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2 0 1 1 A N N U A L R E P O R T
ANNUAL MEETING OF STOCKHOLDERS
May 24, 2012

Table of contents

  • Page 1
    201 1 ANNUAL REPORT A N N U A L M E E T I N G O F S TO C K H O L D E R S May 24, 2012

  • Page 2

  • Page 3
    Stockholders Letters LETTERS TO STOCKHOLDERS WILLIAMS-SONOMA, INC. 2011 ANNUAL REPORT

  • Page 4
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  • Page 5
    ... brands-Pottery Barn, Williams-Sonoma, Pottery Barn Kids, West Elm, PBteen and Rejuvenation-as well as the quality of our associates and their executive leadership. 2011 also saw the first full year of Laura Alber's tenure as the company's President and Chief Executive Officer. Laura has performed...

  • Page 6
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  • Page 7
    ...our performance. Each of our brands-Pottery Barn, Williams-Sonoma, Pottery Barn Kids, West Elm, PBteen and Rejuvenation-has built strategies that will allow it to continue to attract new customers and engage more deeply with existing customers. The Pottery Barn brand saw growth in all key categories...

  • Page 8
    ... reproduction lighting and house parts. Founded in 1977, Rejuvenation manufactures in its Portland factory and sells through its catalog, website and retail stores in Portland, Seattle and Los Angeles. We are applying our multi-channel marketing and supply-chain expertise to the brand to increase...

  • Page 9
    ...trust and support we will achieve great things in 2012 and beyond. Laura J. Alber President, Chief Executive Officer and Director Stockholders Letters These letters contain forward-looking statements. Please see the section titled "Forward-Looking Statements" on page 1 of our Annual Report on Form...

  • Page 10
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  • Page 11
    Form 10-K FORM 10-K WILLIAMS-SONOMA, INC. 2011 ANNUAL REPORT

  • Page 12
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  • Page 13
    ... all persons as of July 31, 2011 listed as executive officers and directors with the Securities and Exchange Commission. This aggregate market value includes all shares held in the Williams-Sonoma, Inc. Stock Fund within the registrant's 401(k) Plan. As of March 26, 2012, 99,584,007 shares of...

  • Page 14
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 15
    ... new products and product lines; statements related to our belief that our direct-mail catalogs and the Internet act as a cost-efficient means of testing market acceptance of new products and new brands; statements related to decreasing retail leased square footage in fiscal 2012; statements...

  • Page 16
    ... and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services PART IV Exhibits and Financial Statement...

  • Page 17
    ... Pottery Barn Kids e-commerce website and gift registry. West Elm In 2002, the West Elm brand was launched with the mailing of our first West Elm catalog. This brand targets design-conscious consumers looking for a modern aesthetic to furnish and accessorize their living spaces with quality products...

  • Page 18
    ...-to-customer segment is found in Note M to our Consolidated Financial Statements. RETAIL STORES As of January 29, 2012, the retail segment has five merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation), operating 576 retail stores located in 44 states...

  • Page 19
    ... temporary employees in our retail stores, customer care centers and distribution centers, and incur significant fixed catalog production and mailing costs. TRADEMARKS, COPYRIGHTS, PATENTS AND DOMAIN NAMES We own and/or have applied to register over 60 separate trademarks and service marks. We...

  • Page 20
    ...this report and in our other public filings. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled "Management's Discussion...

  • Page 21
    ... retail stores that market lines of merchandise similar to ours. We compete with national, regional and local businesses utilizing a similar retail store strategy, as well as traditional furniture stores, department stores and specialty stores. The substantial sales growth in the direct-to-customer...

  • Page 22
    ... our costs: developing innovative, high-quality products in colors and styles that appeal to consumers of varying age groups, tastes and regions, and in ways that favorably distinguish us from our competitors; and effectively managing our supply chain and distribution strategies in order to provide...

  • Page 23
    ... to increase our sales and profits. Historically, more than 50% of our net revenues have been generated by our retail stores. Our ability to open additional stores or close existing stores successfully will depend upon a number of factors, including general economic conditions; our identification...

  • Page 24
    ... results by increasing our transportation costs and decreasing the efficiency of our shipments. Our failure to successfully manage our order-taking and fulfillment operations could have a negative impact on our business and operating results. Our direct-to-customer business depends, in part, on our...

  • Page 25
    ... in the market price of our common stock. Various factors affect comparable store sales, including the number, size and location of stores we open, close, remodel or expand in any period, the overall economic and general retail sales environment, consumer preferences and buying trends, changes...

  • Page 26
    ...reduce the market price of our common stock. Our failure to successfully anticipate merchandise returns might have a negative impact on our business. We record a reserve for merchandise returns based on historical return trends together with current product sales performance in each reporting period...

  • Page 27
    ...peak sales seasons, and incur other expenses to support new brands and brand extensions and the growth of our existing brands, including the opening of new stores. Alternatively, if we are unable to make substantial adjustments to our cost structure during times of uncertainty, such as the 2008-2009...

  • Page 28
    ... are inherent risks associated with replacing our core systems, including supply chain and merchandising systems disruptions, that could affect our ability to get the correct products into the appropriate stores and delivered to customers. We may not successfully launch these new systems, or the...

  • Page 29
    .... We plan to increase our global presence, including through global shipping that we currently offer through a third party vendor. We have limited experience with international sales, anticipating consumer tastes and trends in different countries, and marketing to customers overseas. Moreover...

  • Page 30
    ... increased holiday sales activity, we incur certain significant incremental expenses prior to and during peak selling seasons, particularly October through December, including fixed catalog production and mailing costs and the costs associated with hiring a substantial number of temporary employees...

  • Page 31
    ..., our ability to produce accurate and timely financial statements could be impaired and our investors' views of us could be harmed. We have evaluated and tested our internal controls in order to allow management to report on, and our registered independent public accounting firm to attest to, the...

  • Page 32
    ... to risks and costs associated with credit card fraud and identity theft that could cause us to incur unexpected expenses and loss of revenue. A significant portion of our customer orders are placed through our e-commerce websites or through our customer care centers. In addition, a significant...

  • Page 33
    ...any of our key employees leaves, are seriously injured or are unable to work, and we are unable to find a qualified replacement, we may be unable to execute our business strategy. In addition, our main offices are located in the San Francisco Bay Area, where competition for personnel with retail and...

  • Page 34
    ... of customer care center space in Portland, Oregon. This lease expires in December 2021. Corporate Facilities We also lease office, design studio, photo studio, warehouse and data center space in the following locations: Location Brisbane, California San Francisco, California New York City, New York...

  • Page 35
    ...34 $18.42 The closing price of our common stock on the NYSE on March 26, 2012 was $39.04. See Quarterly Financial Information on page 65 of this Annual Report on Form 10-K for the quarter-end closing price of our common stock for each quarter listed above. STOCKHOLDERS The number of stockholders of...

  • Page 36
    .... The graph shows historical stock price performance, including reinvestment of dividends, and is not necessarily indicative of future performance. COMPARISON OF FIVE - YEAR CUMULATIVE TOTAL RETURN* Among Williams-Sonoma, Inc., the NYSE Composite Index, and the S&P Retailing Index $140 $120 $100...

  • Page 37
    ...corporate and regulatory requirements, capital availability and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice. During fiscal 2010, we repurchased $125,000,000, or 4,263,463 shares of our common...

  • Page 38
    ...catalogs circulated Percent increase (decrease) in number of pages circulated Retail Net Revenues Retail net revenue growth (decline) Retail net revenues as a percent of net revenues Comparable store sales growth (decline)1 Store count Williams-Sonoma Pottery Barn Pottery Barn Kids West Elm Williams...

  • Page 39
    ... key long-term growth initiatives, including driving growth in our direct-to-customer channel, expanding the reach of West Elm, increasing our global presence and executing against our business development strategy. In our global business, we completed the launch of our new global shipping websites...

  • Page 40
    ...-term growth. To enhance and improve our e-commerce performance in 2012, we are focused on back-end technology investments and leveraging multi-channel customer data to enhance the online shopping experience and to make it easier to shop for custom configurations and personalized items. In supply...

  • Page 41
    ... order to support these long-term e-commerce, global expansion, supply chain and other business development growth strategies, we expect our fiscal 2012 capital investment to be in the range of $200,000,000 to $220,000,000 and to invest an additional $15,000,000 to $20,000,000 in incremental selling...

  • Page 42
    ... store sales. Increased net revenues during fiscal 2011 were driven by the Pottery Barn, West Elm and Pottery Barn Kids brands. Net revenues in fiscal 2010 increased by $401,454,000, or 12.9%, compared to fiscal 2009. This increase was driven by growth of 26.9% in our e-commerce net revenues...

  • Page 43
    ...2010 compared to fiscal 2009. Increased net revenues during fiscal 2010 were driven by the Pottery Barn, Pottery Barn Kids and PBteen brands. RETAIL NET REVENUES AND OTHER DATA Dollars in thousands Retail net revenues Retail net revenue growth (decline) Comparable store sales growth (decline) Number...

  • Page 44
    ... by growth of 9.8% in comparable store sales, partially offset by a 4.1% year-over-year reduction in retail leased square footage, including 18 net fewer stores. Increased net revenues during fiscal 2010 were driven by the Pottery Barn, West Elm and Williams-Sonoma brands. COST OF GOODS SOLD Dollars...

  • Page 45
    ... costs associated with our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses...

  • Page 46
    ... to support our e-commerce, global expansion and business development growth strategies. In the direct-to-customer channel, selling, general and administrative expenses as a percentage of direct-to-customer net revenues decreased approximately 120 basis points in fiscal 2011 compared to fiscal 2010...

  • Page 47
    ... sales. In fiscal 2012, we plan to use our cash resources to fund our inventory and inventory related purchases, advertising and marketing initiatives, purchases of property and equipment, stock repurchases and dividend payments. In addition to the current cash balances on hand, we have a credit...

  • Page 48
    ... financial statements. Operating Leases We lease store locations, distribution centers, customer care centers, corporate facilities and certain equipment for original terms ranging generally from 3 to 22 years. Certain leases contain renewal options for periods up to 20 years. The rental payment...

  • Page 49
    ...information concerning our outstanding commercial commitments as of January 29, 2012: Amount of Outstanding Commitment Expiration By Period Dollars in thousands Credit facility Letter of credit facilities Standby letters of credit Total Fiscal 2012 $ - 23,544 9,420 $32,964 Fiscal 2013 to Fiscal 2015...

  • Page 50
    ... in August 2015. As of January 29, 2012, $6,924,000 was outstanding under the Partnership 2 bonds. We made annual rental payments of approximately $2,516,000, $2,567,000 and $2,582,000 plus applicable taxes, insurance and maintenance expenses in fiscal 2011, fiscal 2010 and fiscal 2009, respectively...

  • Page 51
    ... 29, 2012 and January 30, 2011, our inventory obsolescence reserves were $12,026,000 and $12,348,000, respectively. Advertising and Prepaid Catalog Expenses Advertising expenses consist of media and production costs related to catalog mailings, e-commerce advertising and other direct marketing...

  • Page 52
    ... the estimated future volatility of our stock price and the estimated expected term until the option award is exercised, converted or cancelled. The fair value of the award is amortized over the requisite service period. Income Taxes Income taxes are accounted for using the asset and liability...

  • Page 53
    .... The new guidance does not change the items that must be reported in other comprehensive income. This amended guidance is effective for our first quarter of fiscal 2012 and will only impact the presentation of comprehensive income within our consolidated financial statements. In September 2011, the...

  • Page 54
    ... the effect these increased costs may have on our financial statements or results of operations. In addition, as of January 29, 2012, our retail stores in Canada and our limited operations in Asia and Europe, expose us to market risk associated with foreign currency exchange rate fluctuations...

  • Page 55
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Williams-Sonoma, Inc. Consolidated Statements of Earnings Fiscal Year Ended Dollars and shares in thousands, except per share amounts Net revenues Cost of goods sold Gross margin Selling, general and administrative expenses Operating income ...

  • Page 56
    Williams-Sonoma, Inc. Consolidated Balance Sheets Dollars and shares in thousands, except per share amounts ASSETS Current assets Cash and cash equivalents Restricted cash Accounts receivable, net Merchandise inventories, net Prepaid catalog expenses Prepaid expenses Deferred income taxes, net Other...

  • Page 57
    ... of stock-based awards and related tax effect Conversion/release of stock-based awards Repurchase and retirement of common stock Stock-based compensation expense Dividends declared Comprehensive income Balance at January 29, 2012 See Notes to Consolidated Financial Statements. Common Stock Shares...

  • Page 58
    ... Deferred income taxes Tax benefit from exercise of stock-based awards Stock-based compensation expense Other Changes in: Accounts receivable Merchandise inventories Prepaid catalog expenses Prepaid expenses and other assets Accounts payable Accrued salaries, benefits and other current and long-term...

  • Page 59
    ..., Pottery Barn, Pottery Barn Kids, Pottery Barn Bed and Bath, PBteen, West Elm and Rejuvenation). The catalogs reach customers throughout the U.S. The retail segment of our business sells similar products through our five retail store concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West...

  • Page 60
    ... 29, 2012 and January 30, 2011, our inventory obsolescence reserves were $12,026,000 and $12,348,000, respectively. Advertising and Prepaid Catalog Expenses Advertising expenses consist of media and production costs related to catalog mailings, e-commerce advertising and other direct marketing...

  • Page 61
    ... self-insured for workers' compensation, employee health benefits and product and general liability claims. We record self-insurance liabilities based on claims filed, including the development of those claims, and an estimate of claims incurred but not yet reported. Factors affecting this estimate...

  • Page 62
    ...is delivered to the customers. Discounts provided to customers are accounted for as a reduction of sales. We record a reserve for estimated product returns in each reporting period. Shipping and handling fees charged to the customer are recognized as revenue at the time the products are delivered to...

  • Page 63
    ... our retail stores, distribution warehouses, customer care centers, supply chain operations (buying, receiving and inspection) and corporate administrative functions. These costs include employment, advertising, third party credit card processing and other general expenses. Stock-Based Compensation...

  • Page 64
    ..., 2012 includes approximately $48.2 million for the remaining portion of our new inventory and order management system currently under development. Construction in progress is primarily comprised of leasehold improvements and furniture and fixtures related to new, expanded or remodeled retail stores...

  • Page 65
    ... letters of credit issued under the facilities is January 28, 2013. Note D: Income Taxes The components of earnings before income taxes, by tax jurisdiction, are as follows: Fiscal Year Ended Dollars in thousands United States Foreign Total earnings before income taxes Jan. 29, 2012 Jan. 30, 2011...

  • Page 66
    ... of our deferred tax accounts are as follows: Dollars in thousands Jan. 29, 2012 Current: Compensation $ 8,638 Merchandise inventories 21,923 Accrued liabilities 15,438 Customer deposits 53,638 Prepaid catalog expenses (12,869) Other 4,976 Total current 91,744 Non-current: Depreciation (9,008...

  • Page 67
    ... state, local and foreign income tax examinations have been concluded through fiscal 2000. Note E: Accounting for Leases Operating Leases We lease store locations, distribution centers, customer care centers, corporate facilities and certain equipment for original terms ranging generally from...

  • Page 68
    ... in August 2015. As of January 29, 2012, $6,924,000 was outstanding under the Partnership 2 bonds. We made annual rental payments of approximately $2,516,000, $2,567,000 and $2,582,000 plus applicable taxes, insurance and maintenance expenses in fiscal 2011, fiscal 2010 and fiscal 2009, respectively...

  • Page 69
    ... on the date of the annual meeting of stockholders (so long as they continue to serve as a non-employee Board member). Shares issued as a result of award exercises will be funded with the issuance of new shares. Stock-Based Compensation Expense During fiscal 2011, fiscal 2010 and fiscal 2009, we...

  • Page 70
    ... fair market value of our common stock between the date the award was granted and the conversion date for the number of shares vested. The following table summarizes our stock-settled stock appreciation right activity during fiscal 2011: Weighted Average Weighted Average Conversion Contractual Term...

  • Page 71
    ...Form 10-K The fair value for both options and stock-settled stock appreciation rights is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions: • Expected term - The expected term of the option awards represents the period...

  • Page 72
    ... compensation plan that provides supplemental retirement income benefits for a select group of management and other certain highly compensated employees. As of January 1, 2010, we indefinitely suspended all employee salary and bonus deferrals into the plan. We have an unsecured obligation to pay...

  • Page 73
    ... not currently material, are increasing in number as our business expands and our company grows larger. Litigation is inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time and...

  • Page 74
    ....com) and seven direct mail catalogs (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Bed and Bath, PBteen, West Elm and Rejuvenation). The retail segment has five merchandising concepts which sell products for the home (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and...

  • Page 75
    ... to the exit of excess distribution capacity. Unallocated costs include $4.3 million in fiscal 2010 related to the retirement of our former Chairman of the Board and Chief Executive Officer and a $1.9 million benefit in fiscal 2009 representing Visa/MasterCard litigation settlement income. 61

  • Page 76
    ... estimated fair values as of November 1, 2011. Such estimated fair values require management to make estimates and judgments, especially with respect to intangible assets. The allocation of the purchase price to the fair value of assets acquired and liabilities assumed was as follows: Dollars in...

  • Page 77
    ... internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide...

  • Page 78
    January 29, 2012, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. /s/ DELOITTE & TOUCHE LLP San Francisco, California March 29, 2012 64

  • Page 79
    ... 2010, respectively, related to our underperforming retail stores. The sum of the quarterly net earnings per share amounts will not necessarily equal the annual net earnings per share as each quarter is calculated independently. Stock prices represent our common stock price at the close of business...

  • Page 80
    ... 29, 2012, our internal control over financial reporting is effective. Our independent registered public accounting firm audited the financial statements included in this Annual Report on Form 10-K and has issued an attestation report on the Company's internal control over financial reporting. Their...

  • Page 81
    ... Committee Report," "Committee Reports-Audit and Finance Committee Report," "Corporate Governance Guidelines and Corporate Code of Conduct" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION Information required by this Item is...

  • Page 82
    ... Flows for the fiscal years ended January 29, 2012, January 30, 2011 and January 31, 2010 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Quarterly Financial Information (a)(2) Financial Statement Schedules: Schedules have been omitted because they...

  • Page 83
    ... by the undersigned, thereunto duly authorized. WILLIAMS-SONOMA, INC. Date: March 29, 2012 By /s/ LAURA J. ALBER Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in...

  • Page 84
    ..., REORGANIZATION, ARRANGEMENT LIQUIDATION OR SUCCESSION 2.1 Agreement and Plan of Merger of Williams-Sonoma, Inc., a Delaware corporation, and Williams-Sonoma, Inc., a California Corporation, dated May 25, 2011 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K as...

  • Page 85
    ... Form 10-Q for the period ended November 1, 2009 as filed with the Commission on December 12, 2009, File No. 001-14077) Seventh Amendment, dated as of September 3, 2010, to the Reimbursement Agreement between the Company and Bank of America, N.A., dated as of July 1, 2005 (incorporated by reference...

  • Page 86
    ...on Form 10-Q for the period ended November 1, 2009 as filed with the Commission on December 11, 2009, File No. 001-14077) Sixth Amendment, dated as of September 3, 2010, to the Reimbursement Agreement between the Company and Wells Fargo Bank, N.A., dated as of July 1, 2005 (incorporated by reference...

  • Page 87
    ...'s Current Report on Form 8-K filed with the Commission on March 22, 2010, File No. 001-14077) Form of Williams-Sonoma, Inc. 2001 Long-Term Incentive Plan Stock-Settled Stock Appreciation Right Award Agreement for Director Grants (incorporated by reference to Exhibit 10.31 to the Company's Annual...

  • Page 88
    ...NUMBER 10.33+ EXHIBIT DESCRIPTION Form of Williams-Sonoma, Inc. 2001 Long-Term Incentive Plan Stock-Settled Stock Appreciation Right Award Agreement for Employee Grants (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on March 22, 2010...

  • Page 89
    ...1, 1996, to Sublease for the Distribution Facility at 4600 and 4650 Sonoma Cove, Memphis, Tennessee, dated as of August 1, 1990 between the Company and Hewson-Memphis Partners (incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended January 28...

  • Page 90
    ... facility located in Olive Branch, Mississippi between Williams-Sonoma Retail Services, Inc. as lessee and SPI WS II, LLC (the successor-in-interest to Hewson/Desoto Partners, L.L.C.) as lessor, dated November 15, 1999 (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on...

  • Page 91
    ... as filed with the Commission on June 17, 2010, File No. 001-14077) Form of Management Retention Agreement for Executive Vice Presidents and Brand Presidents, approved May 25, 2010 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K as filed with the Commission on...

  • Page 92
    ... Extension Presentation Linkbase Document Indicates a management contract or compensatory plan or arrangement. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities...

  • Page 93
    Notice of 2012 Annual Meeting of Stockholders PROXY STATEMENT Proxy WILLIAMS-SONOMA, INC. 2011 ANNUAL REPORT

  • Page 94
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  • Page 95
    ... Daylight Time Williams-Sonoma, Inc. 3250 Van Ness Avenue San Francisco, California 94109 1) 2) The election of our Board of Directors; The amendment and restatement of the Williams-Sonoma, Inc. 2001 Incentive Bonus Plan to increase the participant payment limit to ten million dollars per award...

  • Page 96
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  • Page 97
    ... Meeting will be held at our corporate headquarters located at 3250 Van Ness Avenue, San Francisco, California 94109. Our Annual Report to Stockholders for the fiscal year ended January 29, 2012, or fiscal 2011, including our financial statements for fiscal 2011, is also included with printed copies...

  • Page 98
    ... proxy card. What if I return my proxy card directly to the company, but do not provide voting instructions? If a signed proxy card is returned to us without any indication of how your shares should be voted, votes will be cast "FOR" the election of the directors named in this Proxy Statement, "FOR...

  • Page 99
    ...is a broker non-vote? The term broker non-vote refers to shares that are held of record by a broker for the benefit of the broker's clients but that are not voted at the Annual Meeting on certain non-routine matters set forth in New York Stock Exchange, or NYSE, Rule 402.08(B) because the broker did...

  • Page 100
    ... of our named executive officers, because your vote is advisory, it will not be binding on us or the Board. However, the Board and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation. Are there...

  • Page 101
    ... stockholder would like a separate Notice or Annual Report and Proxy Statement by phone at 415-421-7900 or by mail at the following mailing address: Williams-Sonoma, Inc., Attention: Annual Report Administrator, 3250 Van Ness Avenue, San Francisco, California 94109. If we receive such notification...

  • Page 102
    ... written communications to the Board or to any of our directors individually, including non-management directors and the Chairman of the Board, at the following address: Williams-Sonoma, Inc., Attention: Corporate Secretary, 3250 Van Ness Avenue, San Francisco, California 94109. All communications...

  • Page 103
    ... closing price of our common stock on the trading day prior to the grant date, rounding down to the nearest whole share. Value of Annual Compensation Cash Compensation for Initial Election to the Board ...Equity Grant for Initial Election to the Board ...Annual Cash Compensation for Board Service...

  • Page 104
    ... the annual equity grant as identified in the preceding table, by the closing price of our common stock on the trading day prior to the grant date, rounding down to the nearest whole share. Represents the fair market value associated with a restricted stock unit award of 6,540 shares of common stock...

  • Page 105
    .... Represents the fair market value associated with a restricted stock unit award of 2,630 shares of common stock made on January 23, 2012, with a fair value as of the grant date of $34.97 per share for an aggregate grant date fair value of $91,971. Represents a dividend equivalent payment made with...

  • Page 106
    ..., including non-executive officers, for potential risks that are reasonably likely to have a material adverse effect on our company. In performing its duties, the Compensation Committee regularly reviews and discusses potential risks that could arise from our employee compensation plans and programs...

  • Page 107
    ... Kids, Pottery Barn Bed + Bath and PBteen, as well as the company's international expansion • Extensive marketing experience, including 33 years of experience with the company • Directed the company's direct-tocustomer strategy, including the growth of its catalog business and the development...

  • Page 108
    ... Chairman and Director of The Body Shop International plc (personal care products), 2002 - 2008 Rose Marie Bravo CBE . . 2011 • Director Age 61 • Vice Chairman, Burberry Limited (apparel and accessories), 2006 - 2007 • Chief Executive Officer, Burberry Limited (apparel and accessories), 1997...

  • Page 109
    ... public companies • Deep understanding of accounting principles and financial reporting rules and regulations, including how internal controls are effectively managed within organizations Anthony A. Greener ...Age 71 2007 • Extensive experience as both an executive and director of companies...

  • Page 110
    ...- 2009 • Advisory Board Member, GSC Group (investment advisor), 2005 - 2006 • Various roles, including Partner and Managing Director, Goldman, Sachs & Co. (investment banking), 1976 - 2005 • Extensive operating and consulting experience, as well as experience as a director at public companies...

  • Page 111
    ... 2009 • Director, Product Marketing, Google Inc., 2003 - 2007 • Director, Telegraph Media Group since 2009 • Extensive marketing knowledge, with over 20 years of experience, and strong experience in digital and social media • Strong insight into brand management and global issues THE BOARD...

  • Page 112
    ...and compensation of our independent registered public accounting firm; the performance of our internal audit function; and our compliance with legal and regulatory requirements; • Prepares the report that the SEC rules require to be included in our annual proxy statement; • Reviews the financial...

  • Page 113
    ... • Reviews and determines our compensation policy for our non-employee directors; • Considers resignation offers of director nominees and recommends to the Board the action to be taken with respect to each such offered resignation; and • Evaluates the performance of our Chief Executive Officer...

  • Page 114
    ... services of the executive officers to the company. The amended and restated 2001 Incentive Bonus Plan also is designed to allow us to provide compensation that qualifies as "performance-based" compensation under Section 162(m). Under Section 162(m), the company may not receive a federal income tax...

  • Page 115
    ...Bonus Plan. For purposes of Section 162(m), covered employees include our Chief Executive Officer and the company's next three most highly compensated executive officers. An executive whose employment or service relationship with the company terminates before the end of any award period generally is...

  • Page 116
    ... the company (or upon certain terminations of employment within a specified period following a change in control). If the award is paid in such an event, it will not constitute performance-based compensation for purposes of Section 162(m). How can we amend or terminate the plan? The Board generally...

  • Page 117
    ..., Williams-Sonoma Brand ...Sandra N. Stangl, President, Pottery Barn Brand ...All current executive officers as a group (six persons) ...All current non-employee directors as a group (eight persons) ...All employees, including all current officers who are not executive officers or directors, as...

  • Page 118
    .... Performance- and Time-Based Equity: The company granted our named executive officers a mixture of performance-based and time-based equity awards in fiscal 2011. Restricted stock units that vest on the second anniversary and the fourth anniversary of the grant date, in each case, only if positive...

  • Page 119
    ... item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote "FOR" the following resolution at the 2012 Annual Meeting: "RESOLVED, that the company...

  • Page 120
    ... internal control over financial reporting, (ii) our 401(k) plan and (iii) our Puerto Rico division; • Review of our quarterly condensed consolidated financial statements; • Audit services related to periodic filings made with the SEC; and • Tax return review services. In fiscal 2011, Deloitte...

  • Page 121
    ... 2012. Our executive officers are appointed by our Board and serve at the pleasure of our Board, subject to rights, if any, under employment contracts. Name Position with the Company and Business Experience Laura J. Alber ...Age 43 Julie P. Whalen ...Age 41 President, Williams-Sonoma Brand since...

  • Page 122
    ...the company's results for fiscal 2010. (5) Restricted stock units were granted as part of the Williams-Sonoma, Inc. Equity Award Exchange, which was approved by stockholders at the 2008 Annual Meeting and was completed during fiscal 2009. Mr. Harvey was not a named executive officer at the time that...

  • Page 123
    ... benefits included under "All Other Compensation" in the Summary Compensation table above. Life Insurance Premiums(1) Matching Contribution to the 401(k) Plan(2) Dividend Equivalent Payments Year Car Allowance Total Laura J. Alber ... 2011 2010 2009 2011 2010 2009 2011 2010 2009 2011 2010 2009...

  • Page 124
    ... as performance-based compensation under Internal Revenue Code Section 162(m)), the Compensation Committee specified a primary performance goal. For fiscal 2011, the Compensation Committee established the primary performance goal for the 2001 Incentive Bonus Plan as positive net cash provided by...

  • Page 125
    ... rights vest at the rate of 25% of the total number of shares subject to the stock-settled stock appreciation rights per year, with remaining vesting dates of April 5, 2012, April 5, 2013, April 5, 2014 and April 5, 2015. (3) Stock-settled stock appreciation rights vest at the rate of 25% of the...

  • Page 126
    ...a cash payment equal to dividends declared between the grant date and the vesting date. (5) Represents restricted stock units granted on April 10, 2009 in connection with the Williams-Sonoma, Inc. Equity Award Exchange. Mr. Harvey and Ms. Stangl were not named executive officers at the time that the...

  • Page 127
    ... Benefits None of our named executive officers received any pension benefits during fiscal 2011. Nonqualified Deferred Compensation None of our named executive officers have contributed to or received earnings from a company nonqualified deferred compensation plan during fiscal 2011. Employment...

  • Page 128
    ... that the severance payments and other benefits payable to an executive under a retention agreement constitute a "parachute payment" under Section 280G of the U.S. tax code and would be subject to the applicable excise tax, then the executive's severance payments and other benefits will be either...

  • Page 129
    ... to report directly to a specified individual or the Board of the company or the entity holding all or substantially all of the company's assets following a change of control, or (v) relocation of the executive to a location more than 50 miles from the company's San Francisco, California main office...

  • Page 130
    ... awards. Value is based on a stock price of $35.12, the closing price of our common stock on January 27, 2012, the last business day of fiscal 2011. (6) Based on a monthly payment of $3,000 to be paid by the company for 18 months or 12 months, as applicable, in lieu of continued employment benefits...

  • Page 131
    ...her role with the company, (ii) reduce Ms. McCollam's annual salary below her current base salary, (iii) locate Ms. McCollam other than at the company's principal executive offices, (iv) relocate the company's principal executive offices outside the San Francisco metropolitan area, (v) substantially...

  • Page 132
    ... outstanding option awards. Value is based on a stock price of $35.12, the closing price of our common stock on January 27, 2012, the last business day of fiscal 2011. (4) Based on a monthly payment of $3,000 to be paid by the company for 12 months in lieu of continued employment benefits. Richard...

  • Page 133
    ...outstanding option awards. Value is based on a stock price of $35.12, the closing price of our common stock on January 27, 2012, the last business day of fiscal 2011. (4) Based on a monthly payment of $3,000 to be paid by the company for 12 months in lieu of continued employment benefits. Proxy 37

  • Page 134
    ...of our executive compensation program is pay for performance. Accordingly, while we pay competitive base salaries and other benefits, the majority of our named executive officers' compensation opportunity is based on incentive pay. Fiscal 2011 CEO's Target Total Direct Compensation Fiscal 2011 Other...

  • Page 135
    ...-term stockholder value creation and providing competitive pay opportunities to attract and retain highly qualified executive talent. Accordingly, the Compensation Committee believes that executive officers and other key employees should have a significant interest in the company's stock performance...

  • Page 136
    ... grant equity awards under the company's 2001 Long-Term Incentive Plan to non-executive officer employees with a corporate rank at or below Senior Vice President. The Chief Executive Officer believes it is important to provide our associates with long-term incentive vehicles that are directly linked...

  • Page 137
    ... the company pays their fees, these advisors report directly to the Compensation Committee. Cook & Co., has been engaged as the independent executive compensation consulting firm to assist the Compensation Committee in discharging its responsibility. During fiscal 2011, Cook & Co. provided the...

  • Page 138
    ... salaries are competitive with comparable public retail companies with respect to similar positions, to create an incentive for executives to join and remain with the company; • Annual incentive opportunities are based principally on the company's overall corporate performance and the executive...

  • Page 139
    ... of our compensation programs for our named executive officers. Annual Net Revenue (in millions) Annual Net Income (in millions) Market Capitalization (in millions) (as of 1/31/2012) 75th Percentile ...Average ...Median ...25th Percentile ...Williams-Sonoma, Inc...How are base salaries determined...

  • Page 140
    ... Bonus Plan for each named executive officer. For fiscal 2011, the Compensation Committee established the primary performance goal for the Bonus Plan as positive net cash flow provided by operating activities (excluding any non-recurring charges) as provided on the company's consolidated statements...

  • Page 141
    ..., the company achieved positive net cash flow provided by operating activities as described above. Since this primary, critical performance goal was achieved, maximum bonuses became available under the Bonus Plan for fiscal 2011 for each named executive officer. As described below, the Compensation...

  • Page 142
    ...the company's pay-for-performance philosophy and aligns executive pay with stockholder interests by limiting the growth of fixed base salaries and increasing incentive pay. The target bonuses under the Bonus Plan for fiscal 2010 and 2011 are listed below for each named executive officer: Fiscal 2010...

  • Page 143
    ... believe that equity compensation awards are important for motivating executive officers and other employees to increase stockholder value over the long term. The equity awards granted to named executive officers are designed to deliver target total direct compensation (base salary, target bonus and...

  • Page 144
    ...the adequacy of compensation levels of named executive officers. In determining the level of restricted stock unit and stock-settled stock appreciation right grants for the Chief Executive Officer, in 2011 the Compensation Committee took into account the performance of the company and the assessment...

  • Page 145
    ... rights is always the closing price of the company's common stock on the trading day prior to the grant date. In general, equity awards to named executive officers are made during the Compensation Committee's March meeting in which the Compensation Committee reviews company performance over the past...

  • Page 146
    ...Pottery Barn, and Richard Harvey, President, Williams-Sonoma. The financial counseling services may include services related to financial planning, tax planning and preparation, and estate planning. The Compensation Committee believes it is in the Company's best interest to provide senior executives...

  • Page 147
    ... scheduled to vest in May 2012 in exchange for a general release of claims in favor of the Company. Grants of stock-settled stock appreciation rights and restricted stock units made in fiscal 2011 to company employees, including its named executive officers, include an acceleration feature which...

  • Page 148
    ... address Internal Revenue Code Section 162(m)? Under Section 162(m) of the Internal Revenue Code of 1986, as amended, and regulations adopted under it by the Internal Revenue Service, publicly held companies may be precluded from deducting certain compensation paid to certain executive officers...

  • Page 149
    ... NYSE rules as currently in effect, was an outside director as such term is defined with respect to Section 162(m) of the Internal Revenue Code and was a non-employee director under Section 16(b) of the Securities Exchange Act of 1934. None of the committee members has ever served as an officer of...

  • Page 150
    ... common stock; (v) a statement from the recommending stockholder in support of the candidate; and (vi) a written indication by the candidate of his or her willingness to serve if elected. A stockholder that desires to recommend a person directly for election to the Board at the company's Annual...

  • Page 151
    ..., as director nominees are as follows: • We regularly review the current composition and size of the Board; • We evaluate the performance of the Board as a whole and evaluate the performance and qualifications of individual members of the Board eligible for re-election at the Annual Meeting...

  • Page 152
    ... registered public accounting firm; the performance of the company's internal audit function; and compliance by the company with legal and regulatory requirements; • Prepare the report that the SEC rules require to be included in the company's annual proxy statement; and • Oversee the financial...

  • Page 153
    ... public accounting firm, pre-approve all audit and non-audit services of the independent registered public accounting firm, and assess its qualifications and independence; • Review the performance of the company's internal audit function, the company's auditing, accounting and financial reporting...

  • Page 154
    ... financial statements be included in the company's Annual Report on Form 10-K for fiscal 2011 for filing with the SEC. AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS Adrian T. Dillon Ted W. Hall Michael R. Lynch AUDIT AND RELATED FEES During fiscal 2011 and 2010, Deloitte did not perform...

  • Page 155
    ...to: Williams-Sonoma, Inc., Attention: Corporate Secretary, 3250 Van Ness Avenue, San Francisco, California 94109. To date, there have been no waivers that apply to our Chief Executive Officer, Acting Chief Financial Officer, Controller or persons performing similar functions under our Corporate Code...

  • Page 156
    ... in August 2015. As of January 29, 2012, $6,924,000 was outstanding under the Partnership 2 bonds. We made annual rental payments of approximately $2,516,000, $2,567,000 and $2,582,000 plus applicable taxes, insurance and maintenance expenses in fiscal 2011, fiscal 2010 and fiscal 2009, respectively...

  • Page 157
    ... we received from such persons for their fiscal 2011 transactions and (ii) information provided to us by them, we believe that all reporting requirements under Section 16(a) were met in a timely manner by the persons who were executive officers, members of the Board of Directors or greater than 10...

  • Page 158
    ... Director and Executive Vice President, Chief Operating and Chief Financial Officer Richard Harvey ...President, Williams-Sonoma Brand Sandra N. Stangl ...President, Pottery Barn Brand McMahan Family Trust dtd 12/7/06 ...2 Oakmont Drive Los Angeles, CA 90049 BlackRock, Inc...40 East 52nd Street New...

  • Page 159
    ... on February 14, 2012. Each of Stephen F. Mandel, Jr. and Lone Pine Managing Member LLC has shared voting power over 6,235,380 shares of our common stock and shared power to dispose or direct the disposition of 6,235,380 shares of our common stock. Lone Pine Associates, the general partner of Lone...

  • Page 160
    ... table includes 12,565 shares held in the Williams-Sonoma, Inc. Stock Fund. This number was calculated by dividing the amount owned in the Williams-Sonoma, Inc. Stock Fund by $39.04, the closing price of Williams-Sonoma, Inc. common stock on March 26, 2012. The number of shares listed in the table...

  • Page 161
    ... held in the Williams-Sonoma, Inc. Stock Fund. This number was calculated by dividing the amount owned by each director and officer in the Williams-Sonoma, Inc. Stock Fund by $39.04, the closing price of WilliamsSonoma, Inc. common stock on March 26, 2012. The number of shares listed in the table...

  • Page 162
    ... or shares equal to the excess of the fair market value of our common stock over the exercise price. No future awards will be granted from the 2000 Nonqualified Stock Option Plan. STOCKHOLDER PROPOSALS How can stockholders submit a proposal for inclusion in our Proxy Statement for the 2013 Annual...

  • Page 163
    ... proposals should be sent to: Williams-Sonoma, Inc., Attention: Corporate Secretary, 3250 Van Ness Avenue, San Francisco, California 94109. Proxy AVAILABILITY OF PROXY STATEMENT AND ANNUAL REPORT ON FORM 10-K Pursuant to SEC rules, we have elected to provide access to our proxy materials by...

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  • Page 165
    ...promulgated thereunder from time to time, the "Code"), and thereby help secure the full deductibility for federal income tax purposes of Plan bonus compensation paid to persons who are "executive officers" of the Company, as such term is defined in Rule 3b-7 under the Securities Exchange Act of 1934...

  • Page 166
    ... as set forth in Section 6.2, but in no event later than two and one-half (2 1⁄ 2) months after the conclusion of the fiscal year of the Company in which or with which the award period ends. All awards under this Plan will be subject to withholding for applicable employment and income taxes. A-2

  • Page 167
    ...Company, or, if not so defined, shall be defined in writing by the Committee at the time of the grant of the award. In the event that an award is paid pursuant to this Section 6.4, then the award shall not constitute performance-based compensation under Code Section 162(m). No payment under the Plan...

  • Page 168
    ... date shall be January 25, 2017, unless earlier terminated by the Board as provided in Section 9 or re-approved by the Company's stockholders at or before such meeting. No awards shall be paid under this Plan unless and until the material terms (within the meaning of Section 162(m)(4)(C) of the Code...

  • Page 169
    ... Officer and other executive officers; (ii) administer the Company's incentive compensation and other equity-based plans (the "Plans") and make grants under them; (iii) oversee the Company's compensation policies, plans, and benefits programs generally, and (iv) in the case of the Williams-Sonoma...

  • Page 170
    ... review and make recommendations to the Board of Directors with respect to changes in the number of shares reserved for issuance under those Plans. • Preparing a compensation committee report on executive compensation as required by the SEC to be included in the Company's annual proxy statement...

  • Page 171
    ... will report to the Board of Directors on a periodic basis and make such recommendations with respect to any of the above matters as the Compensation Committee deems necessary or appropriate. COMPENSATION Members of the Compensation Committee shall receive such fees, if any, for their service as...

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  • Page 173
    ... to each such offered resignation. Exhibits • Review, make recommendations to the Board regarding, and approve, as appropriate, the compensation policy for the non-employee directors of the Company. • Annually evaluate the performance of the Company's Chief Executive Officer, annually oversee...

  • Page 174
    ... counsel or other advisors, including, without limitation, any compensation consultant to be used in the evaluation of non-employee director compensation. • Conduct an annual performance evaluation of the Committee. MEETINGS The Nominations and Corporate Governance Committee will set its own...

  • Page 175
    ...Exchange Commission (the "SEC") rules require to be included in the Company's annual proxy statement; and • Review the financial impact of selected strategic initiatives of the Company, and review and recommend for Board approval selected financing, dividend and stock repurchase policies and plans...

  • Page 176
    ... Company's Board may from time to time direct, and make such investigations and reviews of the Company and its operations as the Chief Executive Officer or the Board may from time to time request. The Committee shall: Financial Statement and Disclosure Matters • Review and discuss with management...

  • Page 177
    ... the planning and staffing of the audit. Oversight of the Company's Internal Audit Function • Review the appointment and replacement of the senior internal auditing executive. Exhibits • Review the significant reports to management prepared by the internal audit department and management...

  • Page 178
    ... appropriate, review the estimated financial impact on the Company of selected proposed strategic initiatives. Dividend Policy and Share Repurchases • As it deems appropriate, review and approve dividend policies developed by management, and recommend for approval by the Board dividend payments to...

  • Page 179
    ... the Company's financial statements and disclosures are complete and accurate and are in accordance with GAAP and applicable rules and regulations. These are the responsibilities of management and the independent auditor. • It is recognized that members of the Committee are not full-time employees...

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  • Page 183
    ... Pottery Barn, pottery barn kids, PBteen, Rejuvenation, west elm, Williams-Sonoma and Williams-Sonoma Home are trademarks of Williams-Sonoma, Inc. Stock Exchange Listing New York Stock Exchange Symbol: WSM Corporate Website www.williams-sonomainc.com Stockholder/Investor Information www.williams...

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