism or other factors affecting such carriers’ ability to provide delivery services to meet our shipping needs, disruptions or increased fuel costs and costs associated with any regulations to address climate change.

Disruptions or slowdowns in these areas could result from disruptions in telephone or network services, power outages, inadequate system capacity, system hardware or software issues, computer viruses, security breaches, human error, changes in programming, union organizing activity, insufficient or inadequate labor to fulfill the orders, disruptions in our third-party labor contracts, inefficiencies due to inventory levels and limited distribution facility space, [added: issues with third-party order fulfillment and dropshipping,] natural disasters or adverse weather conditions.

These problems could result in a reduction in sales as well as increased [removed: selling, general and administrative] expenses.

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 [removed: temporarily and] [added: temporarily,] thus reducing store traffic.

These factors have [removed: caused] [added: caused,] and may continue to [removed: cause] [added: cause,] our comparable brand revenue results to differ materially from prior periods and from earnings guidance we have provided.

For example, we face the risk that our e-commerce business, including our catalog circulation, might cannibalize a significant portion of our retail [removed: sales.][added: sales or our newer brands, brand extensions and products may result in a decrease in sales of existing brands and products.]

While we recognize that our e-commerce sales [added: and sales from new brands and products] cannot be entirely incremental to sales through our retail [removed: channel,] [added: channel or from existing brands and products, respectively,] we seek to attract as many new customers as possible [added: with the most relevant channels, brands and products] to [added: meet customer needs and grow] our [removed: e-commerce websites.][added: market share.]

We continually analyze the business results of our [removed: channels] [added: channels, brands] and [removed: the relationships among the channels] [added: products] in an effort to find opportunities to build incremental sales.

Our newest brands and brand extensions — Williams Sonoma [removed: Home, PBteen] [added: Home] and Mark and Graham, and any other new brands, as well as our acquired brand, Rejuvenation, [removed: or] [added: as well as] our expansion into new lines of business, including our [removed: newly] [added: recently] acquired business, [removed: Outward and] [added: Outward, our new business to business division, which targets] commercial [added: businesses across a number of verticals, including commercial] furniture and hospitality, [removed: may not grow as expected.][added: and our planned subscription-based services,]

[added: 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 [removed: and brand extensions, integrate newly acquired brands, reposition existing brands, develop new lines of business or expand our brands globally,] in a manner that improves our overall business [removed: and] [added: and/or] operating results and may therefore be forced to close the brands or new lines of business, which may damage our reputation [removed: and] [added: and/or] negatively impact our operating results.

_Any significant changes in [added: tax, trade or other policies in the] U.S. [removed: trade, tax] or other [added: countries, including] policies that restrict imports or increase import [removed: tariffs] [added: tariffs,] could have a material adverse effect on our results of operations._

A significant portion of our products are manufactured outside of the U.S. While the [removed: recently passed] U.S. Tax Cuts and Jobs Act (the “Tax [removed: Act”)] [added: Act”), enacted on December 22, 2017, 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, significant changes in tax, trade or other polices either in the U.S. or other countries could significantly increase our tax burden or costs of goods sold.

There is also increased focus, including by governmental and non-governmental organizations, investors, customers, consumers and other stakeholders, on sustainability matters.

Our reputation could be damaged if we do not (or are perceived not to) act responsibly with respect to any sustainability matters, which could negatively impact our business and results of operations.

Any

shipments to us, or discontinue selling to us, any of which could ultimately reduce our sales or increase our costs.

The effect of these franchise arrangements on our business and results of

We must

may not grow as expected.

_We must protect and maintain our brand image and reputation._

Our brands have wide recognition, and our success has been due in large part to our ability to maintain, enhance and protect our brand image and reputation and our customers’ connection to our brands.

Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online dissemination of advertising campaigns.

Even if we react appropriately to negative posts or comments about us and/or our brands on social media and online, our customers’ perception of our brand image and our reputation could be negatively impacted.

In addition, customer sentiment could be shaped by our sustainability policies and related design, sourcing and operations decisions.

Failure to maintain, enhance and protect our brand image could have a material adverse effect on our results of operations.

_Recent tariffs could result in increased prices and/or costs of goods or delays in product received from our vendors and could adversely affect our results of operations._

Recently, the U.S. administration has enacted certain tariffs and proposed additional tariffs on many items sourced from China, including certain furniture, accessories, furniture parts, and raw materials for domestic furniture manufacturing products imported into the U.S. We may not be able to fully or substantially mitigate the impact of these tariffs, pass price increases on to our customers, or secure adequate alternative sources of products or materials.

The tariffs, along with any additional tariffs or retaliatory trade restrictions implemented by other countries, could adversely affect customer sales, including potential delays in product received from our vendors, our cost of goods sold and results of operations.

Additionally, in recent years there has been an increase in the number of employment claims and, in particular, discrimination and harassment claims.

Coupled with the expansion of social media

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.

In addition, changes to any of our software

In addition, we are in the process of replacing our core financial reporting and human capital management systems with new enterprise resource planning systems to standardize our processes worldwide and adopt best-in-class capabilities.

During our implementations, and as we utilize the systems going forward, we may experience periodic or prolonged disruption of our core financial and human capital operations, including our ability to complete our financial close and provide accurate financial reporting on a timely basis, and maintain our internal control compliance efforts.

We may also experience errors in data and security or technical reliability issues.

In order to realize the benefits of our systems, we may be required to change certain business and financial processes, which involves the risk of disruption to our operations or data errors.

In addition, we are heavily reliant on third-party vendors for access to our systems and the accuracy of the functionality within the systems.

If we encounter implementation or usage problems with these new systems or other related systems and infrastructure, or if the systems do not operate as intended, do not give rise to anticipated benefits, or fail to integrate properly with our other systems or software platforms, then our business, results of operations, and internal controls over financial reporting may be adversely affected.

Beginning in fiscal 2019, we have discontinued providing quarterly guidance and instead we will provide guidance on an annual basis only.

We believe this approach is better aligned with the long-term view we take in managing our business and our focus on long-term stockholder value creation.

in the future.

_In preparing our financial statements we make certain assumptions, judgments and estimates that affect the amounts reported, which, if not accurate, may impact our financial results._

We make assumptions, judgments and estimates that impact amounts reported in our consolidated financial statements for a number of items, including merchandise inventories, property and equipment, goodwill, self-insured liabilities, and income taxes, among others.

These assumptions, judgments and estimates are derived from historical experience and various other factors that we believe are reasonable under the circumstances as of the date our consolidated financial statements are prepared.

Actual results could differ materially from our estimates, and such differences may impact our financial results.

##### [Table of Contents](#toc)

to replace.

increases, inflation, consumer confidence in future economic conditions and political conditions, and consumer perceptions of personal well-being and security.

The techniques used to obtain

This, in turn, might cause such foreign

and products from alternative sources, if any, may be of a lesser quality and/or more expensive than those we currently purchase.

franchise partnerships for select countries.

In addition, the decline in the global economic environment has led to increased competition from discount retailers selling similar products at reduced prices.

Further, if we devote time and resources to new brands, acquired brands, brand extensions, brand repositioning, or new

Alternatively, if our new brands, acquired brands, brand extensions, repositioned brands or new lines of business prove to be very successful, we risk hurting our other existing brands through the potential migration of existing brand customers to the new businesses.

Further, in an effort to acquire or build new brands at an early enough stage to leverage the full scale of our capabilities and assets, we may forego the long-term evidence to guarantee success in new or emerging businesses.

For example, the Tax Act was enacted in the U.S. on December 22, 2017.

If we suffer a substantial loss that is not

Also, the replacement of core financial reporting systems could impact our ability to complete our financial close or provide accurate financial reporting on a timely basis.

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the [removed: 52] [added: 53] weeks ended [removed: January 28, 2018] [added: February 3, 2019] (“fiscal [removed: 2017”),] [added: 2018”),] the 52 weeks ended January [removed: 29, 2017] [added: 28, 2018] (“fiscal [removed: 2016”),] [added: 2017”),] and the 52 weeks ended January [removed: 31, 2016] [added: 29, 2017] (“fiscal [removed: 2015”)] [added: 2016”)] should be read in conjunction with our Consolidated Financial Statements and notes thereto.

Net revenues in fiscal [removed: 2017] [added: 2018, including the impact of the additional week,] increased by [removed: $208,547,000] [added: $379,234,000,] or [removed: 4.1%,] [added: 7.2%,] compared to fiscal [removed: 2016,] [added: 2017,] with comparable brand revenue growth of [removed: 3.2%.][added: 3.7%.]

This increase in net revenues was driven by a [removed: 5.5%] [added: 10.9%] increase in e-commerce net revenues (primarily driven by West Elm, [removed: Williams Sonoma] [added: Pottery Barn] and [removed: Rejuvenation)] [added: Pottery Barn Kids] and [added: Teen) and] a [removed: 2.6%] [added: 3.0%] increase in retail net revenues (primarily driven by [removed: Pottery Barn and] West [removed: Elm),] [added: Elm and Pottery Barn),] with particular strength in furniture.

Total fiscal 2017 net revenue growth [removed: included] [added: was partially attributable to] a 1.4% increase in store leased square footage primarily due to 2 net new stores, and a 2.2% increase in international revenues primarily related to our company-owned international operations.

| _In thousands_ | | Fiscal [removed: 2017] [added: 2018 (53 Weeks)] | | | | % Total | | | | Fiscal [removed: 2016] [added: 2017 (52 Weeks)] | | | | % Total | | | | Fiscal [removed: 2015] [added: 2016 (52 Weeks)] | | | | % Total | | |

| E-commerce net revenues | | $ | [removed: 2,778,457] [added: 3,082,064] | | | | [removed: 52.5%] [added: 54.3%] | | | $ | [removed: 2,633,602] [added: 2,778,457] | | | | [removed: 51.8%] [added: 52.5%] | | | $ | [removed: 2,522,580] [added: 2,633,602] | | | | [removed: 50.7%] [added: 51.8%] | |

| Retail net revenues | | | [removed: 2,513,902] [added: 2,589,529] | | | | [removed: 47.5%] [added: 45.7%] | | | | [removed: 2,450,210] [added: 2,513,902] | | | | [removed: 48.2%] [added: 47.5%] | | | | [removed: 2,453,510] [added: 2,450,210] | | | | [removed: 49.3%] [added: 48.2%] | |

| Net revenues | | $ | [removed: 5,292,359] [added: 5,671,593] | | | | 100.0% | | | $ | [removed: 5,083,812] [added: 5,292,359] | | | | 100.0% | | | $ | [removed: 4,976,090] [added: 5,083,812] | | | | 100.0% | |

This increase in net revenues was driven by a [removed: 4.4%] [added: 10.9%] increase in e-commerce net revenues [removed: (primarily driven by West Elm, Williams Sonoma] and [removed: Rejuvenation),] [added: a 3.0% increase in retail net revenues,] with particular strength in furniture.

The following table summarizes our net revenues by brand for fiscal [removed: 2017,] [added: 2018,] fiscal [removed: 2016] [added: 2017] and fiscal [removed: 2015:][added: 2016:]

| _In thousands_ | | Fiscal [removed: 2017] [added: 2018 (53 Weeks)] | | | | Fiscal [removed: 2016] [added: 2017 (52 Weeks)] | | | | Fiscal [removed: 2015] [added: 2016 (52 Weeks)] | | |

| Pottery Barn | | $ | [removed: 2,066,302] [added: 2,177,344] | | | $ | [removed: 2,024,218] [added: 2,066,302] | | | $ | [removed: 2,074,051] [added: 2,024,218] | |

| West Elm | | | [removed: 1,114,339] [added: 1,292,928] | | | | [removed: 971,568] [added: 1,114,339] | | | | [removed: 821,136] [added: 971,568] | |

| Williams Sonoma | | | [removed: 1,022,434] [added: 1,056,125] | | | | [removed: 1,002,194] [added: 1,022,434] | | | | [removed: 993,609] [added: 1,002,194] | |

| [removed: Other_1_] [added: Other_2_] | | | [removed: 228,816] [added: 249,434] | | | | [removed: 212,633] [added: 228,816] | | | | [removed: 193,619] [added: 212,633] | |

| Total | | $ | [removed: 5,292,359] [added: 5,671,593] | | | $ | [removed: 5,083,812] [added: 5,292,359] | | | $ | [removed: 4,976,090] [added: 5,083,812] | |

| [removed: _1_] [added: _2_] | _Primarily consists of net revenues from our international franchise operations, Rejuvenation and Mark and Graham._ |

[removed: 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.

[added: Additionally, comparable brand revenue growth for newer concepts] is not separately disclosed until such time that we believe those sales are meaningful to evaluating the performance of the brand.

| _Comparable brand revenue growth [removed: (decline)_] [added: (decline)1_] | | Fiscal [removed: 2017] [added: 2018 (53 Weeks)] | | | | Fiscal [removed: 2016] [added: 2017 (52 Weeks)] | | | | Fiscal [removed: 2015] [added: 2016 (52 Weeks)] | | |

| Pottery Barn | | | [removed: 1.0%] [added: 1.2%] | | | | [removed: (3.5%] [added: 1.0%] | [removed: )] | | | [removed: 1.9%] [added: (3.5%] | [added: )] |

| West Elm | | | [removed: 10.2%] [added: 9.5%] | | | | [removed: 12.8%] [added: 10.2%] | | | | [removed: 14.8%] [added: 12.8%] | |

| Williams Sonoma | | | [removed: 3.2%] [added: 1.7%] | | | | [removed: 1.3%] [added: 3.2%] | | | | [removed: 1.1%] [added: 1.3%] | |

| [removed: Total_1_] [added: Total_2_] | | | [removed: 3.2%] [added: 3.7%] | | | | [removed: 0.7%] [added: 3.2%] | | | | [removed: 3.7%] [added: 0.7%] | |

| [removed: _1_] [added: _2_] | _Total comparable brand revenue growth includes the results of Rejuvenation and Mark and Graham._ |

| Retail net revenues | | $ | [removed: 2,513,902] [added: 2,589,529] | | | $ | [removed: 2,450,210] [added: 2,513,902] | | | $ | [removed: 2,453,510] [added: 2,450,210] | |

| Retail net revenue growth (decline) | | | [removed: 2.6%] [added: 3.0%] | | | | [removed: (0.1%] [added: 2.6%] | [removed: )] | | | [removed: 5.4%] [added: (0.1%] | [added: )] |

| Store count – beginning of year | | | [removed: 629] [added: 631] | | | | [removed: 618] [added: 629] | | | | [removed: 601] [added: 618] | |

| Store openings_1_ | | | [removed: 28] [added: 23] | | | | [removed: 29] [added: 28] | | | | [removed: 34] [added: 29] | |

| Store closings_1_ | | | [removed: (26] [added: (29] | ) | | | [removed: (18] [added: (26] | ) | | | [removed: (17] [added: (18] | ) |

| Store count – end of year | | | [removed: 631] [added: 625] | | | | [removed: 629] [added: 631] | | | | [removed: 618] [added: 629] | |

| Store selling square footage at year-end | | | [removed: 4,019,000] [added: 4,105,000] | | | | [removed: 3,951,000] [added: 4,019,000] | | | | [removed: 3,827,000] [added: 3,951,000] | |

| Store leased square footage (“LSF”) at year-end | | | [removed: 6,451,000] [added: 6,557,000] | | | | [removed: 6,359,000] [added: 6,451,000] | | | | [removed: 6,163,000] [added: 6,359,000] | |

| | | Fiscal [removed: 2017] [added: 2018] | | | | | | | | Fiscal [removed: 2016] [added: 2017] | | | | | | | | Fiscal [removed: 2015] [added: 2016] | | | | | | |

| Williams Sonoma | | | [removed: 228] [added: 220] | | | | [removed: 6,700] [added: 6,900] | | | | [removed: 234] [added: 228] | | | | [removed: 6,600] [added: 6,700] | | | | [removed: 239] [added: 234] | | | | 6,600 | |

| Pottery Barn | | | [removed: 203] [added: 205] | | | | [removed: 13,900] [added: 14,200] | | | | [removed: 201] [added: 203] | | | | 13,900 | | | | [removed: 197] [added: 201] | | | | [removed: 13,800] [added: 13,900] | |

| West Elm | | | [removed: 106] [added: 112] | | | | 13,100 | | | | [removed: 98] [added: 106] | | | | [removed: 13,300] [added: 13,100] | | | | [removed: 87] [added: 98] | | | | [removed: 13,200] [added: 13,300] | |

| Pottery Barn Kids | | | [removed: 86] [added: 78] | | | | [removed: 7,400] [added: 7,500] | | | | [removed: 89] [added: 86] | | | | 7,400 | | | | 89 | | | | [removed: 7,500] [added: 7,400] | |

| Rejuvenation | | | [removed: 8] [added: 10] | | | | [removed: 8,800] [added: 8,500] | | | | [removed: 7] [added: 8] | | | | [removed: 9,100] [added: 8,800] | | | | [removed: 6] [added: 7] | | | | [removed: 9,000] [added: 9,100] | |

| Total | | | [removed: 631] [added: 625] | | | | [removed: 10,200] [added: 10,500] | | | | [removed: 629] [added: 631] | | | | [removed: 10,100] [added: 10,200] | | | | [removed: 618] [added: 629] | | | | [removed: 10,000] [added: 10,100] | |

As fiscal 2018 is a 53-week year as compared to a 52-week year in fiscal 2017, our discussion of fiscal 2018 results below includes approximately $85,000,000 of net revenues and $0.10 of diluted earnings per share associated with the additional week.

Total fiscal 2018 net revenue growth was partially attributable to a 1.6% increase in store leased square footage and a 5.7% increase in international revenues, primarily related to our company-owned international operations, as well as the favorable impact of the adoption of ASU 2014-09 primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues (see Note A to our Consolidated Financial Statements).

Revenue growth was also supported by our double digit new customer growth, which reflects the success of our strategies to increase customer acquisition and drive our future growth.

All brands delivered positive comparable brand revenue growth in fiscal 2018.

Growth in Pottery Barn accelerated from last year, driven by strength in e-commerce and growth in new businesses: Marketplace and Pottery Barn Apartment, as well as strong upholstery growth.

The Pottery Barn Kids and Teen business improved from last year, delivering combined comparable brand revenue growth of 2.8%.

Our Baby business continued to gain momentum attracting new customers as the entry point to our brand and through registry creations.

West Elm had another year of double digit net revenue growth driven by strong e-commerce performance and continued strength in the core furniture business.

The Williams Sonoma brand delivered comparable brand revenue growth of 1.7%.

And, our emerging brands, Rejuvenation and Mark and Graham, continued to scale with double digit net revenue growth and increased profitability.

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 using 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 strong membership growth over the past year, as well as our complimentary design service, Design Crew.

We also launched two new initiatives during the year: Design Crew Room Planner and The One Registry collective, both of which are enabling a more personalized and convenient shopping experience for our customers.

In our supply chain, we continued to drive operational improvements in fiscal 2018.

In our non-furniture business, our order consolidation efforts and continued improvement in distribution center productivity enabled us to lower our cartons-per-order and order-to-delivery time so that our customers received their orders faster this holiday season and with less waste.

Additionally, we were proud to be recognized once again by Barron’s for all of our sustainability efforts across the business.

At a ranking of number 24, we were the only company in our industry to be among the financial publication’s annual list of 100 Most Sustainable U.S. companies.

In summary, 2018 was another year of solid financial and operational accomplishments resulting in earnings and cash flow generation that allowed us to return approximately $435,629,000 to our stockholders through stock repurchases and dividends.

Over the next few years, we plan target whitespace in the market; we plan to drive cross-brand initiatives that leverage our platform; and we plan to bring technology innovation and continued improvement in customer experience.

We have a strong foundation to support the execution of our initiatives in fiscal 2019 and beyond, as well as to deliver long-term shareholder value.

Due to the adoption of ASU 2014-09 in fiscal 2018, certain incentives received from credit card issuers as well as breakage income related to our unredeemed stored-value cards are now presented within net revenues (see Note A to our Consolidated Financial Statements).

Net revenues in fiscal 2018, including the impact of the additional week of net revenues, increased by $379,234,000 or 7.2%, compared to fiscal 2017, with comparable brand revenue growth of 3.7%.

Total fiscal 2018 net revenue growth was partially attributable to a 1.6% increase in store leased square footage and a 5.7% increase in international revenues primarily related to our company-owned international operations, as well as the favorable impact of the adoption of ASU 2014-09 primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues (see Note A to our Consolidated Financial Statements).

| Pottery Barn Kids and Teen_1_ | | | 895,762 | | | | 860,468 | | | | 873,199 | |

| _1_ | _Net revenues of the Pottery Barn Kids and PBteen brands are being reported on a combined basis as Pottery Barn Kids and Teen._ |

Comparable stores are defined as

| Pottery Barn Kids and Teen | | | 2.8% | | | | (1.7% | ) | | | (2.8% | ) |

| _1_ | _Comparable brand revenue is calculated on a 53-week to 53-week basis for fiscal 2018 and on a 52-week to 52-week basis for fiscal 2017 and fiscal 2016._ |

| _In thousands_ | | Fiscal 2018 (53 Weeks) | | | | Fiscal 2017 (52 Weeks) | | | | Fiscal 2016 (52 Weeks) | | |

_Fiscal 2018 vs. Fiscal 2017_

Cost of goods sold as a percentage of net revenues decreased to 63.0% in fiscal 2018 from 63.5% in fiscal 2017.

This decrease was primarily driven by the leverage of occupancy costs and includes the favorable impact from the adoption of ASU 2014-09, primarily associated with the reclassification of other income from selling, general and administrative expenses into net revenues.

In the e-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 fiscal 2017, we made progress on our four strategic priorities of digital leadership, product innovation, retail transformation and operational excellence.

To expand our digital leadership, we accelerated our investments in technology and advertising to drive new customer acquisition, conversion and an improved shopping experience.

In product innovation, we evolved our product strategies to better align to shifting consumer preferences and broaden our brands’ market reach.

In retail, we focused our efforts around value-added services, inspiration and convenience, as our stores remain an important source for new customer acquisition, establishing brand loyalty and driving sales across our multi-channel platform.

And, in our goal of operational excellence, we focused on cost efficiencies in the supply chain and inventory optimization to offset our investments in the business, including improving the speed of order fulfillment and delivery and reducing the rate of returns and damages.

All of these strategic initiatives helped drive the net revenue growth in our brands, particularly in Pottery Barn, which ended the year with 1.0% comparable brand revenue growth compared to a decline of 3.5% in fiscal 2016.

Additionally, in fiscal 2017, diluted earnings per share was $3.02 (which included $0.48 of tax expense related to the recently enacted Tax Cuts and Jobs Act - see Note D to our Consolidated Financial Statements, as well as $0.11 due to severance-related charges and our acquisition of Outward, Inc.) versus $3.41 in fiscal 2016.

We also returned $331,189,000 to our stockholders through stock repurchases and dividends.

As we look forward to fiscal 2018, we plan to drive growth across our brands by focusing on our four strategic priorities, as well as through new product categories and markets where we see significant potential.

In digital advertising, we will continue to focus on vehicles that drive awareness and improve perception, while optimizing our catalog strategy and in-house capabilities to maximize our total advertising spend.

We plan to leverage important technology trends such as 3D visualization, augmented reality, artificial intelligence and machine learning to further enhance the customer experience.

In retail, we plan to invest in optimizing top-performing stores while closing underperforming stores, including the early closure of a number of domestic stores.

In addition to executing on our growth initiatives, we will also be focused on driving operational excellence throughout our business.

We see substantial cost savings opportunities, particularly in supply chain, inventory management, increased order visibility, and improved speed and quality of delivery, all of which will further enhance the customer experience and drive down returns and replacements, as well as drive down costs over time.

In summary, fiscal 2017 was a year in which we made meaningful progress in strengthening our business for long-term, profitable growth.

As we enter fiscal 2018, we are confident that our competitive advantages, along with our drive for continuous operational excellence, will allow us to continue the momentum we are seeing in the business and to deliver long-term sustainable returns for our stockholders.

Net revenues in fiscal 2016 increased by $107,722,000 or 2.2%, compared to fiscal 2015, with comparable brand revenue growth of 0.7%.

This net revenue increase was partially offset by a 0.1% decrease in retail net revenues (primarily in Pottery Barn and Williams Sonoma, partially offset by increases in West Elm and Rejuvenation).

Total fiscal 2016 net revenue growth included a 7.5% increase in international revenues primarily related to our company-owned international operations.

| Pottery Barn Kids | | | 625,910 | | | | 635,381 | | | | 640,073 | |

| PBteen | | | 234,558 | | | | 237,818 | | | | 253,602 | |

Additionally, comparable brand revenue growth for newer concepts

| Pottery Barn Kids | | | (1.8% | ) | | | (1.4% | ) | | | 2.2% | |

| PBteen | | | (1.4% | ) | | | (6.2% | ) | | | (2.7% | ) |

_Fiscal 2016 vs. Fiscal 2015_

Cost of goods sold as a percentage of net revenues remained relatively flat, increasing less than 10 basis points to 63.0% in fiscal 2016 from 62.9% in fiscal 2015.

Higher selling margins from reduced shipping and fulfillment-related costs as a result of our focus on our supply chain and inventory initiatives were offset by an increase in occupancy costs related to investments in our supply chain.

In the e-commerce channel, cost of goods sold as a percentage of net revenues decreased in fiscal 2016 compared to fiscal 2015 primarily driven by higher selling margins from reduced shipping and fulfillment-related costs as a result of our focus on our supply chain and inventory initiatives, partially offset by an increase in occupancy costs related to investments in our supply chain.

This increase as a percentage of net revenues was primarily driven by severance-related reorganization charges of approximately $14,406,000 during fiscal 2016, as well as an increase in digital advertising expenses.

In the retail channel, selling, general and administrative expenses as a percentage of net revenues decreased in fiscal 2016 compared to fiscal 2015 primarily driven by the leverage of employment expenses.

In response to the Tax Act, the SEC issued Staff Accounting Bulletin No. 118, which allows issuers to recognize provisional estimates of the impact of the Tax Act in their financial statements and provides a one-year measurement period for a registrant to adjust the estimates and complete the accounting required under Financial Accounting Standards Board Accounting Standards Codification 740, _Income Taxes_.

The increase in the effective income tax rate in fiscal 2017 compared to fiscal 2016 reflects the provisional impact of the Tax Act, including the transition tax on deemed repatriated earnings of foreign subsidiaries and the effects of the reduced corporate income tax rate, which also requires the re-measurement of our deferred tax assets and liabilities (see Note D to our Consolidated Financial Statements).

The decrease in the effective income tax rate in fiscal 2016 compared to fiscal 2015 reflects a one-time favorable tax adjustment in fiscal 2016.

repurchases and dividend payments.

Net cash used in investing activities compared to fiscal 2015 decreased primarily due to a reduction in purchases of property and equipment.

long-term debt of $300,000,000.

See section titled Dividends within Part II, Item 5 of this Annual Report on Form 10-K for further information.

| Interest | | | 8,040 | | | | 15,589 | | | | — | | | | — | | | | 23,629 | |

| Operating leases_3_ | | | 288,583 | | | | 732,986 | | | | 322,662 | | | | 524,704 | | | | 1,868,935 | |

| Purchase obligations_4_ | | | 872,682 | | | | 16,987 | | | | — | | | | — | | | | 889,669 | |

[removed: During fiscal 2017,] [added: As of February 3, 2019,] we had [removed: borrowings of] $300,000,000 [added: outstanding] under the term loan, [removed: all of which was outstanding as of January 28, 2018,] and [removed: $170,000,000] [added: during fiscal 2018 we had borrowings of $60,000,000] under the revolver, all of which were repaid in the fourth quarter of fiscal [removed: 2017.][added: 2018.]

As of [removed: January 28, 2018,] [added: February 3, 2019,] our investments, made primarily in interest bearing demand deposit accounts and money market funds, are stated at cost and approximate their fair values.

We purchase a significant amount of inventory from vendors outside of the U.S. in transactions that are denominated in U.S. [removed: dollars.][added: dollars and, as such, any foreign currency impact related to these international purchase transactions was not significant to us during fiscal 2018 or fiscal 2017.]

While the impact of foreign currency exchange rate fluctuations was not material to us in fiscal [removed: 2017,] [added: 2018,] we have continued to see volatility in the exchange rates in the countries in which we do business.

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 fiscal 2017 or fiscal 2016.

With [added: design,] manufacturing and distribution facilities in Portland, Oregon, Rejuvenation offers a wide assortment of made-to-order lighting, hardware, furniture and home décor inspired by history, designed for today and made to last for years to come.

Headquartered in San Jose, California, Outward’s technology enables [added: scalable] applications in product visualization, digital room design and augmented and virtual reality.

As of [removed: January 28, 2018,] [added: February 3, 2019,] the e-commerce channel had 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 our e-commerce websites and direct-mail catalogs.

As of [removed: January 28, 2018,] [added: February 3, 2019,] the retail channel had the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation, [removed: operating 631 stores] [added: which operate 625 stores,] comprising [removed: 586] [added: 579] stores in 43 states, Washington, D.C. and Puerto Rico, 24 stores in Canada, 19 stores in Australia and [removed: 2] [added: 3] stores in the United Kingdom.

We also have multi-year franchise agreements with third parties in the Middle East, the Philippines, [added: Mexico and South Korea that currently operate 108 franchised stores as well as e-commerce websites in certain locations.]

We purchase most of our merchandise from numerous foreign and domestic manufacturers and importers, the largest of which accounted for approximately 2% of our purchases during fiscal [removed: 2017.][added: 2018.]

Approximately [removed: 65%] [added: 66%] of our merchandise purchases in fiscal [removed: 2017] [added: 2018] were sourced from foreign [removed: vendors in 43 countries,] [added: vendors,] predominantly in [removed: Europe] [added: Asia] and [removed: Asia.][added: Europe.]

[removed: Approximately 99%] [added: Substantially all] of these purchases were negotiated and paid for in U.S. dollars.

In addition, we manufacture merchandise, primarily upholstered furniture and lighting, at our facilities located in North Carolina, [removed: California] [added: California, Oregon] and [removed: Oregon.][added: Mississippi.]

The specialty [added: e-commerce and] retail [removed: business is] [added: businesses are] highly competitive.

The substantial sales growth in the direct-to-customer industry within the last decade, particularly in e-commerce, has encouraged the entry of many new [removed: competitors] [added: competitors, including discount retailers selling similar products at reduced prices, new business models] and an increase in competition from established companies.

As of [removed: January 28, 2018,] [added: February 3, 2019,] we had approximately [removed: 27,800] [added: 28,200] employees, of whom approximately [removed: 10,900] [added: 11,400] were full-time.

In preparation for and during our fiscal [removed: 2017] [added: 2018] holiday selling season, we hired approximately [removed: 9,300] [added: 8,300] temporary employees primarily in our retail stores, customer care centers and distribution facilities.

[removed: We] [added: As of February 3, 2019, we] own and/or have applied to register [removed: 126] [added: 146] separate trademarks and service marks.

We own and/or have applied to register our key brand names as trademarks in the U.S. [removed: and] [added: as well as] 94 additional jurisdictions.

We also own numerous copyrights and trade dress rights for our products, product packaging, catalogs, books, house publications, [added: website designs and store designs, among other things, which are used by our subsidiaries and franchisees under a license.]

We hold patents on certain product [removed: functions and] [added: functions,] product [removed: designs.][added: designs and proprietary technology.]

[removed: In addition, we have registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,” “potterybarnkids.com,”] “pbteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,” “rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, [added: patents,] copyrights, trade dress rights and domain names that we hold are of material importance to us.

The SEC [removed: also] maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding Williams-Sonoma, Inc. and other companies that file materials electronically with the SEC.

Born in Brooklyn in 2002, West Elm is dedicated to transforming people’s lives and spaces through creativity, style and purpose.

West Elm creates unique, modern and affordable home decor and curate a global selection of local, ethically-sourced and Fair Trade Certified products, available online and in our stores worldwide.

INTELLECTUAL PROPERTY

In addition, we have registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,” “potterybarnkids.com,”

Information on our website is not, and will not be deemed, a part of this report or incorporated into any other filings we make with the SEC.

West Elm inspires customers to express their personal style with great design that is accessible, affordable and attainable.

Headquartered in Brooklyn, New York, West Elm opened its first store in 2003 in Dumbo, the neighborhood it still proudly calls home.

Mixing clean lines, natural materials and handcrafted collections from

the U.S. and around the world, West Elm creates unique, affordable designs for modern living.

From its commitment to Fair Trade Certified, local and handcrafted products, to its community-driven in-store events and collaborations, to its role as part of an active community on social media, everything West Elm does is designed to make an impact.

Mexico and South Korea that currently operate 93 franchised stores as well as e-commerce websites in certain locations.

In addition, we face increased competition from discount retailers who, in the past, may not have competed with us or to this degree.

TRADEMARKS, COPYRIGHTS, PATENTS AND DOMAIN NAMES

website designs and store designs, among other things, which are used by our subsidiaries and franchisees under a license.

The public may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549-0213.

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

For the fiscal year ended [removed: January 28, 2018.][added: February 3, 2019.]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ [removed: (Do not check if a smaller reporting company)] Smaller reporting company ☐ Emerging growth company ☐

As of July [removed: 30, 2017,] [added: 29, 2018,] the approximate aggregate market value of the registrant’s common stock held by non-affiliates was [removed: $3,945,278,000.][added: $4,678,185,000.]

It is assumed for purposes of this computation that an affiliate includes all persons as of July [removed: 30, 2017] [added: 29, 2018] listed as executive officers and directors with the Securities and Exchange Commission.

As of March [removed: 25, 2018, 83,310,319] [added: 31, 2019, 78,563,968] shares of the registrant’s common stock were outstanding.

Portions of our definitive Proxy Statement for the [removed: 2018] [added: 2019] Annual Meeting of Stockholders, also referred to in this Annual Report on Form 10-K as our Proxy Statement, which will be filed with the Securities and Exchange Commission, or SEC, have been incorporated in Part III hereof.

Such forward-looking statements include, without limitation, statements related to: projections of earnings, revenues, growth and other financial items; the strength of our business and our brands; our ability to execute strategic priorities and growth initiatives regarding digital leadership, product [added: and technology] innovation, [added: cross-brand initiatives,] retail transformation and operational excellence; our beliefs about our competitive [removed: advantages;] [added: advantages and areas of potential future growth in the market;] our ability to drive long-term sustainable returns; the plans, strategies, initiatives and objectives of management for future operations; our brands, products and related initiatives, including our ability to introduce new brands, [removed: new] [added: brand extensions,] products and product lines and bring in new customers; our belief that our e-commerce websites and direct-mail catalogs act as a cost-efficient means of testing market acceptance of new products and new brands; the complementary nature of our e-commerce and retail channels; our marketing efforts; our acquisition of Outward, Inc., including the valuation of intangible assets acquired; our global business and expansion efforts, including franchise, other third-party arrangements and company-owned operations; our ability to attract new customers; the seasonal variations in demand; our ability to recruit, retain and motivate skilled personnel; our belief in the reasonableness of the steps taken to protect the security and confidentiality of the information we collect; our belief in the adequacy of our facilities and the availability of suitable additional or substitute space; our belief in the ultimate resolution of current legal proceedings; the payment of dividends; our stock repurchase program; our capital allocation strategy in fiscal [removed: 2018;] [added: 2019;] our planned use of cash in fiscal [removed: 2018;] [added: 2019;] our compliance with financial covenants; our belief that our cash on hand and available credit facilities will provide adequate liquidity for our business operations over the next 12 months; the impact of the 2017 Tax Cuts and Jobs [removed: Act, including our evaluation of] [added: Act;] the impact [removed: on the accumulated earnings] of [added: tariffs on] our [removed: foreign subsidiaries;] [added: business and] our [added: results of operations; our] belief regarding the effects of potential losses under our indemnification obligations; the impact of inflation; the effects of changes in our inventory reserves; the impact of new accounting pronouncements; and statements of belief and statements of assumptions underlying any of the foregoing.

FISCAL YEAR ENDED [removed: JANUARY 28, 2018][added: FEBRUARY 3, 2019]

| | | [removed: [PART I](#tx689546_1)] [added: PART I] | | | | |

| Item 1. | | [removed: [Business](#tx689546_2)] [added: [Business](#tx683578_1)] | | | 3 | |

| Item 1A. | | [Risk [removed: Factors](#tx689546_3)] [added: Factors](#tx683578_2)] | | | 6 | |

| Item 1B. | | [Unresolved Staff [removed: Comments](#tx689546_4)] [added: Comments](#tx683578_3)] | | | [removed: 21] [added: 22] | |

| Item 2. | | [removed: [Properties](#tx689546_5)] [added: [Properties](#tx683578_4)] | | | [removed: 21] [added: 22] | |

| Item 3. | | [Legal [removed: Proceedings](#tx689546_6)] [added: Proceedings](#tx683578_5)] | | | [removed: 22] [added: 23] | |

| Item 4. | | [Mine Safety [removed: Disclosures](#tx689546_7)] [added: Disclosures](#tx683578_6)] | | | [removed: 22] [added: 23] | |

| | | [removed: [PART II](#tx689546_8)] [added: PART II] | | | | |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#tx689546_9)] [added: Securities](#tx683578_7)] | | | [removed: 23] [added: 24] | |

| Item 6. | | [Selected Financial [removed: Data](#tx689546_10)] [added: Data](#tx683578_8)] | | | 26 | |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx689546_11)] [added: Operations](#tx683578_9)] | | | 27 | |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#tx689546_12)] [added: Risk](#tx683578_10)] | | | [removed: 37] [added: 39] | |

| Item 8. | | [Financial Statements and Supplementary [removed: Data](#tx689546_13)] [added: Data](#tx683578_11)] | | | [removed: 38] [added: 40] | |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx689546_14)] [added: Disclosure](#tx683578_12)] | | | [removed: 64] [added: 67] | |

| Item 9A. | | [Controls and [removed: Procedures](#tx689546_15)] [added: Procedures](#tx683578_13)] | | | [removed: 64] [added: 67] | |

| Item 9B. | | [Other [removed: Information](#tx689546_16)] [added: Information](#tx683578_14)] | | | [removed: 65] [added: 68] | |

| | | [removed: [PART III](#tx689546_17)] [added: PART III] | | | | |

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#tx689546_18)] [added: Governance](#tx683578_15)] | | | [removed: 66] [added: 69] | |

| Item 11. | | [Executive [removed: Compensation](#tx689546_19)] [added: Compensation](#tx683578_16)] | | | [removed: 66] [added: 69] | |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#tx689546_20)] [added: Matters](#tx683578_17)] | | | [removed: 66] [added: 69] | |

| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#tx689546_21)] [added: Independence](#tx683578_18)] | | | [removed: 66] [added: 69] | |

| Item 14. | | [Principal Accountant Fees and [removed: Services](#tx689546_22)] [added: Services](#tx683578_19)] | | | [removed: 66] [added: 69] | |

| | | [removed: [PART IV](#tx689546_23)] [added: PART IV] | | | | |

| Item 15. | | [Exhibits and Financial Statement [removed: Schedules](#tx689546_24)] [added: Schedules](#tx683578_20)] | | | [removed: 67] [added: 70] | |

| Item 16. | | [Form 10-K [removed: Summary](#tx689546_25)] [added: Summary](#tx683578_21)] | | | [removed: 71] [added: 75] | |

10-K 1 d683578d10k.htm 10-K

10-K 1 d689546d10k.htm 10-K

For our store locations, our gross leased store space as of [removed: January 28, 2018] [added: February 3, 2019] totaled approximately [removed: 6,451,000] [added: 6,557,000] square feet for [removed: 631] [added: 625] stores compared to approximately [removed: 6,359,000] [added: 6,451,000] square feet for [removed: 629] [added: 631] stores as of January [removed: 29, 2017.][added: 28, 2018.]

The following table summarizes the location and size of our leased facilities occupied [added: by us] as of [removed: January 28, 2018:][added: February 3, 2019:]

| Mississippi | | | [removed: 2,105,000] [added: 2,165,000] | |

| Texas | | | [removed: 896,000] [added: 822,000] | |

| Florida | | | [removed: 116,000] [added: 135,000] | |

| Massachusetts | | | [removed: 112,000] [added: 140,000] | |

| California | | | [removed: 249,000] [added: 266,000] | |

In addition to the above [removed: contracts,] [added: leased properties,] we enter into other agreements for offsite storage needs for our distribution facilities and our retail store locations, as necessary.

[removed: As of January 28, 2018, the total leased space] relating to these properties was not material to us and is not included in the occupied square footage reported above.

As of [removed: January 28, 2018,] [added: February 3, 2019,] we owned 471,000 square feet of space, primarily in California, for our corporate headquarters and certain data center operations.

As of February 3, 2019, the total leased space

The closing price of our common stock on the NYSE on March [removed: 25, 2018] [added: 31, 2019] was [removed: $50.11.][added: $56.27.]

The number of stockholders of record of our common stock as of March [removed: 25, 2018] [added: 31, 2019] was [removed: 341.][added: 320.]

[removed: ][added: ]

During fiscal [removed: 2015,] [added: 2018,] we repurchased [removed: 2,950,438] [added: 5,373,047] shares of our common stock at an average cost of [removed: $76.26] [added: $54.96] per share and a total cost of [removed: $224,995,000.][added: $295,304,000.]

In March [removed: 2018, we announced that] [added: 2019,] our Board of Directors [removed: had] authorized an increase in [added: the amount available for repurchase under] our [added: existing] stock repurchase [removed: program to] [added: plan by an additional] $500,000,000.

The following table summarizes our repurchases of shares of our common stock during the fourth quarter of fiscal [removed: 2017] [added: 2018] under our stock repurchase program:

| * | $100 invested on 2/2/14 in stock or index, including reinvestment of dividends. Fiscal year ending February 3. |

| | | 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 |

| 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 | |

| --- | --- |

The following table sets forth the high and low selling prices of our common stock on the NYSE for the periods indicated:

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Fiscal 2017 | | | | High | | | | Low | | |

| 4th Quarter | | | | $ | 55.88 | | | $ | 44.01 | |

| 3rd Quarter | | | | $ | 54.18 | | | $ | 42.68 | |

| 2nd Quarter | | | | $ | 54.85 | | | $ | 43.96 | |

| 1st Quarter | | | | $ | 55.89 | | | $ | 46.44 | |

| Fiscal 2016 | | | | High | | | | Low | | |

| 4th Quarter | | | | $ | 56.94 | | | $ | 45.98 | |

| 3rd Quarter | | | | $ | 57.40 | | | $ | 45.96 | |

| 2nd Quarter | | | | $ | 61.03 | | | $ | 47.66 | |

| 1st Quarter | | | | $ | 61.97 | | | $ | 49.39 | |

##### [Table of Contents](#toc)

| | | 2/3/13 | | 2/2/14 | | 2/1/15 | | 1/31/16 | | 1/29/17 | | 1/28/18 |

| Williams-Sonoma, Inc. | | 100.00 | | 123.90 | | 181.29 | | 122.14 | | 115.52 | | 133.91 |

| NYSE Composite Index | | 100.00 | | 113.96 | | 123.38 | | 115.60 | | 139.03 | | 172.18 |

| S&P Retailing | | 100.00 | | 127.31 | | 153.15 | | 183.73 | | 218.98 | | 320.95 |

DIVIDENDS

In fiscal 2017, fiscal 2016 and fiscal 2015, total cash dividends declared were approximately $135,779,000, or $1.56 per common share, $133,588,000, or $1.48 per common share, and $130,290,000, or $1.40 per common share, respectively.

In March 2018, we announced that our Board of Directors had authorized a 10% increase in our quarterly cash dividend, from $0.39 to $0.43 per common share, for an annual cash dividend of $1.72 per share, subject to capital availability.

Our quarterly cash dividend may be limited or terminated at any time.

| October 30, 2017 | | – November 26, 2017 | | | 316,700 | | | | $ 48.32 | | | | 316,700 | | | | $ 240,954,000 | |

| November 27, 2017 | | – December 24, 2017 | | | 263,000 | | | | $ 51.01 | | | | 263,000 | | | | $ 227,539,000 | |

| December 25, 2017 | | – January 28, 2018 | | | 244,700 | | | | $ 53.70 | | | | 244,700 | | | | $ 214,399,000 | |

| Total | | | | | 824,400 | | | | $ 50.77 | | | | 824,400 | | | | $ 214,399,000 | |

| _In thousands, except percentages, per share amounts and retail stores data_ | | [removed: Fiscal 2017 (52] [added: _Fiscal 20181_ (53] Weeks) | | | | Fiscal [removed: 2016] [added: 2017] (52 Weeks) | | | | Fiscal [removed: 2015] [added: 2016] (52 Weeks) | | | | Fiscal [removed: 2014] [added: 2015] (52 Weeks) | | | | Fiscal [removed: 2013] [added: 2014] (52 Weeks) | | |

| Net revenues | | $ | [removed: 5,292,359] [added: 5,671,593] | | | $ | [removed: 5,083,812] [added: 5,292,359] | | | $ | [removed: 4,976,090] [added: 5,083,812] | | | $ | [removed: 4,698,719] [added: 4,976,090] | | | $ | [removed: 4,387,889] [added: 4,698,719] | |

| Net revenue growth | | | [removed: 4.1%] [added: 7.2%] | | | | [removed: 2.2%] [added: 4.1%] | | | | [removed: 5.9%] [added: 2.2%] | | | | [removed: 7.1%] [added: 5.9%] | | | | [removed: 8.5%] [added: 7.1%] | |

| Comparable brand revenue [removed: growth_1_] [added: growth_2_] | | | [removed: 3.2%] [added: 3.7%] | | | | [removed: 0.7%] [added: 3.2%] | | | | [removed: 3.7%] [added: 0.7%] | | | | [removed: 7.1%] [added: 3.7%] | | | | [removed: 8.8%] [added: 7.1%] | |

| Gross profit | | $ | [removed: 1,931,711] [added: 2,101,013] | | | $ | [removed: 1,883,310] [added: 1,931,711] | | | $ | [removed: 1,844,214] [added: 1,883,310] | | | $ | [removed: 1,800,504] [added: 1,844,214] | | | $ | [removed: 1,704,216] [added: 1,800,504] | |

| Gross margin | | | [removed: 36.5%] [added: 37.0%] | | | | [removed: 37.0%] [added: 36.5%] | | | | [removed: 37.1%] [added: 37.0%] | | | | [removed: 38.3%] [added: 37.1%] | | | | [removed: 38.8%] [added: 38.3%] | |

| Operating income | | $ | [removed: 453,811] [added: 435,953] | | | $ | [removed: 472,599] [added: 453,811] | | | $ | [removed: 488,634] [added: 472,599] | | | $ | [removed: 502,265] [added: 488,634] | | | $ | [removed: 452,098] [added: 502,265] | |

| Operating [removed: margin_2_] [added: margin_3_] | | | [removed: 8.6%] [added: 7.7%] | | | | [removed: 9.3%] [added: 8.6%] | | | | [removed: 9.8%] [added: 9.3%] | | | | [removed: 10.7%] [added: 9.8%] | | | | [removed: 10.3%] [added: 10.7%] | |

| Net earnings | | $ | [removed: 259,545] [added: 333,684] | | | $ | [removed: 305,387] [added: 259,545] | | | $ | [removed: 310,068] [added: 305,387] | | | $ | [removed: 308,854] [added: 310,068] | | | $ | [removed: 278,902] [added: 308,854] | |

| Basic earnings per share | | $ | [removed: 3.03] [added: 4.10] | | | $ | [removed: 3.45] [added: 3.03] | | | $ | [removed: 3.42] [added: 3.45] | | | $ | [removed: 3.30] [added: 3.42] | | | $ | [removed: 2.89] [added: 3.30] | |

| Diluted earnings per share | | $ | [removed: 3.02] [added: 4.05] | | | $ | [removed: 3.41] [added: 3.02] | | | $ | [removed: 3.37] [added: 3.41] | | | $ | [removed: 3.24] [added: 3.37] | | | $ | [removed: 2.82] [added: 3.24] | |

| Shares used in calculation of earnings per share: [added: Basic] | | | [added: 81,420] | | | | [added: 85,592] | | | | [added: 88,594] | | | | [added: 90,787] | | | | [added: 93,634] | |

| Diluted | | | [removed: 86,080] [added: 82,340] | | | | [removed: 89,462] [added: 86,080] | | | | [removed: 92,102] [added: 89,462] | | | | [removed: 95,200] [added: 92,102] | | | | [removed: 98,765] [added: 95,200] | |

| Working [removed: capital_3_] [added: capital_4_] | | $ | [removed: 628,622] [added: 619,531] | | | $ | [removed: 405,924] [added: 628,622] | | | $ | [removed: 339,673] [added: 405,924] | | | $ | [removed: 515,975] [added: 339,673] | | | $ | [removed: 558,007] [added: 515,975] | |

| Total assets | | $ | [removed: 2,785,749] [added: 2,812,844] | | | $ | [removed: 2,476,879] [added: 2,785,749] | | | $ | [removed: 2,417,427] [added: 2,476,879] | | | $ | [removed: 2,330,277] [added: 2,417,427] | | | $ | [removed: 2,336,734] [added: 2,330,277] | |

| Return on assets | | | [removed: 9.9%] [added: 11.9%] | | | | [removed: 12.5%] [added: 9.9%] | | | | [removed: 13.1%] [added: 12.5%] | | | | [removed: 13.2%] [added: 13.1%] | | | | [removed: 12.3%] [added: 13.2%] | |

| Net cash provided by operating activities | | $ | [removed: 499,704] [added: 585,986] | | | $ | [removed: 524,709] [added: 499,704] | | | $ | [removed: 544,026] [added: 524,709] | | | $ | [removed: 461,697] [added: 544,026] | | | $ | [removed: 453,769] [added: 461,697] | |

| Capital expenditures | | $ | [removed: 189,712] [added: 190,102] | | | $ | [removed: 197,414] [added: 189,712] | | | $ | [removed: 202,935] [added: 197,414] | | | $ | [removed: 204,800] [added: 202,935] | | | $ | [removed: 193,953] [added: 204,800] | |

| Long-term debt and other long-term [removed: obligations] [added: liabilities] | | $ | [removed: 372,226] [added: 380,944] | | | $ | [removed: 71,215] [added: 372,226] | | | $ | [removed: 49,713] [added: 71,215] | | | $ | [removed: 62,698] [added: 49,713] | | | $ | [removed: 61,780] [added: 62,698] | |

| Stockholders’ equity | | $ | [removed: 1,203,566] [added: 1,155,714] | | | $ | [removed: 1,248,220] [added: 1,203,566] | | | $ | [removed: 1,198,226] [added: 1,248,220] | | | $ | [removed: 1,224,706] [added: 1,198,226] | | | $ | [removed: 1,256,002] [added: 1,224,706] | |

| Stockholders’ equity per share (book value) | | $ | [removed: 14.37] [added: 14.66] | | | $ | [removed: 14.29] [added: 14.37] | | | $ | [removed: 13.38] [added: 14.29] | | | $ | [removed: 13.33] [added: 13.38] | | | $ | [removed: 13.35] [added: 13.33] | |

| Return on equity | | | [removed: 21.2%] [added: 28.3%] | | | | [removed: 25.0%] [added: 21.2%] | | | | [removed: 25.6%] [added: 25.0%] | | | | [removed: 24.9%] [added: 25.6%] | | | | [removed: 21.7%] [added: 24.9%] | |

| Annual dividends declared per share | | $ | [removed: 1.56] [added: 1.72] | | | $ | [removed: 1.48] [added: 1.56] | | | $ | [removed: 1.40] [added: 1.48] | | | $ | [removed: 1.32] [added: 1.40] | | | $ | [removed: 1.24] [added: 1.32] | |

| E-commerce net revenue growth | | | [removed: 5.5%] [added: 10.9%] | | | | [removed: 4.4%] [added: 5.5%] | | | | [removed: 6.4%] [added: 4.4%] | | | | [removed: 12.1%] [added: 6.4%] | | | | [removed: 13.1%] [added: 12.1%] | |

| E-commerce net revenues as a percent of net revenues | | | [removed: 52.5%] [added: 54.3%] | | | | [removed: 51.8%] [added: 52.5%] | | | | [removed: 50.7%] [added: 51.8%] | | | | [removed: 50.5%] [added: 50.7%] | | | | [removed: 48.2%] [added: 50.5%] | |

| Retail net revenue growth (decline) | | | [added: 3.0% | | | |] 2.6% | | | | (0.1% | ) | | | 5.4% | | | | 2.4% | | [removed: | | 4.6% | |]

| Retail net revenues as a percent of net revenues | | | [removed: 47.5%] [added: 45.7%] | | | | [removed: 48.2%] [added: 47.5%] | | | | [removed: 49.3%] [added: 48.2%] | | | | [removed: 49.5%] [added: 49.3%] | | | | [removed: 51.8%] [added: 49.5%] | |

| Number of stores at year-end | | | [removed: 631] [added: 625] | | | | [removed: 629] [added: 631] | | | | [removed: 618] [added: 629] | | | | [removed: 601] [added: 618] | | | | [removed: 585] [added: 601] | |

| Store selling square footage at year-end | | | [removed: 4,019,000] [added: 4,105,000] | | | | [removed: 3,951,000] [added: 4,019,000] | | | | [removed: 3,827,000] [added: 3,951,000] | | | | [removed: 3,684,000] [added: 3,827,000] | | | | [removed: 3,590,000] [added: 3,684,000] | |

| Store leased square footage at year-end | | | [removed: 6,451,000] [added: 6,557,000] | | | | [removed: 6,359,000] [added: 6,451,000] | | | | [removed: 6,163,000] [added: 6,359,000] | | | | [removed: 5,965,000] [added: 6,163,000] | | | | [removed: 5,838,000] [added: 5,965,000] | |

| [removed: _1_] [added: _2_] | _Comparable brand revenue is calculated on a 52-week to 52-week [added: basis, with the exception of fiscal 2018 which is calculated on a 53-week to 53-week] basis. See definition of comparable brand revenue within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”_ | |

| [removed: _2_] [added: _3_] | _Operating margin is defined as operating income as a percent of net revenues._ | |

| [removed: _3_] [added: _4_] | _In fiscal 2015, we prospectively adopted Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes, and now present both deferred tax assets and deferred tax liabilities as noncurrent in our Consolidated Balance Sheets. Prior balance sheets were not retrospectively adjusted and, as a result, working capital for fiscal [removed: 2013 and fiscal] 2014 may not be comparable to [removed: fiscal 2015, fiscal 2016 and fiscal 2017._] [added: other years._] | |

| _1_ | _In fiscal 2018, we adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers, using the modified retrospective method. Amounts reported for fiscal 2017 and prior years have not been adjusted, and continue to be reported in accordance with previous revenue recognition guidance. See Note A to the Consolidated Financial Statements._ | |

| --- | --- | --- |

| Basic | | | 85,592 | | | | 88,594 | | | | 90,787 | | | | 93,634 | | | | 96,669 | |

| _In thousands, except per share amounts_ | | | Fiscal [removed: 2017] [added: 2018 (53 weeks)] | | | | Fiscal [removed: 2016] [added: 2017 (52 weeks)] | | | | Fiscal [removed: 2015] [added: 2016 (52 weeks)] | |

| E-commerce net revenues | | | $ [removed: 2,778,457] [added: 3,082,064] | | | | $ [removed: 2,633,602] [added: 2,778,457] | | | | $ [removed: 2,522,580] [added: 2,633,602] | |

| Retail net revenues | | | [removed: 2,513,902] [added: 2,589,529] | | | | [removed: 2,450,210] [added: 2,513,902] | | | | [removed: 2,453,510] [added: 2,450,210] | |

| Net revenues | | | [removed: 5,292,359] [added: 5,671,593] | | | | [removed: 5,083,812] [added: 5,292,359] | | | | [removed: 4,976,090] [added: 5,083,812] | |

| Cost of goods sold | | | [removed: 3,360,648] [added: 3,570,580] | | | | [removed: 3,200,502] [added: 3,360,648] | | | | [removed: 3,131,876] [added: 3,200,502] | |

| Gross profit | | | [removed: 1,931,711] [added: 2,101,013] | | | | [removed: 1,883,310] [added: 1,931,711] | | | | [removed: 1,844,214] [added: 1,883,310] | |

| Selling, general and administrative expenses | | | [removed: 1,477,900] [added: 1,665,060] | | | | [removed: 1,410,711] [added: 1,477,900] | | | | [removed: 1,355,580] [added: 1,410,711] | |

| Operating income | | | [removed: 453,811] [added: 435,953] | | | | [removed: 472,599] [added: 453,811] | | | | [removed: 488,634] [added: 472,599] | |

| Interest (income) expense, net | | | [removed: 1,372] [added: 6,706] | | | | [removed: 688] [added: 1,372] | | | | [removed: 627] [added: 688] | |

| Earnings before income taxes | | | [removed: 452,439] [added: 429,247] | | | | [removed: 471,911] [added: 452,439] | | | | [removed: 488,007] [added: 471,911] | |

| Income taxes | | | [removed: 192,894] [added: 95,563] | | | | [removed: 166,524] [added: 192,894] | | | | [removed: 177,939] [added: 166,524] | |

| Net earnings | | | $ [removed: 259,545] [added: 333,684] | | | | $ [removed: 305,387] [added: 259,545] | | | | $ [removed: 310,068] [added: 305,387] | |

| Basic earnings per share | | | $ [removed: 3.03] [added: 4.10] | | | | $ [removed: 3.45] [added: 3.03] | | | | $ [removed: 3.42] [added: 3.45] | |

| Diluted earnings per share | | | $ [removed: 3.02] [added: 4.05] | | | | $ [removed: 3.41] [added: 3.02] | | | | $ [removed: 3.37] [added: 3.41] | |

| Basic | | | [removed: 85,592] [added: 81,420] | | | | [removed: 88,594] [added: 85,592] | | | | [removed: 90,787] [added: 88,594] | |

| Diluted | | | [removed: 86,080] [added: 82,340] | | | | [removed: 89,462] [added: 86,080] | | | | [removed: 92,102] [added: 89,462] | |

| _In thousands_ | | [removed: |] Fiscal [removed: 2017] [added: 2018] | | | | Fiscal [removed: 2016] [added: 2017] | | | | Fiscal [removed: 2015] [added: 2016] | | [added: |]

| Foreign currency translation adjustments | | | [removed: 3,730] [added: (5,032] | [added: )] | | | [removed: 1,523] [added: 3,730] | | | | [removed: (7,958] [added: 1,523] | [removed: )] |

| Change in fair value of derivative financial instruments, net of tax (tax benefit) of [removed: $(259), $(327)] [added: $390, $(259)] and [removed: $380] [added: $(327)] | | | [removed: (715] [added: 1,098] | [removed: )] | | | [removed: (916] [added: (715] | ) | | | [removed: 1,074] [added: (916] | [added: )] |

| Reclassification adjustment for realized (gain) loss on derivative financial instruments, net of tax (tax benefit) of [removed: $(38), $(41)] [added: $122, $(38)] and [removed: $421] [added: $(41)] | | | [removed: 106] [added: (357] | [added: )] | | | 106 | | | | [removed: (1,184] [added: 106] | [removed: )] |

| Comprehensive income | | | $ [removed: 262,666] [added: 329,393] | | | | $ [removed: 306,100] [added: 262,666] | | | | $ [removed: 302,000] [added: 306,100] | |

| _In thousands, except per share amounts_ | | [removed: Jan. 28, 2018] [added: Feb. 3, 2019] | | | | Jan. [removed: 29, 2017] [added: 28, 2018] | | |

| Cash and cash equivalents [added: at beginning of year] | | [removed: $] | 390,136 | | | [removed: $] | 213,713 | | [added: | | 193,647 | |]

| Accounts receivable, net | | | [removed: 90,119] [added: 107,102] | | | | [removed: 88,803] [added: 90,119] | |

| Merchandise inventories, net | | | [removed: 1,061,593] [added: 1,124,992] | | | | [removed: 977,505] [added: 1,061,593] | |

| Prepaid catalog expenses | | | [removed: 24,028] [added: —] | | | | [removed: 23,625] [added: 20,517] | |

| Other [added: current] assets | | | [removed: 11,876] [added: 21,939] | | | | [removed: 10,652] [added: 11,876] | |

| Total current assets | | | [removed: 1,636,445] [added: 1,694,343] | | | | [removed: 1,367,180] [added: 1,636,445] | |

| Property and equipment, net | | | [removed: 932,283] [added: 929,635] | | | | [removed: 923,283] [added: 932,283] | |

| Deferred income taxes, net | | | [removed: 67,306] [added: 44,055] | | | | [removed: 135,238] [added: 67,306] | |

| Total assets | | $ | [removed: 2,785,749] [added: 2,812,844] | | | $ | [removed: 2,476,879] [added: 2,785,749] | |

| Income taxes payable | | | [removed: 56,783] [added: 21,461] | | | | [removed: 23,245] [added: 56,783] | |

| Total current liabilities | | | [removed: 1,007,823] [added: 1,074,812] | | | | [removed: 961,256] [added: 1,007,823] | |

| Deferred rent and lease incentives | | | [removed: 202,134] [added: 201,374] | | | | [removed: 196,188] [added: 202,134] | |

| Long-term debt | | | [removed: 299,422] [added: 299,620] | | | | [removed: —] [added: 299,422] | |

| Other long-term [removed: obligations] [added: liabilities] | | | [removed: 72,804] [added: 81,324] | | | | [removed: 71,215] [added: 72,804] | |

| Total liabilities | | | [removed: 1,582,183] [added: 1,657,130] | | | | [removed: 1,228,659] [added: 1,582,183] | |

| Common stock: $.01 par value; 253,125 shares authorized; [removed: 83,726] [added: 78,813] and [removed: 87,325] [added: 83,726] shares issued and outstanding at [removed: January 28, 2018] [added: February 3, 2019] and January [removed: 29, 2017,] [added: 28, 2018,] respectively | | | [removed: 837] [added: 789] | | | | [removed: 873] [added: 837] | |

| Additional paid-in capital | | | [removed: 562,814] [added: 581,900] | | | | [removed: 556,928] [added: 562,814] | |

| Retained earnings | | | [removed: 647,422] [added: 584,333] | | | | [removed: 701,702] [added: 647,422] | |

| Cash and cash equivalents | | $ | 338,954 | | | $ | 390,136 | |

| Prepaid expenses | | | 101,356 | | | | 62,204 | |

| Goodwill | | | 85,382 | | | | 18,838 | |

| Other long-term assets, net | | | 59,429 | | | | 130,877 | |

| Accounts payable | | $ | 526,702 | | | $ | 457,144 | |

| Accrued expenses | | | 163,559 | | | | 134,207 | |

| Gift card and other deferred revenue | | | 290,445 | | | | 300,607 | |

| Other current liabilities | | | 72,645 | | | | 59,082 | |

| Net earnings | | | — | | | | — | | | | — | | | | 333,684 | | | | — | | | | — | | | | 333,684 | |

| Repurchases of common stock | | | (5,373 | ) | | | (53 | ) | | | (25,775 | ) | | | (269,476 | ) | | | — | | | | — | | | | (295,304 | ) |

| 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 | |

| _2_ | _Primarily relates to our adoption of ASU 2014-09 in fiscal 2018. See Note A._ |

| _In thousands_ | | Fiscal 2018 (53 Weeks) | | | | Fiscal 2017 (52 Weeks) | | | | Fiscal 2016 (52 Weeks) | | |

| Net earnings | | $ | 333,684 | | | $ | 259,545 | | | $ | 305,387 | |

| 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 | |

These brands are also part of The Key Rewards, our free-to-join loyalty program that offers members exclusive benefits across the Williams-Sonoma family of brands.

_Reclassifications_

Certain amounts reported in our Consolidated Balance Sheet as of January 28, 2018 and our Consolidated Statements of Cash Flows for the fifty-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.

To determine if the value of our inventory should be reduced below cost,

During fiscal 2016, we recorded asset impairment charges of approximately $1,765,000, related to our retail stores.

Goodwill is not amortized, but rather is subject to

Accordingly, no further impairment testing of goodwill was performed.

_Merchandise Sales_

Revenues from the sale of our merchandise through our e-commerce channel, at our retail stores, as well as to our franchisees and wholesale customers are, in each case, recognized at a point in time when control of

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.

Revenue from the sale of merchandise is reported net of sales returns.

As of February 3, 2019, we recorded a liability for expected sales returns of approximately $26,276,000 within other current liabilities and a corresponding asset for the expected net realizable value of the merchandise inventory to be returned of approximately $10,030,000 within other current assets in our Consolidated Balance Sheet.

Prior to the adoption of Auditing Standards Update (“ASU”) 2014-09, _Revenue from Contracts with Customers_ in the first quarter of fiscal 2018, we recorded a reserve for estimated product returns, net of cost of merchandise inventory to be returned, within other current liabilities.

| --- | --- |

| Prepaid expenses | | | 58,693 | | | | 52,882 | |

| Other assets, net | | | 149,715 | | | | 51,178 | |

| Accounts payable | | $ | 459,378 | | | $ | 453,710 | |

| Accrued salaries, benefits and other liabilities | | | 135,884 | | | | 130,187 | |

| Customer deposits | | | 292,460 | | | | 294,276 | |

| Other liabilities | | | 63,318 | | | | 59,838 | |

| Balance at February 1, 2015 | | | 91,891 | | | $ | 919 | | | $ | 527,261 | | | $ | 701,214 | | | $ | (2,548 | ) | | $ | (2,140 | ) | | $ | 1,224,706 | |

| Net earnings | | | — | | | | — | | | | — | | | | 310,068 | | | | — | | | | — | | | | 310,068 | |

| Repurchases of common stock | | | (2,950 | ) | | | (30 | ) | | | (12,646 | ) | | | (212,319 | ) | | | — | | | | — | | | | (224,995 | ) |

| Dividends declared | | | — | | | | — | | | | — | | | | (130,290 | ) | | | — | | | | — | | | | (130,290 | ) |

| Prepaid catalog expenses | | | (403 | ) | | | 5,294 | | | | 5,022 | |

| Accounts payable | | | 2,382 | | | | 3,169 | | | | 60,507 | |

| Accrued salaries, benefits and other liabilities | | | 9,157 | | | | 25,876 | | | | (135 | ) |

| Customer deposits | | | (2,394 | ) | | | (3,037 | ) | | | 35,877 | |

| Excess tax benefit related to stock-based awards | | | — | | | | 4,894 | | | | 14,494 | |

| Repayment of long-term obligations | | | — | | | | — | | | | (1,968 | ) |

| Cash and cash equivalents at beginning of year | | | 213,713 | | | | 193,647 | | | | 222,927 | |

inventory (which ranges from large furniture to small tabletop items) and execution against loss prevention initiatives in our stores, distribution facilities, off-site storage locations, and with our third-party warehouse and transportation providers.

Prepaid catalog expenses consist primarily of third-party incremental direct costs, including creative design, paper, printing, postage and mailing costs for all of our direct response catalogs.

In fiscal 2015, we performed a quantitative goodwill impairment test and determined that the fair value of each of our reporting units substantially exceeded their carrying value.

Accordingly, we did not recognize any goodwill impairment in fiscal 2015.

Customer deposits are primarily comprised of deferred revenues related to unredeemed stored-value cards and undelivered merchandise.

We maintain a liability for unredeemed stored-value cards until the earlier of redemption, escheatment or four years as we have concluded that the likelihood of our stored-value cards being redeemed beyond four years from the date of issuance is remote.

Income from unredeemed stored-value cards, which is recorded in other income within selling, general and administrative expenses, is not material to our Consolidated Financial Statements.

_Revenue Recognition_

We recognize revenues (including shipping fees) and the related cost of goods sold (including shipping expense) at the time the products are delivered to our customers.

Revenue is recognized for retail sales (excluding home-delivered merchandise) at the point of sale in the store and, for home-delivered merchandise and e-commerce sales, when the merchandise is delivered to the customer.

Discounts provided to customers are accounted for as a reduction of sales.

We record a reserve for estimated product returns in each reporting period.

Revenues are presented net of any taxes collected from customers and remitted to governmental authorities.

We recognize revenues from sales to franchisees at the time merchandise ownership is transferred to the franchisee.

_Sales Returns Reserve_

Our customers may return purchased items for an exchange or refund.

A summary of activity in our sales returns reserve is as follows:

| Balance at beginning of year | | $ | 16,058 | | | $ | 19,113 | | | $ | 14,782 | |

| Provision for sales returns | | | 302,320 | | | | 303,694 | | | | 321,421 | |

| Actual sales returns | | | (306,536 | ) | | | (306,749 | ) | | | (317,090 | ) |

| Balance at end of year | | $ | 11,842 | | | $ | 16,058 | | | $ | 19,113 | |

| _1_ | _Amounts are shown net of cost of goods sold._ |

As of [removed: January 28, 2018,] [added: February 3, 2019,] 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.

[removed: Based on that evaluation,] our [removed: 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 SEC.

Our management assessed the effectiveness of the company’s internal control over financial reporting as of [removed: January 28, 2018.][added: February 3, 2019.]

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in _Internal Control-Integrated Framework (2013)._ Based on our assessment using those criteria, our management concluded that, as of [removed: January 28, 2018,] [added: February 3, 2019,] our internal control over financial reporting is effective.

Their audit report appears on pages [removed: 62] [added: 65] and [removed: 63] [added: 66] of this Annual Report on Form 10-K.

Based on that evaluation, our management, including our CEO and CFO, concluded that

On April 3, 2019, the Company’s Compensation Committee adopted the Amended and Restated 2012 EVP Level Management Retention Plan (the “MRP”).

The terms of the MRP are substantially identical to the terms of the Company’s 2012 EVP Level Management Retention Plan adopted on November 1, 2012 by the Company’s Compensation Committee, which terms were described in the Company’s Current Report on Form 8-K as filed with the Commission on November 7, 2012.

None.

Information required by this Item is incorporated by reference herein to information under the headings “Election of Directors,” “Information Concerning Executive Officers,” “Audit and Finance Committee Report,” “Corporate Governance — Corporate Governance Guidelines and Code of Business Conduct and Ethics,” “Corporate Governance — Audit and Finance Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy [removed: Statement.][added: Statement for the 2019 Annual Meeting of Stockholders (the “Proxy Statement”).]

Information required by this Item is incorporated by reference herein to information under the [removed: headings] [added: heading] “Security Ownership of Principal Stockholders and Management” [removed: and “Equity Compensation Plan Information”] in our Proxy Statement.

Information required by this Item is incorporated by reference herein to information under the headings [removed: “Committee Reports — Audit] [added: “Audit] and Finance Committee Report” and “Proposal [removed: 4] [added: 3] — Ratification of Selection of Independent Registered Public Accounting Firm — Deloitte Fees and Services” in our Proxy Statement.

| (a)(1) | [added: |] Financial Statements: | [added: | | | |]

[added: | | |] 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: [added: | | | | |]

| | | [added: | |] PAGE | | |

| [added: | |] [Consolidated Statements of [removed: Earnings](#tx689546_201)] [added: Earnings](#tx683578_22)] | | | [removed: 38] [added: 40] | |

| [added: | |] [Consolidated Statements of Comprehensive [removed: Income](#tx689546_202)] [added: Income](#tx683578_23)] | | | [removed: 38] [added: 40] | |

| [added: | |] [Consolidated Balance [removed: Sheets](#tx689546_203)] [added: Sheets](#tx683578_24)] | | | [removed: 39] [added: 41] | |

| [added: | |] [Consolidated Statements of Stockholders’ [removed: Equity](#tx689546_204)] [added: Equity](#tx683578_25)] | | | [removed: 40] [added: 42] | |

| [added: | |] [Consolidated Statements of Cash [removed: Flows](#tx689546_205)] [added: Flows](#tx683578_26)] | | | [removed: 41] [added: 43] | |

| [added: | |] [Notes to Consolidated Financial [removed: Statements](#tx689546_206)] [added: Statements](#tx683578_27)] | | | [removed: 42] [added: 44] | |

| [added: | |] [Report of Independent Registered Public Accounting [removed: Firm](#tx689546_207)] [added: Firm](#tx683578_28)] | | | [removed: 62] [added: 65] | |

| [added: | |] [Quarterly Financial [removed: Information](#tx689546_208)] [added: Information](#tx683578_29)] | | | [removed: 64] [added: 67] | |

| (a)(2) | [added: |] 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. | [added: | | | |]

| (a)(3) | [added: |] Exhibits: The exhibits listed in the below Exhibit Index are filed or incorporated by reference as part of this Form 10-K | [added: | | | |]

| (b) | [added: |] Exhibits: The exhibits listed in the below Exhibit Index are filed or incorporated by reference as part of this Form 10-K | [added: | | | |]

| (c) | [added: |] Financial Statement Schedules: Schedules have been omitted because they are not required or are not applicable. | [added: | | | |]

| [removed: 10.1*] [added: 10.1] | | [Seventh Amended and Restated Credit Agreement, dated January 8, 2018, between the Company and Bank of America, N.A., as administrative agent, letter of credit issuer and swingline lender, Wells Fargo Bank, National Association, as syndication agent and the lenders party [removed: thereto](https://www.sec.gov/Archives/edgar/data/719955/000119312518102232/d689546dex101.htm)] [added: thereto (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2018 as filed with the Commission on March 29, 2018, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312518102232/d689546dex101.htm)] |

| [removed: 10.7] [added: 10.8] | | [Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and Wells Fargo Bank, N.A., dated as of August 30, 2013 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended November 3, 2013 as filed with the Commission on December 12, 2013, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312513471753/d613006dex102.htm) |

| [removed: 10.8] [added: 10.9] | | [First Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and Wells Fargo Bank, N.A., dated as of August 29, 2014 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended November 2, 2014 as filed with the Commission on December 5, 2014, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312514434838/d798275dex102.htm) |

| [removed: 10.9] [added: 10.10] | | [Second Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and Wells Fargo Bank, N.A., dated as of August 28, 2015 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended November 1, 2015 as filed with the Commission on December 11, 2015, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312515401464/d39336dex102.htm) |

| [removed: 10.10] [added: 10.11] | | [Third Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and Wells Fargo Bank, N.A., dated as of August 26, 2016 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended October 30, 2016 as filed with the Commission on December 7, 2016, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312516787485/d268653dex102.htm) |

| [removed: 10.11] [added: 10.12] | | [Fourth Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and Wells Fargo Bank, N.A., dated as of August 25, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended October 29, 2017 as filed with the Commission on December 6, 2017, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312517362895/d466116dex101.htm) |

| [removed: 10.12] [added: 10.14] | | [Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and U.S. Bank National Association, dated as of August 30, 2013 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 3, 2013 as filed with the Commission on December 12, 2013, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312513471753/d613006dex103.htm) |

| [removed: 10.13] [added: 10.15] | | [First Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and U.S. Bank National Association, dated as of August 29, 2014 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 2, 2014 as filed with the Commission on December 5, 2014, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312514434838/d798275dex103.htm) |

| [removed: 10.14] [added: 10.16] | | [Second Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and U.S. Bank National Association, dated as of August 28, 2015 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended November 1, 2015 as filed with the Commission on December 11, 2015, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312515401464/d39336dex103.htm) |

| [removed: 10.15] [added: 10.17] | | [Third Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and U.S. Bank National Association, dated as of August 26, 2016 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended October 30, 2016 as filed with the Commission on December 7, 2016, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312516787485/d268653dex103.htm) |

| [removed: 10.16] [added: 10.18] | | [Fourth Amendment to Reimbursement Agreement between the Company, Williams-Sonoma Singapore Pte. Ltd., and U.S. Bank National Association, dated as of August 25, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended October 29, 2017 as filed with the Commission on December 6, 2017, File No. 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312517362895/d466116dex103.htm) |

| [removed: 10.17+] [added: 10.20+] | | [Williams-Sonoma, Inc. 2001 Long-Term Incentive Plan, as amended (incorporated by reference to Exhibit [removed: D] [added: A] to the Company’s definitive proxy statement [removed: on Schedule A] as filed on April [removed: 7, 2011,] [added: 13, 2018,] File No. [removed: 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312511091348/ddef14a.htm)] [added: 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312518116995/d561100ddef14a.htm#toc561100_26)] |

| [removed: 10.18+] [added: 10.22+] | | [Form of [removed: Notice of Grant and Stock Option Agreement under the Company’s] [added: Williams-Sonoma, Inc.] 2001 Long-Term Incentive Plan [added: Restricted Stock Unit Award Agreement for Grants to Employees] (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended [removed: October 31, 2004] [added: May 4, 2014] as filed with the Commission on [removed: December 10, 2004,] [added: June 12, 2014,] File No. [removed: 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312504210939/dex102.htm)] [added: 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312514234823/d712968dex102.htm)] |

| [removed: 10.19+] [added: 10.23+] | | [Form of Williams-Sonoma, Inc. 2001 Long-Term Incentive Plan [removed: Stock-Settled] [added: Performance] Stock [removed: Appreciation Right] [added: Unit] Award Agreement for [removed: Director] Grants [added: to Employees] (incorporated by reference to Exhibit [removed: 10.31] [added: 10.15] to the Company’s Annual Report on Form 10-K for the fiscal year ended February [removed: 3, 2008] [added: 2, 2014] as filed with the Commission on April 3, [removed: 2008,] [added: 2014,] File No. [removed: 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312508074283/dex1031.htm)] [added: 001-14077)](http://www.sec.gov/Archives/edgar/data/719955/000119312514129974/d659151dex1015.htm)] |