Pottery Barn 2012 Annual Report Download

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ANNUAL MEETING OF STOCKHOLDERS
2 0 1 2
A N N U A L R E P O R T
May 30, 2013

Table of contents

  • Page 1
    2 01 2 A N N U A L R E P O RT 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 30, 2013

  • Page 2

  • Page 3
    Stockholders Letters LETTERS TO STOCKHOLDERS WILLIAMS-SONOMA, INC. 2012 ANNUAL REPORT

  • Page 4
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  • Page 5
    ... company's strategies and our brands-Pottery Barn, Williams-Sonoma, Pottery Barn Kids, West Elm, PBteen, Rejuvenation, and Mark and Graham-as well as the quality of our associates and executive leadership. Particularly pleasing was that 46% of our revenues were transacted with our customers through...

  • Page 6
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  • Page 7
    ...of our revenues now come from brands that our current team developed. In 2012, we broadened the reach and relevance of each of our brands and invested in new businesses. Pottery Barn continued to deliver impressive growth over industry averages. The brand is focused on selling innovative products at...

  • Page 8
    .... Mark and Graham specializes in high-quality personalized products and gifts. West Elm Market, a brand extension of West Elm, expands the brand to new categories in new settings. Agrarian, a new category extension of the Williams-Sonoma brand, celebrates homemade and homegrown. 2012 also marked...

  • Page 9
    ...improvement in all that we do. We are all owners in every brand, every channel, and every area of expertise. We are shopkeepers, merchants, sales associates, website managers, catalog creators, chefs, designers, buyers, technologists, manufacturers, marketers, and shippers-all over the world. We are...

  • Page 10
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  • Page 11
    Form 10-K FORM 10-K WILLIAMS-SONOMA, INC. 2012 ANNUAL REPORT

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  • Page 13
    ... all persons as of July 29, 2012 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 April 1, 2013, 97,696,301 shares of the...

  • Page 14
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  • Page 15
    ... 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 our marketing efforts; statements related to our ability to attract new customers...

  • 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
    ... by Williams-Sonoma, Inc. in 1986, Pottery Barn is a premier multi-channel home furnishings retailer. The brand was founded on the idea that home furnishings should be exceptional in comfort, quality, style and value. Pottery Barn stores and catalogs are specially designed to make shopping an...

  • Page 18
    ...their email addresses. Detailed financial information about the direct-to-customer segment is found in Note M to our Consolidated Financial Statements. RETAIL STORES As of February 3, 2013, the retail segment has five merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm...

  • Page 19
    ... catalogs and e-commerce websites compete with other retail stores, including large department stores, discount retailers, other specialty retailers offering home-centered assortments, other direct-mail catalogs and other e-commerce websites. The substantial sales growth in the direct-to-customer...

  • Page 20
    ... 9,800 temporary employees primarily in our retail stores, customer care centers and distribution centers. AVAILABLE INFORMATION We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to reports filed or...

  • Page 21
    ... offerings in our brands to cater to customer demands. For example, a change in customer preferences for children's room furnishings may not correlate to a similar change in buying trends for other home furnishings. If we misjudge either the market for our merchandise or our customers' purchasing...

  • Page 22
    ... from numerous foreign and domestic manufacturers and importers. We have no contractual assurances of continued supply, pricing or access to new products, and any vendor could change the terms upon which it sells to us, discontinue selling to us, or go out of business at any time. We may not be able...

  • Page 23
    ... site in Australia. The four stores are currently slated to open simultaneously with the launch of our e-commerce site in May 2013, and are our first locations outside of North America to be owned and operated by us as part of our overall global expansion strategy. While our global expansion to date...

  • Page 24
    ... consumer preferences and buying trends with complete accuracy. In addition, changes in demographics, in the types of merchandise that we sell and in the pricing of our products may reduce the number of suitable store locations. Further, time frames for lease negotiations and store development vary...

  • Page 25
    ... with brands or products similar to ours. The specialty direct-to-customer and retail business is highly competitive. Our e-commerce websites, direct mail catalogs and specialty retail stores compete with other e-commerce websites, other direct mail catalogs and other retail stores that market lines...

  • Page 26
    ... and brands. Our failure to successfully manage the costs and performance of our catalog mailings might have a negative impact on our business. Catalog mailings are an important component of our business. Postal rate increases, such as the recent increase that went into effect in the U.S. in 2013...

  • Page 27
    ... market price of our common stock. Various factors affect comparable brand revenues, 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 in sales...

  • Page 28
    ...as many new customers as possible to our e-commerce websites. We continually analyze the business results of our channels and the relationships among the channels in an effort to find opportunities to build incremental sales. If we are unable to introduce new brands and brand extensions successfully...

  • Page 29
    ... need to manage our operating costs and continue to look for opportunities to reduce costs. We recognize that we may need to increase the number of our employees, especially during peak sales seasons, and incur other expenses to support new brands and brand extensions and the growth of our existing...

  • Page 30
    ...technology, furniture manufacturing, furniture delivery to our customers and the management of our global vendors, each of which were previously outsourced to third party providers. We may also need to continue to insource other aspects of our business in the future in order to control our costs and...

  • Page 31
    ...of increased holiday sales activity, we incur certain significant incremental expenses prior to and during peak selling seasons, particularly October through January, including fixed catalog production and mailing costs and the costs associated with hiring a substantial number of temporary employees...

  • Page 32
    ... 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 portion of sales...

  • Page 33
    ... 3, 2013: Location Distribution Centers Olive Branch, Mississippi South Brunswick, New Jersey City of Industry, California Memphis, Tennessee1 Claremont, North Carolina Other Corporate Facilities Brisbane, California New York City, New York San Francisco, California Other Customer Care Centers Las...

  • Page 34
    ... footage reported above. This compares to approximately 136,000 square feet of leased space as of January 29, 2012. Owned Properties The following table summarizes the location and size of our owned facilities occupied as of February 3, 2013: Location San Francisco, California Rocklin, California...

  • Page 35
    ...AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION Our common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol WSM. The following table sets forth the high and low selling prices of our common stock on the NYSE for the periods indicated: Fiscal 2012 Quarter 3rd...

  • Page 36
    ...with those for the NYSE Composite Index and the S&P Retailing Index, our peer group index. The cumulative total return listed below assumed an initial investment of $100 and reinvestment of dividends. The graph shows historical stock price performance, including reinvestment of dividends, and is not...

  • Page 37
    ... of our common stock under the January 2012 program during the fourth quarter of fiscal 2012: Maximum Total Number of Dollar Value of Average Shares Purchased as Shares That May Price Paid Part of a Publicly Yet Be Purchased Per Share Announced Program Under the Program Form 10-K Fiscal period...

  • Page 38
    ... E-commerce net revenue growth (decline) E-commerce net revenues as a percent of direct-tocustomer net revenues Retail Net Revenues Retail net revenue growth (decline) Retail net revenues as a percent of net revenues Comparable store sales growth (decline)1 Number of stores at year-end Store selling...

  • Page 39
    ... fiscal 2011. This increase was driven by growth across all brands, led by Pottery Barn, West Elm, Pottery Barn Kids and Williams-Sonoma. In e-commerce, net revenues increased 17.4% to $1,656,197,000 in fiscal 2012, compared to $1,410,236,000 in fiscal 2011. Direct-to-customer net revenues generated...

  • Page 40
    ... 2012, we incubated and launched new businesses, including: Mark and Graham, which specializes in personalized products and gifts; West Elm Market, a brand extension of West Elm that expands the brand to new categories in new settings; and Agrarian, a new category extension of the Williams-Sonoma...

  • Page 41
    ... Pottery Barn Williams-Sonoma Pottery Barn Kids West Elm PBteen Other Total Comparable Brand Revenue Comparable brand revenue includes retail comparable store sales and direct-to-customer sales, as well as shipping fees, sales returns and other discounts associated with current period sales. Outlet...

  • Page 42
    ...to fiscal 2010. Increased net revenues during fiscal 2011 were driven by growth across all brands, led by Pottery Barn, West Elm and Pottery Barn Kids. RETAIL NET REVENUES AND OTHER DATA Dollars in thousands Retail net revenues Retail net revenue growth Comparable store sales growth Number of stores...

  • Page 43
    ... in Williams-Sonoma. Comparable store sales in fiscal 2012 increased 2.3%. Retail net revenues in fiscal 2011 increased by $36,498,000, or 1.8%, compared to fiscal 2010. This increase was primarily driven by West Elm, Pottery Barn, international franchise operations and Pottery Barn Kids, despite...

  • Page 44
    ... in occupancy expense dollars was offset by lower selling margins due to higher promotional activity (including shipping fees). In the direct-to-customer channel, cost of goods sold as a percentage of direct-to-customer net revenues increased approximately 70 basis points during fiscal 2011 compared...

  • Page 45
    ... investment 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-tocustomer net revenues decreased approximately 120 basis points in fiscal 2011 compared to...

  • Page 46
    ...inventories. Net cash provided by operating activities in fiscal 2012 increased compared to fiscal 2011 primarily due to the timing of payments associated with accounts payable and accrued salaries, benefits and other expenses, and an increase in income taxes payable and customer deposits, partially...

  • Page 47
    ... Period1 Dollars in thousands Letter of credit facilities Standby letters of credit Credit facility Total 1 Fiscal 2013 $18,578 4,970 - $23,548 Fiscal 2014 Fiscal 2017 to Fiscal 2016 to Fiscal 2018 Thereafter Total $18,578 4,970 - $23,548 See Note C to our Consolidated Financial Statements for...

  • Page 48
    ... 3, 2013 and January 29, 2012, our inventory obsolescence reserves were $12,273,000 and $12,026,000, 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 49
    ... 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 50
    ... 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 each stock-based award is amortized over the requisite service period. Income Taxes Income taxes are accounted for using the asset and...

  • Page 51
    ... are also affected by changes in market interest rates. As of February 3, 2013, our investments, made primarily in money market funds, interest-bearing demand deposit accounts and highly liquid U.S. Treasury bills, are stated at cost and approximate their fair values. Form 10-K Foreign Currency...

  • Page 52
    ...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 Interest (income) expense, net Earnings before income taxes...

  • Page 53
    ... assets Property and equipment, net Non-current deferred income taxes, net Other assets, net Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable Accrued salaries, benefits and other Customer deposits Income taxes payable Current portion of long-term debt Other...

  • Page 54
    ... adjustment Exercise 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 Balance at February 3, 2013 See Notes to Consolidated Financial Statements. 106,962 - - 983...

  • Page 55
    ...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 liabilities Customer deposits Deferred rent and lease incentives Income taxes payable Net cash provided...

  • Page 56
    ... reach customers across 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 Elm and Rejuvenation). As of February 3, 2013, we operate 581 stores in 44 states, Washington, D.C., Canada and...

  • Page 57
    ... 3, 2013 and January 29, 2012, our inventory obsolescence reserves were $12,273,000 and $12,026,000, 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 58
    ... cease use date. During fiscal 2012, we recorded expense of approximately $6,071,000 associated with asset impairment charges, primarily related to underperforming retail stores, all of which is recorded within selling, general and administrative expenses. During fiscal 2011, we recorded expense of...

  • Page 59
    ... store and for home-delivered merchandise and direct-to-customer sales when the merchandise 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...

  • Page 60
    ..., 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 We account for stock-based compensation...

  • Page 61
    ...199,805) $ 734,672 $ Form 10-K 2 Corporate systems projects in progress as of February 3, 2013 and January 29, 2012 includes approximately $39.7 million and $48.2 million, respectively, for the portion of our new inventory and order management system currently under development and not ready for...

  • Page 62
    ... letters of credit issued under the facilities is January 27, 2014. 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 The provision for income taxes...

  • Page 63
    ... income taxes at the statutory rate State income tax rate Other Effective tax rate Significant components of our deferred tax accounts are as follows: Dollars in thousands Current: Compensation Merchandise inventories Accrued liabilities Customer deposits Prepaid catalog expenses Other Total current...

  • Page 64
    ... state, local and foreign income tax examinations have been concluded through fiscal 2001. 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 65
    ... financed the construction of the facility were fully repaid in December 2010, at which time we continued to rent the facility on a month-to-month basis. We subsequently agreed to lease the facilities from Partnership 1 through June 2013. We made annual rental payments in fiscal 2012, fiscal 2011...

  • Page 66
    ...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 2012, fiscal 2011 and fiscal 2010, we recognized total stock-based compensation expense, as a component of selling, general and...

  • Page 67
    ... on the excess of the market value of our common stock on the last business day of the fiscal year (or $45.02) over the conversion price. The following table summarizes additional information about stock-settled stock appreciation rights: Weighted average grant date fair value per share of awards...

  • Page 68
    ... date fair value per share of awards granted Intrinsic value of awards released 1 1 Fiscal 2012 Fiscal 2011 Fiscal 2010 $ 37.94 $ 39.27 $ 28.13 $16,730,000 $12,865,000 $32,109,000 Intrinsic value for releases is based on the market value on the date of release. Tax Effect We present tax benefits...

  • Page 69
    ... in fiscal 2012, fiscal 2011 and fiscal 2010, respectively. We also have a nonqualified executive deferred compensation plan that provides supplemental retirement income benefits for a select group of management and other certain highly compensated employees. In January 2010 all employee salary and...

  • Page 70
    ...-to-customer and retail. The direct-to-customer segment has seven merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Rejuvenation and Mark and Graham) which sell our products through our seven e-commerce websites and eight direct-mail catalogs. Our direct-to...

  • Page 71
    ... taxes. Unallocated costs before interest and income taxes include corporate employee-related costs, occupancy expenses (including depreciation expense), administrative costs and third party service costs, primarily in our corporate systems, corporate facilities and other administrative departments...

  • Page 72
    ... Goodwill Total liabilities Total purchase price $ 5,089 565 4,718 180 18,089 (2,984) 25,657 $ Results of operations of Rejuvenation have been included in our Consolidated Statements of Earnings since the November 1, 2011 acquisition date. Pro forma results of the acquired business have not been...

  • Page 73
    ... 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 74
    February 3, 2013, 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 April 4, 2013 60

  • Page 75
    ... information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over the company...

  • Page 76
    ... management concluded that, as of February 3, 2013, 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 the Company's internal control over financial reporting...

  • Page 77
    ... Corporate Governance Committee Report," "Committee Reports-Audit and Finance Committee Report," "Corporate Governance Guidelines and Code of Business Conduct and Ethics" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION Information...

  • Page 78
    ... Flows for the fiscal years ended February 3, 2013, January 29, 2012 and January 30, 2011 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 79
    ... requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WILLIAMS-SONOMA, INC. Date: April 4, 2013 By /s/ LAURA J. ALBER Chief Executive Officer Pursuant to the...

  • Page 80
    ..., 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 filed with...

  • Page 81
    ... 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended October 30, 2011 as filed with the Commission December 9, 2011, File No. 001-14077) Ninth Amendment, dated as of August 31, 2012, to the Reimbursement Agreement between the Company and Bank of America, N.A., dated as of July...

  • Page 82
    ... 10.2 to the Company's Quarterly Report on Form 10-Q for the period ended October 30, 2011 as filed with the Commission on December 9, 2011, File No. 001-14077) Eighth Amendment, dated as of August 31, 2012, to the Reimbursement Agreement between the Company and Wells Fargo, N.A., dated as of July...

  • Page 83
    ... with the Commission December 7, 2012, File No. 001-14077) 10.24 10.25 Form 10-K 10.26 10.27 10.28 10.29 STOCK PLANS 10.30+ Williams-Sonoma, Inc. Amended and Restated 1993 Stock Option Plan (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal...

  • Page 84
    ... Definitive Proxy Statement on Schedule 14A as filed with the Commission on April 6, 2012, File No. 001-14077) Williams-Sonoma, Inc. Pre-2005 Executive Deferral Plan (incorporated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2009 as...

  • Page 85
    ... to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2009 as filed with the Commission on April 2, 2009, File No. 001-14077) January 2009 Amendment to the Williams-Sonoma, Inc. 401(k) Plan dated January 20, 2009 (incorporated by reference to Exhibit 10...

  • Page 86
    ...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 Form 10-K for the fiscal...

  • Page 87
    ... May 25, 2010 (incorporated by reference to Exhibit 10.67 to the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2011 as filed with the Commission on March 31, 2011, File No. 001-14077) 2012 EVP Level Management Retention Plan Separation Agreement and General Release with...

  • Page 88
    EXHIBIT NUMBER XBRL 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE * + Filed herewith. XBRL ... Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document Indicates a management contract or compensatory plan or arrangement. 74

  • Page 89
    Notice of 2013 Annual Meeting of Stockholders PROXY STATEMENT Proxy WILLIAMS-SONOMA, INC. 2012 ANNUAL REPORT

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  • Page 91
    ... NOTICE OF 2013 ANNUAL MEETING OF STOCKHOLDERS MEETING DATE: TIME: PLACE: May 30, 2013 9:00 a.m. Pacific Daylight Time Williams-Sonoma, Inc. 3250 Van Ness Avenue San Francisco, California 94109 1) 2) 3) The election of our Board of Directors; An advisory vote to approve executive compensation; The...

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  • Page 93
    ... PUBLIC ACCOUNTING FIRM ...INFORMATION CONCERNING EXECUTIVE OFFICERS ...EXECUTIVE COMPENSATION ...Executive Compensation Summary ...Compensation Discussion and Analysis ...Summary Compensation Table for Fiscal 2012, Fiscal 2011 and Fiscal 2010 ...Other Annual Compensation from Summary Compensation...

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  • Page 95
    ... 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 February 3, 2013, or fiscal 2012, including our financial statements for fiscal 2012, is also included with printed copies...

  • Page 96
    ... voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it. Who may vote? Only stockholders of record at the close of business on April 1, 2013, the record date, are entitled to receive notice of and to vote at the Annual Meeting. Each holder of...

  • Page 97
    ...-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 by the broker on certain non-routine matters set forth in New York Stock Exchange, or NYSE, Rule 402.08(B) because the broker did not receive instructions...

  • Page 98
    ... Board within the authorized range. How many votes are needed to approve Proposals 2 and 3? Proposals 2 and 3 require the affirmative vote of holders of a majority of voting power entitled to vote thereon, present in person or represented by proxy, at the Annual Meeting. Proxy cards marked "abstain...

  • Page 99
    ... 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 100
    ... 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 101
    ... attending our Board, committee or business meetings. Non-employee directors and their spouses receive discounts on our merchandise. Non-Employee Director Compensation During Fiscal 2012 The following table shows the compensation provided to our non-employee directors during fiscal 2012. Fees Earned...

  • Page 102
    ... 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. (2) Represents the fair market value associated with a restricted stock unit award of 7,244 shares of common stock made on May 24, 2012, with a fair value as of the...

  • Page 103
    ... and policies. Accordingly, Cook & Co. evaluated the company's executive and non-executive compensation programs for such risk and the mechanisms in our programs designed to mitigate these risks. Among other things, Cook & Co. reviewed our pay philosophy, forms of incentives, performance metrics...

  • Page 104
    ...• Director, CafePress.com (customized and personalized products) since 2007 • Extensive retail industry, merchandising and operational experience, including 18 years of experience with the company • Implemented successful growth strategies, including Pottery Barn Kids, Pottery Barn Bed + Bath...

  • Page 105
    ... as a 2006 - 2007 public company director • Chief Executive Officer, Burberry • Strong understanding of global Group Plc, 1997 - 2006 brand management, • President, Saks Fifth Avenue merchandising, marketing and (specialty department store), product development 1992 -1997 • Chairman and...

  • Page 106
    ..., Finance and Administration, and Chief Financial Officer, Agilent Technologies, Inc. (technology testing and analysis solutions), 2001 - 2010 • Vice Chairman, WNS (Holdings) Limited (outsourcing services) since 2013, Director since 2012 • Director, NDS Group Ltd. (pay television software), 2011...

  • Page 107
    ... and Finance Committee • Vice Chairman, Investment Banking, J.P. Morgan (investment banking) since 2010 • Senior Managing Director, GSC Group (investment advisor), 2006 - 2009 (GSC Group filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in August 2010) • Advisory Board...

  • Page 108
    ...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 OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ALL OF THE DIRECTORS LISTED...

  • Page 109
    ...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 110
    ... by stockholders, provided that such nominees are submitted pursuant to the procedures and timelines described in the "Nominations and Corporate Governance Committee Report" and "Stockholder Proposals" sections of this Proxy Statement. Are there any disclosures relating to Compensation Committee...

  • Page 111
    ... to our success while maintaining direct links between executive pay, individual performance, the company's financial performance and stockholder returns. The Compensation Committee believes that our executive compensation programs should support the company's objective of creating value for its...

  • Page 112
    ... basis, the compensation of the named executive officers, as disclosed in the company's Proxy Statement for the 2013 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Executive Compensation, the tabular disclosure...

  • Page 113
    ... provided the company with the following services for fiscal 2012: • The issuance of an opinion on (i) our annual consolidated financial statements and the effectiveness of our internal control over financial reporting, (ii) our 401(k) plan and (iii) our statutory financial filings for our global...

  • Page 114
    ... of our Board, subject to rights, if any, under employment contracts. Name Position with the Company and Business Experience Laura J. Alber ...Age 44 Julie P. Whalen ...Age 42 President, Williams-Sonoma Brand since 2013 President, Pottery Barn Kids and PBteen Brands, 2010 - 2013 Executive Vice...

  • Page 115
    ... for our non-employee directors in 2007; • Increasing share ownership guidelines for our Chief Executive Officer to five times annual base salary in 2013; • Providing no golden parachute excise tax gross-up; • Providing no single-trigger equity compensation vesting on a change of control and...

  • Page 116
    ... 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 Compensation Committee members has ever served as an officer of the company. How many times did the Compensation Committee meet during fiscal 2012...

  • Page 117
    ..., reviews total compensation of the Chief Executive Officer, and approves the bonus, equity and any other benefits or perquisites to be provided to the Chief Executive Officer based on this evaluation; • Reviews and makes recommendations to the independent directors on the Board on any base salary...

  • Page 118
    ... 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 2012, Cook & Co. provided the...

  • Page 119
    ...: • Base salary; • Annual incentive opportunities; and • Long-term incentives. The Compensation Committee believes that offering the executive team a total compensation package with a significant pay-for-performance component helps achieve the company's objective of creating value for its...

  • Page 120
    ... based on publicly available information as of April 1, 2013. The table provides a financial overview of the comparable companies to illustrate their revenues, income, and market capitalization as a group relative to the company. The Compensation Committee may review additional benchmarking surveys...

  • Page 121
    ... annual incentives paid under the Bonus Plan as deductible performance-based compensation under Internal Revenue Code Section 162(m), which otherwise restricts our ability to deduct executive compensation in excess of $1,000,000 for the named executive officers other than the Chief Financial Officer...

  • Page 122
    ... as the primary performance goal for fiscal 2012 because it believed that maintaining positive net cash flow was critical to the success of the company in fiscal 2012. The achievability of the goal was deemed substantially uncertain for purposes of Internal Revenue Code Section 162(m). When the...

  • Page 123
    ...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 Compensation Committee reviewed and approved the target bonus for Ms. Whalen upon her promotion to EVP, Chief Financial Officer...

  • Page 124
    ... 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 equity awards) that is competitive with that offered by comparable companies...

  • Page 125
    ... stock unit grants for the Chief Executive Officer, the Compensation Committee took into account the company's performance and the assessment of the independent members of the Board of Directors concerning the Chief Executive Officer's performance. What equity grants were made in fiscal 2012...

  • Page 126
    ...of the company's common stock equal to that number of shares with a value equal to three times annual base salary and to maintain this minimum amount of stock ownership throughout employment. In March 2013, the Compensation Committee approved an amendment to the Executive Share Ownership Policy with...

  • Page 127
    ... 2012, without the Chief Executive Officer present, the Compensation Committee reviewed Ms. Alber's base salary. After a discussion of Ms. Alber's individual performance and company performance and a review of her total compensation and that of other chief executive officers in our proxy peer group...

  • Page 128
    ... a $500 monthly car allowance. Some of these perquisites are also provided to other employees. In fiscal 2012, the Compensation Committee authorized and approved the reimbursement of expenses for financial counseling services of up to $12,000 annually for certain executive officers, including each...

  • Page 129
    ... 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...

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    ... Financial Officer effective July 27, 2012. Richard Harvey resigned as President of the Williams-Sonoma brand effective March 20, 2013. Stock Awards ($)(1) Option Awards ($)(2) Non-Equity Incentive Plan Compensation ($) All Other Compensation ($)(3) Name and Principal Position Fiscal Year Salary...

  • Page 131
    ...under "All Other Compensation" in the Summary Compensation table above. Matching Life Contribution Executive Dividend Fiscal Insurance to the Car Financial Equivalent Year Premiums(1) 401(k) Plan(2) Allowance Services Payments Other Total Laura J. Alber ...2012 $ 2,340 2011 $ 420 2010 $ 420 Julie...

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    ... or Base Price of Option Awards ($/Sh) - - Closing Market Price on Date of Grant ($/Sh) - - Grant Date Fair Value of Stock and Option Awards ($) - $5,960,024 - 7/30/2012 4/16/2012 - 4/16/2012 - 4/16/2012 - 4/16/2012 - - 7/18/2012 4/16/2012 - 4/16/2012 - 4/16/2012 - 4/16/2012 - $ 385,000...

  • Page 133
    ...tables set forth information regarding equity awards held by our named executive officers at February 3, 2013. Option Awards(1) Equity Incentive Plan Number of Securities Number of Securities Awards: Number of Underlying Underlying Securities Underlying Option Unexercised Options Unexercised Options...

  • Page 134
    ...to continued service and a performance criterion of positive net cash flow provided by operating activities (excluding any non-recurring charges) for fiscal 2011 as provided on the company's consolidated statements of cash flows. In addition, upon vesting, the executive receives a cash payment equal...

  • Page 135
    ...payment equal to dividends declared between the grant date and the vesting date. Option Exercises and Stock Vested The following table sets forth information regarding exercises and vesting of equity awards held by our named executive officers during fiscal 2012. Option Awards Number of Shares Value...

  • Page 136
    ... 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 137
    ... 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 138
    ... Alber as of February 3, 2013 if her employment had been terminated in various situations. Compensation and Benefits For Good Reason Involuntary Without Cause Change-ofControl Death Disability Base Salary(1) ...Bonus Payment(3) ...Equity Awards ...Health Care Benefits(6) ... $ 2,600,000 $ 4,566,667...

  • Page 139
    ... option awards. Value is based on a stock price of $45.02, the closing price of our common stock on February 1, 2013, the last business day of fiscal 2012. (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...

  • Page 140
    ... February 3, 2013. (3) Value is based on a stock price of $45.02, the closing price of our common stock on February 1, 2013, the last business day of fiscal 2012. (4) Based on a monthly payment of $3,000 to be paid by the company for 12 months in lieu of continued employment benefits. (5) Represents...

  • Page 141
    ... 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 the company. Who prepared this Compensation Committee Report? Members of the...

  • Page 142
    ... for election to the Board shall direct the recommendation in writing to Williams-Sonoma, Inc., Attention: Corporate Secretary, 3250 Van Ness Avenue, San Francisco, California 94109. The recommendation must include: (i) the candidate's name, home and business contact information; (ii) detailed...

  • Page 143
    ... perform our responsibilities in fiscal 2012? The Nominations and Corporate Governance Committee held a total of three meetings during fiscal 2012, and we took the following actions, among other things: • Evaluated the current composition of the Board, and considered desired skill sets, qualities...

  • Page 144
    ... 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 procedures, and the company's independent registered public...

  • Page 145
    ... the quality of the company's accounting principles, the soundness of significant judgments and the clarity of disclosures in the company's financial statements. Did we review the fees billed by Deloitte for fiscal 2012? Yes. We reviewed and discussed the fees billed by Deloitte for services in...

  • Page 146
    ... audited financial statements be included in the company's Annual Report on Form 10-K for fiscal 2012 for filing with the SEC. AUDIT AND FINANCE COMMITTEE OF THE BOARD OF DIRECTORS Adrian T. Dillon Mary Ann Casati Michael R. Lynch INDEPENDENT AUDITOR'S FEES AND SERVICES During fiscal 2012 and 2011...

  • Page 147
    ... 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, Chief Financial Officer, Controller or persons performing similar functions under our Code of Business Conduct...

  • Page 148
    ... the Partnership 2 bonds. We made annual rental payments of approximately $2,473,000, $2,516,000 and $2,567,000 plus applicable taxes, insurance and maintenance expenses in fiscal 2012, fiscal 2011 and fiscal 2010, respectively. As of February 3, 2013, Partnership 2 qualifies as a variable interest...

  • Page 149
    ... from such persons for their fiscal 2012 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% stockholders...

  • Page 150
    ...Former President, Williams-Sonoma Brand Sandra N. Stangl ...President, Pottery Barn Brands Sharon L. McCollam ...Former Director and Executive Vice President, Chief Operating and Chief Financial Officer JPMorgan Chase & Co...270 Park Avenue New York, NY 10017 Aristotle Capital Management ...11100...

  • Page 151
    ... as McMahan Family Trust dtd 12/7/06) filed with the Securities and Exchange Commission on February 14, 2013. (6) Includes 36,562 shares held by Mr. Connolly in the Williams-Sonoma, Inc. Stock Fund under our 401(k) plan, based on a statement dated April 1, 2013. The number of shares listed in the...

  • Page 152
    ... in the Williams-Sonoma, Inc. Stock Fund under our 401(k) plan, based on a statement dated April 1, 2013. (11) The information above is based on information taken from the Form 4 of Ms. McCollam filed with the Securities and Exchange Commission on March 15, 2012. The number of shares listed in the...

  • Page 153
    EQUITY COMPENSATION PLAN INFORMATION The following table provides information regarding securities authorized for issuance under our equity compensation plans as of February 3, 2013. Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining ...

  • Page 154
    ... proxy card for such meeting will confer upon our proxy holders discretionary authority to vote on such matter. Where should stockholder proposals be sent? Stockholder proposals should be sent to: Williams-Sonoma, Inc., Attention: Corporate Secretary, 3250 Van Ness Avenue, San Francisco, California...

  • Page 155
    ...www.williams-sonomainc.com/investors/annual-reports.html and upon written request and without charge to any stockholder by writing to: Williams-Sonoma, Inc., Attention: Annual Report Administrator, 3250 Van Ness Avenue, San Francisco, California 94109. San Francisco, California April 10, 2013 Proxy...

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  • Page 159
    ..., Pottery Barn, pottery barn kids, west elm, PBteen, Williams-Sonoma Home, Rejuvenation and Mark and Graham 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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