AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 31/10/2026
Moat44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Owned patents, distinct brands and in-house design support differentiation, while recurring supply-chain savings and comparable-sales growth corroborate operating capability. These are mixed evidence of structural advantage: the passages establish neither a sustained relative cost lead nor customer willingness to pay a protected premium.
durability · 2/4 · Trademark maintenance and owned patents provide identifiable legal protection, and savings recur across disclosed annual and quarterly periods. However, protection against imitation is imperfect and merchandise commitments precede known trends. Persistence of assets and execution does not establish durable protection of economic returns.
customer dependency · 1/4 · The disclosed customer tie consists of points and certificates usable on future purchases, with accounting estimates informed by historical redemption. This supports a weak purchase incentive rather than demonstrated dependency. No meaningful switching friction or essential customer integration is established by these program terms.
erosion resilience · 2/4 · Fiscal 2025 and second-quarter 2026 comparable-sales growth, alongside recurring supply-chain savings, demonstrate resilience in demand and operations. Nevertheless, second-quarter non-GAAP gross margin fell 160 basis points, primarily from tariffs. Actual outcomes are mixed; hypothetical imitation and AI risks are not treated as realized erosion.
Pricing power50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Management reports executing targeted price increases within tariff mitigation, while continuing comparable-sales growth and tariff-driven merchandise-margin compression show mixed commercial outcomes. This assessment is indirect: disclosed results do not isolate realized selling-price changes from units, mix, vendor concessions or other costs, and do not demonstrate a sustained premium.
retention · 2/4 · Assessed indirectly from fiscal 2025 comparable brand revenue growth of 3.5%, second-quarter 2026 growth of 6.2% and historical loyalty-certificate redemption patterns. These indicate continuing demand and some engagement, but cannot distinguish returning customers from new demand or establish repeat purchasing after price increases.
margin resilience · 2/4 · Supply-chain savings partially offset merchandise-margin pressure, but first-quarter 2026 gross margin declined 30 basis points and second-quarter non-GAAP gross margin declined 160 basis points. The second quarter's GAAP expansion included a 610-basis-point net tariff-refund benefit. Underlying resilience is therefore mixed rather than demonstrated by reported expansion alone.
contractual freedom · 2/4 · The executed mitigation plan includes targeted merchandise price increases, establishing some practical discretion to change selling prices. The same disclosure warns that passing costs through may be limited. This supports mixed practical pricing freedom; contractual restrictions and rights to reprice committed customer orders remain unestablished.
Predictability86
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 50.00
- Revenue growth volatility (pp)
- 5.84
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 3.57
- observedAnnualPeriods
- 5.00
Financial strength88
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope. An original fully reconciled nonnegative liability partition proves the existing endpoint grade across every permitted borrowing amount and original rounding interval. The bounded component does not estimate a debt amount or leverage ratio.
- debtFcfGrade
- 100.00
- netDebtEbitGrade
- 100.00
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 51.07
- borrowingLowerBound
- 0.00
- borrowingUpperBound
- 552.58
- Current ratio (x)
- 1.39
- cashInterestPaid
- 0.69
- cashInterestCoverage
- 1900.13
Capital allocation100
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Return grade is exactly 100: the minimum three-year average pretax return exceeds 25% even with all reported liabilities as the upper borrowing bound and every input within its original stated accuracy. Exact debt and return percentages remain unknown; no ROIC percentage is imputed. Does not establish acquisition quality or buyback timing.
- operatingReturnGrade
- 100.00
- 3-year average dilution (%)
- -3.71
- 3-year average SBC / revenue (%)
- 1.25
- cashConversionGrade
- 100.00
- operatingReturnLowerBound
- 32.88
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 3/4 · First-half 2026 operating cash flow of $695.9 million supported $116.4 million of capital expenditure, $287.8 million of repurchases and $175.4 million of dividends, with no Credit Facility borrowings. Cash flow included $200.2 million of refunds and interest, so cash reserves also matter. Repurchase value creation remains unproven.
incentive alignment · 2/4 · Actual fiscal 2025 PSU grants link three-year payouts to revenue, EPS, cash flow and adjusted ROIC; CEO ownership exceeded 125 times salary as of April 21, 2026. However, 2016–2025 PSU payouts averaged 209% of target, and other executives may comply through retention requirements before reaching ownership thresholds.
execution · 3/4 · Annual comparable-sales growth followed by further quarterly growth, repeated supply-chain efficiencies and positive operating cash generation demonstrate strong execution. Operating outcomes provide indirect evidence rather than verified customer-service measures. Tariff refunds materially benefit cash flow and GAAP margins; those benefits do not establish management's claimed competitive superiority.
governance · 2/4 · An independent chair, annual director elections, independent audit committee and 97% average board and committee attendance support functioning oversight. The cumulative $49 million freight-expense error tempers that evidence; management concluded prior periods were not materially misstated. Governance structures and attendance do not alone establish exceptional oversight effectiveness.
Evidence
Our in-house design capabilities and vertically integrated sourcing organization allow us to deliver high-quality, lasting products at competitive prices.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, business overview, design and sourcing assertion · Filed 26/03/2026
Our brands — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow — represent distinct merchandise strategies that are marketed through e-commerce, direct-mail catalogs, retail stores, and business-to-business.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, brand portfolio and distribution channels · Filed 26/03/2026
Trademarks are generally valid as long as they are in use and/or their registrations are properly maintained, and they have not been found to have become generic.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, intellectual property, conditional trademark validity · Filed 26/03/2026
As of February 1, 2026, we also own approximately 380 patents in connection with certain product designs, inventions and proprietary technology.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, patents owned as of February 1, 2026 · Filed 26/03/2026
The actions we take to protect our intellectual property rights may not be adequate to prevent imitation of our brands and products by others, particularly in jurisdictions outside the U.S.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, intellectual-property imitation risk · Filed 26/03/2026
Advances in generative AI technology may reduce barriers to competition, as well as accelerate anti-competitive behavior, which existing laws may not adequately address.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, potential AI-related competitive erosion · Filed 26/03/2026
Thus, we usually must order merchandise, and enter into contracts for the purchase and manufacturing of such merchandise, up to twelve months and generally multiple seasons in advance of the applicable selling season and frequently before trends are known.
2025-03-27, dateKind=filed; fiscal 2024 Form 10-K, merchandise purchase lead times · Filed 27/03/2025
While we continue to execute against an aggressive tariff mitigation plan which includes cost reductions from vendors, moving production to lower cost markets and cost savings in other areas of the business, as well as targeted price increases, we may not be able to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, pass price increases on to our customers or secure adequate alternative sources of products or materials.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, tariff mitigation including targeted price increases and pass-through limitations · Filed 26/03/2026
•Comparable brand revenue of +3.5%.
2026-05-06, dateKind=filed; 2026 proxy statement, fiscal 2025 financial performance, comparable brand revenue · Filed 06/05/2026
announces strong second quarter 2026 results
Q2 comparable brand revenue +6.2%
GAAP operating margin of 22.9%; non-GAAP operating margin of 17.3%
2026-08-26, dateKind=filed; second-quarter 2026 earnings exhibit, comparable brand revenue and operating margins · Filed 26/08/2026
•Gross margin of 45.5% on a non-GAAP basis, -160bps to LY driven by (i) lower merchandise margins of -230bps primarily driven by tariff costs, partially offset by (ii) supply chain efficiencies of +30bps, and (iii) occupancy leverage of +40bps.
2026-08-26, dateKind=filed; second-quarter 2026 earnings exhibit, non-GAAP gross-margin bridge versus prior year · Filed 26/08/2026
•Gross margin of 46.2% -30bps to LY driven by (i) the impact of -70bps from the prior year out-of-period freight adjustment in Q1 FY24, (ii) lower merchandise margins of -40bps and (iii) occupancy deleverage of -20bps, partially offset by (iv) supply chain efficiencies of +50bps and (v) favorable physical inventory results of +50bps.
2026-03-18, dateKind=filed; fiscal 2025 earnings exhibit, annual gross-margin bridge · Filed 18/03/2026
•Gross margin of 44.0% -30bps to LY driven by (i) lower merchandise margins of -100bps, partially offset by (ii) supply chain efficiencies of +50bps and (iii) occupancy leverage of +20bps.
2026-05-21, dateKind=filed; first-quarter 2026 earnings exhibit, gross-margin bridge versus prior year · Filed 21/05/2026
•Gross margin of 51.6% on a GAAP basis, +450bps to LY driven by (i) IEEPA tariff refunds, net of tariff-related vendor concessions, of +610bps, (ii) occupancy leverage of +40bps, and (iii) supply chain efficiencies of +30bps, partially offset by (iv) lower merchandise margins of -230bps primarily driven by tariff costs.
2026-08-26, dateKind=filed; second-quarter 2026 earnings exhibit, GAAP gross-margin bridge including net tariff refunds · Filed 26/08/2026
We offer a customer loyalty program, The Key Rewards, that allows members to earn points on qualifying purchases.
2026-08-28, dateKind=filed; second-quarter 2026 Form 10-Q, The Key Rewards program · Filed 28/08/2026
Points earned through either method enable members to receive certificates that may be redeemed on future merchandise purchases.
2026-08-28, dateKind=filed; second-quarter 2026 Form 10-Q, reward certificates redeemable against future merchandise · Filed 28/08/2026
The measurement of standalone selling prices takes into consideration the discount the customer would receive in a separate transaction for the delivered item, as well as our estimate of certificates expected to be issued and redeemed, based on historical patterns.
2026-03-26, dateKind=filed; fiscal 2025 Form 10-K, loyalty-certificate accounting based on historical issuance and redemption patterns · Filed 26/03/2026
Pottery Barn Kids
43
—
—
43
44
Rejuvenation
13
—
—
13
11
GreenRow
1
—
—
1
—
Total
506
3
(1)
508
509
7
Condensed Consolidated Statements of Cash Flows (unaudited)
For the Twenty-six Weeks Ended
(In thousands)
August 2, 2026
August 3, 2025
Cash flows from operating activities:
Net earnings
$
569,471
$
478,825
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization
112,683
113,165
Loss on disposal/impairment of assets
1,108
3,599
Non-cash lease expense
127,380
121,936
Deferred income taxes
12,884
14,658
Tax benefit related to stock-based awards
11,650
11,423
Stock-based compensation expense
61,530
46,974
Other
(898)
(1,275)
Changes in:
Accounts receivable
(19,495)
2,411
Merchandise inventories
15,000
(98,562)
Prepaid expenses and other assets
(27,704)
(37,959)
Accounts payable
49,314
(48,962)
Accrued expenses and other liabilities
(89,166)
(78,142)
Gift card and other deferred revenue
16,197
(7,069)
Operating lease liabilities
(127,247)
(125,977)
Income taxes payable
(16,845)
6,633
Net cash provided by operating activities
695,862
401,678
Cash flows from investing activities:
2026-08-26, dateKind=filed; unaudited cash-flow statement, twenty-six weeks ended August 2, 2026 and August 3, 2025, in thousands · Filed 26/08/2026
Purchases of property and equipment
(116,434)
(110,293)
Other
62
(1,195)
Net cash used in investing activities
(116,372)
(111,488)
Cash flows from financing activities:
Repurchases of common stock
(287,805)
(289,108)
Payment of dividends
(175,444)
(155,994)
Tax withholdings related to stock-based awards
(99,095)
(67,903)
Debt issuance costs
—
(1,187)
Other
(7,658)
(6,941)
Net cash used in financing activities
(570,002)
(521,133)
Effect of exchange rates on cash and cash equivalents
(353)
3,789
Net increase (decrease) in cash and cash equivalents
9,135
(227,154)
Cash and cash equivalents at beginning of period
1,019,801
1,212,977
Cash and cash equivalents at end of period
$
1,028,936
$
985,823
8
Exhibit 1
2nd Quarter GAAP to Non-GAAP Reconciliation
(unaudited)
For the Thirteen Weeks Ended
For the Twenty-six Weeks Ended
August 2, 2026
August 3, 2025
August 2, 2026
August 3, 2025
(In thousands, except per share data)
$
% of Net
revenues
$
% of Net
revenues
$
% of Net
revenues
$
% of Net
revenues
Gross profit
$
1,011,948
51.6
%
$
864,623
47.1
%
$
1,805,374
47.9
%
$
1,630,432
45.7
%
Tariff refund income1
(167,778)
—
(167,778)
—
Tariff refund-related vendor concessions2
47,464
—
47,464
—
Non-GAAP gross profit
$
891,634
45.5
%
$
864,623
47.1
%
$
1,685,060
44.8
%
$
1,630,432
45.7
%
Selling, general and administrative expenses
$
563,153
28.7
%
$
536,564
29.2
%
$
1,064,891
28.3
%
2026-08-26, dateKind=filed; continuation of first-half cash-flow statement and GAAP/non-GAAP reconciliation; cash-flow period and units supplied by e18 · Filed 26/08/2026
•Maintained strong liquidity position of $1.0 billion in cash and $696 million in operating cash flow, inclusive of the collection of $200.2 million of tariff refunds and the related interest, enabling the company to deliver returns to stockholders of $90 million through dividends.
2026-08-26, dateKind=filed; second-quarter 2026 earnings exhibit, cash and operating cash flow including collected tariff refunds and interest · Filed 26/08/2026
During the thirteen and twenty-six weeks ended August 2, 2026 and August 3, 2025, we had no borrowings under our Credit Facility.
2026-08-28, dateKind=filed; second-quarter 2026 Form 10-Q, no Credit Facility borrowings during stated thirteen- and twenty-six-week periods · Filed 28/08/2026
In fiscal 2025, equity was granted to our NEOs in the form of PSUs and RSUs.
2026-05-06, dateKind=filed; 2026 proxy statement, actual fiscal 2025 PSU and RSU grants · Filed 06/05/2026
PSUs were granted with variable payout based on achievement of predetermined three-year performance goals.
2026-05-06, dateKind=filed; 2026 proxy statement, granted PSUs and three-year performance goals · Filed 06/05/2026
◦Revenue Growth (3-year CAGR) (weighted 20%)
◦EPS (3-year CAGR) (weighted 20%)
◦Operating Cash Flow (3-year average) (weighted 30%)
2026-05-06, dateKind=filed; 2026 proxy statement, PSU revenue, EPS and operating cash-flow metrics and weights · Filed 06/05/2026
◦Adjusted ROIC (3-year average) (weighted 30%)
2026-05-06, dateKind=filed; 2026 proxy statement, PSU adjusted ROIC metric, averaging period and weight · Filed 06/05/2026
Ms. Alber’s personal wealth is tied to Company performance, and as of April 21, 2026, she held stock worth over 125x her base salary, well above the 5x guideline.
2026-05-06, dateKind=filed; 2026 proxy statement, CEO stock holdings relative to salary as of April 21, 2026 · Filed 06/05/2026
As of April 21, 2026, all our NEOs meet or exceed the stock ownership guidelines or comply with the stock retention requirements for vested RSUs that are designed to bring the executive up to the applicable ownership level.
2026-05-06, dateKind=filed; 2026 proxy statement, executive ownership or retention compliance as of April 21, 2026 · Filed 06/05/2026
Over the prior ten years (2016-2025), the annual bonus plan for each respective year had corporate multipliers (financial performance) within the range of 81% – 175% of target (average of 130% of target).
2026-05-06, dateKind=filed; 2026 proxy statement, 2016–2025 incentive history and period context for e29 · Filed 06/05/2026
During that same time period, PSUs have paid out between 178% – 248% of target (average payout of 209% of target).
2026-05-06, dateKind=filed; 2026 proxy statement, PSU payout range and average for the same 2016–2025 period identified in e28 · Filed 06/05/2026
Williams-Sonoma, Inc. | 2026 Proxy Statement | Page 15
Table of Contents
Audit and Finance Committee
Current Members
Responsibilities
Frits van Paasschen, Chair
Esi Eggleston Bracey
Andrew Campion
William Ready
Independence
The Board has determined that each member of the Audit and Finance Committee is independent under the currently effective NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
2026-05-06, dateKind=filed; 2026 proxy statement, Audit and Finance Committee independence · Filed 06/05/2026
Each incumbent Director attended at least 75% of the aggregate of (i) the total number of meetings of the Board held during the period of fiscal 2025 and (ii) the total number of meetings held by all committees of the Board on which such Director served during the period of fiscal 2025 that such Director served, and average Board and Committee meeting attendance for all Directors was 97%.
2026-05-06, dateKind=filed; 2026 proxy statement, fiscal 2025 board and committee attendance · Filed 06/05/2026
Subsequent to the filing of our fiscal 2023 Form 10-K, in April 2024, we determined that we over-recognized freight expense in fiscal 2021, 2022 and 2023 for a cumulative amount of $49 million.
2026-03-18, dateKind=filed; fiscal 2025 earnings exhibit, freight-expense error affecting fiscal 2021–2023 · Filed 18/03/2026
We evaluated the error, both qualitatively and quantitatively, and determined that no prior interim or annual periods were materially misstated.
2026-03-18, dateKind=filed; fiscal 2025 earnings exhibit, issuer assessment of prior-period error materiality · Filed 18/03/2026
ü Active and ongoing stockholder engagement
ü Independent Board Chair
ü Regular Board and committee refreshments with a range of tenures
2026-05-06, dateKind=filed; 2026 proxy statement, independent Board Chair and governance practices · Filed 06/05/2026
ü Diverse Board that provides a range of viewpoints
ü Annual election of all directors
ü All Directors are independent except the CEO
2026-05-06, dateKind=filed; 2026 proxy statement, annual director elections and board independence · Filed 06/05/2026
As a result, all financial results described here should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates that are identified prior to the time we file the Form 10-K for the fiscal year ended February 1, 2026.
2026-03-18, dateKind=filed; fiscal 2025 earnings exhibit, preliminary-results qualification before Form 10-K filing · Filed 18/03/2026
