WSM 10-K & 10-Q changes, risk factors and insider trading

•If we are unable to identify and analyze factors affecting our business,business and anticipate changing consumer preferences and buying trends, and manage our inventory and marketing spend commensurate with customer demand,trends our sales levels and operating results may decline.

•Our business and operating results may be harmed if we are unable to manage our inventory and timely and effectively deliver merchandise to our stores and customers.

•Declines in our comparable brand revenues may harm our operating results and cause a decline in the market price of our commonstock stock.price.

•Our failureinability to successfully manage the costs and performance of our digital advertising might have a negative impact on our business.

•If we are unable to successfully manage the complexities associated with an omni-channel and multi-brand business, we may suffer declines in our existing business and our ability to attract new business.customers.

•Our inability or failure to adequately protectsecure or enforceprotect our intellectual property rights could negatively impact our business.

•We outsourceface disruption risks related to the outsourcing of certain aspects of our business to third-partythird suppliersparties, andas arewell inas challenges related to the processinsourcing of insourcing certain business functions from third-party suppliers.functions.

•We depend on foreign suppliers and third-party agents for timely and effective sourcing of our raw materials and merchandise, and we may not be able to acquire such products in appropriate quantities and at acceptable prices to meet our needs.

•If ourOur suppliers may fail to adhere tomeet our quality control standards and test protocols,protocols weor may delayfail to comply with applicable laws and regulations, which could result in delays or a product launch or recall a product, whichand could damage our reputation and negatively affect our operations and financial results.

•Our operating results may be harmed by unsuccessful management of our employment, occupancy and other operating costs, andincluding thecosts operationrelated to employment, advertising and growth of our business may be harmed if we are unable to attract qualified personnel.occupancy.

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending, including general economic conditions, inflationary pressures, consumer disposable income, rising fuel prices, recession and fears of recession, unemployment, war and fears of war,war (including the recent conflict with Iran), outbreaks of disease, adverse weather, availability and cost of consumer credit, consumer debt levels, conditions in the housing market, elevated interest rates, sales tax rates and rate increases, consumer confidence in future economic and political conditions, and consumer perceptions of personal well-being and security. In particular, past economic downturns and inflationary pressures have led to decreased discretionary spending, which adversely impacted our business. An uncertain economic environment could also cause our suppliers to go out of business or our banks to discontinue lending to us or our suppliers, or it could cause us to undergo restructurings, any of which could adversely impact our business and operating results. In addition, periods of decreased home purchases, such as in the current environment, typically lead to decreased consumer spending on home products. These factors have affected, and may in the future affect, our various brands and channels differently. Adverse changes in factors affecting discretionary consumer spending or decreases in consumer spending on home products during periods of decreased home purchases, such as in the current environment, have reduced and may in the future reduce consumer demand for our products, thus reducing our sales and harming our business and operating results. These factors have affected, and may in the future affect, our various brands and channels differently.

If we are unable to identify and analyze factors affecting our business,business and anticipate changing consumer preferences and buying trends, and manage our inventory and marketing spend commensurate with customer demand, our sales levels and operating results may decline.

Our success depends, in large part, upon our ability to identify and analyze factors affecting our business and to anticipate and respond in a timely manner to changing merchandise trends and customer demands in order to maintain and attract customers. For example, in the specialty home products business, style and color trends are constantly evolving. As a result, consumer preferences cannot be predicted with certainty and may change between selling seasons. We must be able to stay current with preferences and trends in our brands and address the customer tastes for each of our target customer demographics. Additionally, changes in customer preferences and buying trends may affect our brands differently. We must also be able to identify and adjust the offerings in each of 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 habits, our sales may decline significantly or may be delayed while we work to fill related backorders. Alternatively, we may be required to mark down certain products to sell any excess inventory or to sell such inventory through our outletoutlets or other liquidation channels at prices which are significantly lower than our retail prices, any of which would negatively impact our business and operating results.

Our business and operating results may be harmed if we are unable to manage our inventory and timely and effectively deliver merchandise to our stores and customers.

If we are unable to effectively manage our inventory levels and supply chain, including by predicting the appropriate levels and type of inventory to stock within each of our distribution facilities, our business and operating results may be harmed. A critical component of managing inventory levels is predictability of transit times from our global suppliers to our distribution centers. Factors such as labor disputes, union organizing activity, geopolitical instability, changing tariff and trade regulations, acts of terrorism, war, outbreaks of disease, adverse weather, natural disasters, and climate change can affect the global supply chain and disrupt our business. For example, instability in the Middle East is deterring commercial vessels from traveling through the Suez Canal,Canal and the Strait of Hormuz, and as a result, vessels are now traveling around the Cape of Good Hope, South Africa, resulting in longer transit times and increased costs. Additionally, we have been, and may continue to be, affected by disruptions and delays in the shipping channels utilizing the Panama Canal. Increases in transit times as a result of disruptions in ocean transit may require adjustments to our inventory stocking strategy, which could lead to an increase in on-hand inventory and a resulting storage challenge.

Further, weWe cannot control all the various factors that might affect our e-commerce fulfillment rates and the timely and effective delivery of merchandise delivery to our stores and customers. We rely upon third-party carriers for our merchandise shipments and reliable data regarding the timing of those shipments, including shipments to our customers and to and from our stores. In addition, we are heavily dependent upon certain carriers for the delivery of our merchandise to our customers. As a result of ourOur dependence on all of these third-partyproviders providers,subjects we are subjectus to risks,certain includingrisks which has caused, and could continue to cause, restrictions in shipping capacity and a related increase in costs. Such risks include: labor disputes, union organizing activity, fluctuations in fuel costs,costs (including recent fluctuations due to the conflict with Iran), increases in regulatory burden, changing tariff and trade regulations, adverse weather, natural disasters, climate change, the closure of such carriers’ offices or a reduction in operational hours due to an economic slowdown or the inability to sufficiently ramp up operational hours during an economic recovery or upturn, availability of adequate trucking or railway providers, the potential for railway and port worker strikes, possible acts of terrorism, war, outbreaks of disease or other factors affecting such carriers’ ability to provide delivery services to meet our shipping needs. Due to these factors, transportation companies, including ocean and rail freight and trucking, have struggled and may continue to struggle to operate profitably, further restricting shipping capacity and resulting in increased fulfillment expenses and delayed fulfillment. Any such increased cost or delay in fulfillment could negatively impact the results of our business.

Further, we have experienced, and may continue to experience increased costs and restricted capacity from our third-party shipping providers and shortages of raw materials used to make our products and increased costs associated with our packaging. Failure to deliver merchandise in a timely and effective manner could cause customers to cancel their orders and could damage our reputation and brands. In addition, fuel costs have been volatile and vessel operating companies and other transportation companies continue to struggle to operate profitably, which could lead to increased fulfillment expenses. Any rise in fulfillment expenses could negatively affect our business and operating results.

Our brands have wide recognition, and our success has been due in large part to our ability to maintain, enhance and protect our brand image and reputation and our customers’ connection to our brands. Our continued success depends in part on our ability to adapt to a rapidly changing media environment, including our reliance on social media and online advertising campaigns.campaigns, and more recently the growing use of artificial intelligence (“AI”) and generative AI, as well as changes to consumer behavior based on these new technologies. Even if we react appropriately to negative posts or comments about us and/or our brands on social media and online, our customers’ perception of our brand image and our reputation could be negatively impacted. Additionally, as we continue to expand our utilization of collaborations with third-party brands and individuals, our reputation could be negatively impacted by the actions of our collaborative partners and any related public responses. In addition, customer sentiment could be shaped by public actions taken by our executives or employees as well as our corporate and supply chain policies and related design, sourcing and operations decisions. Failure to maintain, enhance and protect our brand image could have a material adverse effect on our results of operations.

•managing against increasingly competitive promotional activity;

•developing new innovative shopping experiences, like mobile applications andapplications, augmented reality and AI capabilities, that effectively engage today’s digital customers;

•smartlyeffectively leveraging artificial intelligence ("AI") and machine learning to enhance the customer experience and streamline processes;

Our retail stores, corporate offices, distribution and manufacturing facilities, customer care centers, infrastructure and e-commerce operations, as well as the operations of our suppliers from which we receive goods and services, are vulnerable to damage from earthquakes, tornadoes, hurricanes, fires, floods or other volatile weather, climate change, power losses, government-mandated shutdowns, telecommunications failures, hardware and software failures, computer hacking, cybersecurity breaches, computer viruses and similar events. If any of these events result in damage to our facilities or systems, or those of our suppliers, we may experience interruptions in our business until the damage is repaired, resulting in the potential loss of customers and revenues. In addition, we may incur costs in repairing any damage beyond our applicableavailable insurance coverage.

There has been increasedcontinued focus from our stakeholders, including consumers, associates and investors, on our sustainability initiatives, including our publicly stated goals.initiatives. These statementsinitiatives reflect our current plans and aspirations, and we cannot guarantee that we will be able to achieve them. Our efforts to accomplish and accurately report on these goals present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation, stock price and results of operations. We could also incur additional costs and require additional resources to make progress, monitor and track our performance with respect to our goals.

The standards for tracking and reporting on sustainability matters are relatively new and continue to evolve.evolving. Collecting, measuring and reporting such information and metrics can be difficult and time consuming and may require us to rely on data from third parties, such as suppliers, who may not reliably or accurately track or record such data. Our selected disclosure framework or standards may need to be changed from time to time, which may result in a lack of consistent or meaningful comparative data from period to period. In addition, our interpretation of reporting frameworks or standards may differ from those of others and such frameworks or standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.

If our practices do not meet evolving consumer, associate, investor, regulatory body or other stakeholder expectations and standards, our results and reputation could be negatively impacted. Further, if we do not make progress againston our own goals, then our reputation, our ability to attract or retain associates and our competitiveness, including as an investment and a business partner, could be negatively impacted. Our failure, or perceived failure, to pursue or fulfillmeet our goals or to satisfy various reporting standards within the timelines we announce, or at all, could also expose us to government enforcement actions and private litigation. Separately, there is increased scrutiny of companies’ sustainability initiatives. Such perception of our sustainability initiatives, whether due to perceived over or under pursuit of such initiatives, may likewise result in criticism as well as potential litigation or other adverse impacts.

We are subject to changing rules and regulations promulgated by a number of federal, state and local governmental and self-regulatory organizations, including the SEC, the New York Stock Exchange and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by U.S. federal and state legislatures, making compliance more difficult and uncertain. For example, compliance with California's recently adoptedCalifornia’s climate-related reporting requirements, and any similar proposals by state regulators and other international regulatory bodies, could be costly, difficult and time consuming, especially as reporting standards are still evolving. These changing rules, regulationsrules and regulations, along with evolving stakeholder expectationsexpectations, have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased managementthe time and attention spentof complying with or meeting such regulations and expectations.management.

Approximately 66%65% of our net revenues were generated by e-commerce sales in fiscal 2024.2025. The success of our e-commerce business depends, in part, on third partiesparties, platforms and factors over which we have limited control.control, including a limited number of our key digital platforms. We must continually respond to changing consumer preferences and buying trends relating to e-commerce usage, including an emphasis on mobile e-commerce.e-commerce and increasing adoption of AI-enabled shopping solutions, including personalized recommendations, chatbots and agentic checkout. Our success in e-commerce has been strengthened in part by our ability to leverage the information we have on our customers to infer customer interests and affinities such that we can personalize the experience they have with us.us, including through the use of AI-enabled solutions. We also utilize digital advertising to reach internet and app users whose behavior indicates they might be interested in our products. Current or future legislation or changes to other corporations' policies may reduce or restrict our ability to use these techniques, which could reduce the effectiveness of our marketing efforts.

We are also vulnerable to certain additional risks and uncertainties associated with our e-commerce and mobile websites, apps and digital marketing efforts, including: changes in required technology interfaces; website downtime and other technical failures; internet connectivity issues; costs and technical issues as we upgrade our website software; computer viruses; cyberattacks; human error; supplier reliability; changes in applicable international, federal and state regulations, such as the European Union's General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act (“CCPA”) and, the California Privacy Rights Act (“CPRA”), and other emerging or evolving privacy laws and related compliance costs; security breaches; and consumer privacy concerns. We must keep up to date with competitive technology trends and opportunities that are emerging throughout the retail environment, including the use of new or improved technology (such as AI), evolving creative user interfaces and other e-commerce marketing changes as it relates to paid search, re-targeting, loyalty programs, paid social advertising and the proliferation of mobile usage, among others. While we endeavor to predict and invest in technology that is most relevant and beneficial to our company, our initiatives may not prove to be successful, may increase our costs or may not succeed in driving sales or attracting customers. Our failure to successfully respond to these risks and uncertainties might adversely affect the sales or margin in our e-commerce business, require us to impair certain assets and damage our reputation and brands.

Declines in our comparable brand revenues may harm our operating results and cause a decline in the market price of our commonstock stock.price.

Various factors affect comparable brand revenues, including: our e-commerce business; the sales mix among our distribution channels; 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; our ability to efficiently source and distribute products; changes in our merchandise mix; competition (including competitive promotional activity and discount retailers); current local and global economic conditions; the timing of our releases of new merchandise and promotional events; the success of our marketing programsefforts; the cannibalization of existing store sales by our new stores; shifts in catalog circulation; and fluctuations in foreign exchange rates. Among other things, weather conditions have affected, and may continue to affect, comparable brand revenues by limiting our ability to deliver our products to our stores, altering consumer behavior, or requiring us to close certain stores temporarily, thus reducing store traffic. Even if stores are not closed, many customers may decide to avoid going to stores in bad weather. These factors have caused, and may continue to cause, our comparable brand revenue results to differ materially from prior periods and from earnings guidance we havemay provided.provide. For example, the overall economic and general retail sales environment, as well as local and global economic conditions, has recently caused and could continue to cause a decline in our comparable brand revenue results. In addition, public health conditions or other unforeseen events, could affect our ability to deliver our products to our customers and stores, alter consumer behavior, or require us to close certain stores temporarily or reduce customer capacity within certain stores temporarily, thus reducing store traffic and materially impacting our comparable brand revenues.

Our comparable brand revenues have recently fluctuated on an annual, quarterly and monthly basis, and we expect that comparable brand revenues will continue to fluctuate in the future. In addition, past comparable brand revenues are not necessarily an indication of future results and comparable brand revenues may decrease in the future. Our ability to improve our comparable brand revenue results depends, in large part, on maintaining and improving our forecasting of customer demand and buying trends, selecting effective marketing techniques (including digital advertising), effectively driving traffic to our stores, e-commerce websites and direct-mail catalogs through marketing and various promotional events, providing an appropriate mix of merchandise for our broad and diverse customer base and using effective pricing strategies. Any failure to meet the comparable brand revenue expectations of investors and securities analysts in one or more future periods could significantly reduce the market price of our common stock.

Our failureinability to successfully manage the costs and performance of our digital advertising might have a negative impact on our business.

We use various forms of advertising, including print, catalog and digital advertisingchannels, to drive sales and traffic to our e-commerce sites.sites and retail stores. Competition and available inventory may affect the price we pay when we buy ads and these dynamic costs could impact the efficiency of our spend. Additionally, we have historically experienced fluctuations in our customers’ response to our marketing.advertising. Customer response to our advertisements is substantially dependent on our marketing efforts and merchandise assortment, availability and creative presentation, as well as the general retail sales environment, current domestic and global economic conditions and competition. In addition, ifour use of new and evolving AI solutions, including solutions that drive web traffic and personalize search results, may alter the effectiveness of our advertising efforts. If we misjudge the correlation between our advertising spend and net sales, if we mismanage budgets or if our strategy overall does not continue to be successful, our results of operations could be negatively impacted.

If we are unable to successfully manage the complexities associated with an omni-channel and multi-brand business, we may suffer declines in our existing business and our ability to attract new business.customers.

With the expansion of our e-commerce business and business-to-business division,division and the development and acquisition of new brands and brand extensions, our overall business has become substantially more complex. TheThis changesevolving incomplexity our business havehas forced us to develop new expertise and face new challenges, risks and uncertainties. For example, we face the risk that our e-commerce business might cannibalize a portion of our retail sales or our newer brands, brand extensions and products may result in a decrease in sales of existing brands and products. While we recognize that our e-commerce sales and sales from new brands and products cannot be entirely incremental to sales through our retail channel or from existing brands and products, respectively, we seek to attract as many new customers as possible with the most relevant channels, brands and products and to meet customer needs and grow our market share. As it relates to our business-to-business division, we are exposed to newdifferent complexities regarding size and scale of contracts, as well as the extended contracting timeline and potential limited customer base, and the procurement of sufficient quantities of commercial-grade products. Additionally, as our business-to-business division is dependent on our customer'scustomers’ business models and their ability to obtain appropriate levels of financing, we face new complexities in managing the impacts of such activities. We continually analyze the business results of our channels, brands and products in an effort to find opportunities to build incremental sales.

Many of these factors are beyond our control. For example, for the purpose of identifying suitable store locations, we rely, in part, on demographic data regarding the location of consumers in our target market segments. While we believe that this data and other relevant information are helpful indicators of suitable store locations, we recognize that these information sources cannot predict future consumer preferences and buying trends with complete accuracy. In addition, changes in demographics, in consumer shopping patterns,patterns (such as a reduction in mall traffic,traffic), in the types of merchandise that we sell and in the pricing of our products, may reduce the number of suitable store locations or cause formerly suitable locations to become less desirable.desirable, Further,making timeit frames for lease negotiations and store development vary from locationdifficult to locationoperate andstores can be subject to unforeseen delays or unexpected cancellations.profitably. We may experience delays in opening new store locations or remodeling existing locations due to the uncertain availability and increased costs of necessary building materials necessary to remodel and improve our stores,materials, as well as delays in receiving required permits from local governments. We may not be able to open new stores or, if opened, operate those stores profitably. Construction and other delays in store openings could have a negative impact on our business and operating results. Additionally, the time frames for lease negotiations vary by location and we may not be able to renegotiate the terms of our current leases or close our underperforming stores on terms favorable to us, any of which could negatively impact our operating results. Our typical methods of managing these risks and uncertainties may not be sufficient, and as a result, our business and operating results could be negatively impacted.

Risk of loss or theft of assets, including loss of inventory (also called shrink), is inherent in the retail business. We have historically experienced loss of assets and inventory shrink due to damage, errors or misconduct by associates or third parties, theft, fraud, organized retail crime, transaction processing errors, changes in our technology systems, our use of estimates in preparing financial statementssystems and other causes, which may be further impacted by macroeconomic factors, including the enforcement environment. Our inability to effectively prevent and/or minimize the loss of assets and inventory shrink, or to effectively reduce, or to accurately predict and accrue for the impact of those losses, could adversely affect our financial performance.

Our inability or failure to adequately protectsecure or enforceprotect our intellectual property rights could negatively impact our business.

We may not be able to effectively protect or enforce our intellectual property rights in the U.S. or in foreign jurisdictions, particularly as we continue to expand our business offerings and geographic reach. The laws of certain countries may not protect intellectual property rights to the same extent as the laws of the U.S. Our trademarks, service marks, copyrights, trade dress rights, trade secrets, domain names, patents, designs, proprietary technology and other intellectual property are valuable assets that are critical to our success. The unauthorized reproduction, theft or other misappropriation of our intellectual property could diminish the value of our brands or reputation and cause a decline in our sales. ProtectionThe development and protection of our intellectual property rights and maintenance of our distinct branding and designs are particularly important as they distinguish our products and services from our competitors. The actions we take to protect our intellectual property rights may not be adequate to prevent imitation of our brands and products by others, particularly in jurisdictions outside the U.S. that do not have strong intellectual property protection. In addition, the costs of protecting and policingdefending our intellectual property assets may adversely affect our operating results. Advances in generative AI technology may reduce barriers to competition, as well as enable anti-competitive behavior which existing intellectual property laws may not adequately address and also make it easier for infringers to violate our intellectual property rights.

We outsourceface disruption risks related to the outsourcing of certain aspects of our business to third-partythird suppliersparties, andas arewell inas challenges related to the processinsourcing of insourcing certain business functions from third-party suppliers.functions.

We outsource certain aspects of our business to third-partythird suppliersparties that subject us to risks of disruptions in our business as well as increased costs. For example, we utilize outside suppliers for such things as payroll processing, email and other digital marketingadvertising and various distribution facilities and delivery services. In some cases, we rely on a single supplier or a limited number of suppliers for such services.services, and transitioning to alternative providers may be difficult, costly, time-consuming or not feasible. Accordingly, we are subject to the risks associated with their ability to successfully provide the necessary services to meet our needs. If our suppliers are unable to adequately protect our data and information is lost, our ability to deliver our services is interrupted, our suppliers’ fees are higher than expected or our suppliers make mistakes in the execution of operations support, then our business and operating results may be negatively impacted.

InWe addition,are inalso thesubject past,to werisks haveassociated insourced certain aspects ofwith our business,reliance on third-party technology providers, including certaincloud-based technologyand servicessoftware-as-a-service providers, for access to our systems and the managementaccuracy and security of certainthe furnituretheir manufacturingfunctionality. andSystem delivery,upgrades, eachmigrations ofor whichintegrations wasmay previouslyincrease outsourcedour exposure to third-partycybersecurity providers.risks Weor mayservice alsointerruptions. need to continue to insource other aspects of our business in the future in order to control our costs and to stay competitive. This may cause disruptions in our business and result in increased cost to us. In addition, ifIf we encounter implementation or usage problems with these insourcedsystems aspectsor ofrelated our business,infrastructure, or if theysuch systems do not operate as intended, aredo unablenot give rise to performanticipated these functions better than, or at least as well as, our third-party providers,benefits, or fail to integrate properly with our other systems,systems or software platforms, then our business, results of operations, and internal controls over financial reporting may be adversely affected.

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the 52 weeks ended February 1, 2026 (“fiscal 2025”), and the 53 weeks ended February 2, 2025 (“fiscal 2024”), and the 52 weeks ended January 28, 2024 (“fiscal 2023”) should be read in conjunction with our Consolidated Financial Statements and notes thereto. Fiscal 2024 results included a 53rd week, which we estimate contributed 150 basis points to revenue growth and 20 basis points to operating margin in fiscal 2024. All explanationsExplanations of changes in operational results are discussed in order of magnitude.

Our products in our portfolio of nine brands — Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teen, West Elm, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow — represent distinct merchandise strategies that are marketed through e-commercee-commerce, websites,direct-mail ourcatalogs, retail storesstores, and direct-mail catalogs.business-to-business. These brands arecollectively also part ofsupport The Key Rewards, our loyalty and credit card program that offers members exclusive benefits across the Williams-Sonoma family of brands.benefits. We operate in the U.S., Puerto Rico, Canada, Australia and the United Kingdom, offer international shipping to customers worldwide,Kingdom and have unaffiliated franchisees that operate stores in the Middle East, the Philippines, Mexico, South KoreaKorea, India and India,the as well as e-commerce websites in certain locations.Philippines.

In fiscal 2024,2025, Pottery Barn, our largest brand, saw comparable brand revenue ("“brand comp"”) decline of 6.2% driven by reduced furniture demand and our strategy to reduce promotional activity, partially offset by relative strength in our non-furniture and seasonal categories. The Pottery Barn Kids and Teen brands saw brand comp growth of 3.0% in fiscal 2024,0.4% driven by strength in collaborations,retail, ouroffset dormby and baby offeringsnon-furniture and seasonal decor.categories.

The WilliamsPottery SonomaBarn brandKids and Teen brands saw brand comp growth of 2.4%4.4% in fiscal 2024 resulting from strength in the brand's kitchen business2025 driven by cookware,collaborations, cutleryexpanded dorm and electricsbaby asofferings, welland as ourstrong seasonal andgifting decorative offerings.assortments.

Finally, our emerging brands, Rejuvenation, Mark and Graham, and GreenRow, combined, delivered double-digit brand comp growth.growth in fiscal 2025.

We ended thefiscal year2025 with a cash balance of $1.2$1.0 billion and generated positive operating cash flow of $1.4$1.3 billion. In addition to our cash balance, we also ended the year with no outstanding borrowings under our revolving line of credit. This strong liquidity position allowed us to fund the operations of our business, invest $221.6$259.4 million in capital expenditures and return $1.1$1.2 billion to our stockholders through stock repurchases and dividends to stockholders.dividends.

Looking ahead to 2025,2026, our focuswe will remainfocus on our three key priorities of (i) returning toaccelerating growth, (ii) elevating ourdelivering world-class customer service and (iii) driving earnings. Despite continued macroeconomic and geopolitical uncertainties,uncertainty, including ongoing unpredictability related to tariffs, we are focused on executing against these priorities to deliverdrive performance in 20252026 and beyond.

Returning toAccelerating Growth

Elevating ourDelivering World-Class Customer Service

As we look forward to the year ahead, we believe these three key priorities will set us apart from our competition and allow us to drivesupport long-term growth and profitability. Growth creates leverage in our operating model, and improved service supports reinvestment in our business and delivers earnings growth. We have a powerful portfolio of brands, serving a range of categories, aesthetics,aesthetics and life stages, and we have built a strong omni-channel platform and infrastructure, which we believe positions us well for the next stage of growth. However, the current uncertain macroeconomic environment with the weak housing market, elevated interest rates, layoffs, inflationary pressure, political uncertainty, global geopolitical instability and new tariffs could negatively impact our business. For information on risks, please see “Risk Factors” in Part I, Item 1A.

Net revenues consist of sales of merchandise to our customers through our e-commerce websites, retaildirect-mail storescatalogs and direct-mailretail catalogs,stores, and include shipping fees received from customers for delivery of merchandise to their homes. Our revenues also include sales to our business-to-business customers and to our franchisees, incentives received from credit card issuers in connection with our private label and co-branded credit cards, and breakage income related to our stored-value cards.

2Primarily3Primarily consists of net revenues from Rejuvenation, Mark and Graham, our international franchise operations, Mark and Graham,operations and GreenRow.

Comparable brand revenue includes comparable e-commerce sales, including through our direct-mail catalog, and store sales, as well as shipping fees, sales returns and other discounts associated with current period sales. Comparable stores are defined as permanent stores where gross square footage did not change by more than 20% in the previous 12 months, and which have been open for at least 12 consecutive months without closure for more than seven days within the same fiscal month. Outlet comparable store revenues are included in their respective brands. Business-to-business revenues are included in comparable brand revenue for each of our brands. Sales to our international franchisees are excluded from comparable brand revenue as their stores and e-commerce websites are not operated by us. Sales from certain operations are also excluded until such time that we believe those sales are meaningful to evaluating their performance. Additionally, comparable brand revenue for new and emerging conceptsbrands is not separately disclosed until such time that we believe those sales are meaningful to evaluating the performance of the brand.

1Comparable brand revenue is calculated on a 52-week to 52-week basis for fiscal 2025 and on a 53-week to 53-week basis for fiscal 2024 and on a 52-week to 52-week basis for fiscal 2023,2024, and includes business-to-business net revenues within each brand.

2Total3Total comparable brand revenue growth (decline) includes the results of our emerging brands Rejuvenation, Mark and Graham, and GreenRow.

Gross profit is equal to our net revenues less costs of goods sold. Cost of goods sold includes (i) cost of goods,merchandise, which consists of cost of merchandise,tariffs, inbound freight expenses,costs, freight-to-store expensescosts and other inventory related costs such as replacements, damages, obsolescence and shrinkage;shrinkage, (ii) occupancy expenses,costs, which consists of rent, other occupancy costs (including property taxes, common area maintenance and utilities) and depreciation;depreciation, and (iii) shipping costs, which consists of third-party delivery services and shipping materials.

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

1Includes occupancy expensescosts of $793.1$820.3 million and $814.3$793.1 million in fiscal 20242025 and fiscal 2023,2024, respectively.

Gross profit increased $278.7$20.8 million, or 8.4%,0.6%, compared to fiscal 2023.2024. Gross margin increaseddecreased to 46.5%46.2% from 42.6%46.5% in fiscal 2023.2024. This increasedecrease in gross margin of 39030 basis points was driven by (i) higherthe out-of-period freight adjustment in the first quarter of fiscal 2024 of 70 basis points, (ii) lower merchandise margins of 17040 basis points as a result of the flow-through of tariffs into cost of goods sold, and (iii) the deleverage of occupancy costs of 20 basis points, partially offset by (iiiv) supply chain efficiencies of 13050 basis points, including lower shipping costs, reductions in returnsdamages and damages, reduced out-of-market and multiple shipments,returns, reduced replacements, as well as fewer customer accommodations, and (iiiv) anfavorable out-of-periodphysical freightinventory adjustmentresults of 70 basis points in the first quarter of fiscal 2024 and (iv) the leverage of occupancy costs of 2050 basis points.

SG&A increased $92.7$35.2 million or 4.5%,1.6%, compared to fiscal 2023.2024. SG&A as a percentage of net revenues increased to 27.9%28.0% from 26.6%27.9% for fiscal 2023.2024. This increase of 13010 basis points was primarily driven by (i) higher general expenses of 20 basis points from the resolution of a prior year indirect tax matter and a favorable insurance settlement which did not recur in fiscal 2025, and (ii) an increase in employment expense of 8020 basis points due to higher performance-based incentive compensation and employee benefits costs and (ii) an increase in advertising expenses of 90 basis points;compensation, partially offset by (iii) lowera generaldecrease in advertising expenses of 4030 basis points from the resolution of an indirect tax matter and a favorable insurance settlement.points.

The effective income tax rate was 25.1% for fiscal 2025, compared to 24.3% for fiscal 2024, compared to 25.4% for fiscal 2023.2024. This decreaseincrease was primarily driven by (i) higherlower excess tax benefit from stock-based compensation andcompensation, (ii) the tax effect of earnings mix change,change partially offset byand (iii) fewera expirationshigher ofdisallowed statutesexecutive ofcompensation limitations related to uncertain tax positionsdeduction in fiscal 2024.2025.

•Our operating leases had fixed lease payment obligations, including imputed interest, of $1.6$1.7 billion, with $308.7$325.7 million payable within 12 months. Additionally, we have future payment obligations of $205.9 million relating to executed lease agreements for which the related lease terms had not yet commenced as of February 1, 2026. See Note E to our Consolidated Financial Statements for amount outstanding as of February 2, 2025information related to operatinglease leases.obligations.

•Our purchase obligations consist primarily of open purchase orders to purchase inventory as well as commitments for products and services used in the normal course of business. As of February 2,1, 2025,2026, our purchase obligations were approximately $996.7$1.1 million,billion, withsubstantially $979.5all millionof which is expected to be settled within 12 months.

In fiscal 20242025 and fiscal 2023,2024, total cash dividends declared were approximately$326.8 million, or $2.64 per common share, and $293.2 million, or $2.28 per common share, and $236.8 million, or $1.80 per common share, respectively. In March 2025,2026, we announced that our Board of Directors authorized a 16%15% increase in our quarterly cash dividend, from $0.57$0.66 to $0.66$0.76 per common share, subject to capital availability. Our quarterly cash dividend may be limited or terminated at any time. See “Risk Factor - If we are unable to pay quarterly dividends or repurchase our stock at intended levels, our reputation and stock price may be harmed.”

Stock Repurchase ProgramsProgram

See section titled “Stock Repurchase ProgramsProgram” within Part II, Item 5 of this Annual Report on Form 10-K for further information.

As of February 2,1, 2025,2026, we held $1.2$1.0 billion in cash and cash equivalents, the majority of which was held in money market funds and interest-bearing demand deposit accounts, and of which $141.1$45.7 million was held by our international subsidiaries. AsConsistent is consistent withinwith our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements may involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our business and operating results to differ materially from those expressed or implied by such statements. Such forward-looking statements include, without limitation, statements related to: our ability to provide products that are designed and built for durability and longevity at competitive prices; changes in and the related impact of U.S. (federal, state and local) and international tax laws and trade policies and regulations; our ability to mitigate current and potential future tariffs and realize tariff refunds; the complementary nature of our e-commerce and retail channels; the plans, strategies, initiatives and objectives of management for future operations; our ability to execute strategic priorities and growth initiatives, including those regarding digital leadership, product and technology innovation, cross-brand initiatives, retail transformation and operational excellence; the strength of our business and our brands; our marketing efforts; our ability to provide world-class customer service through supply chain improvements; our belief that our key differentiators, growth strategies and the efficiencies of our operating model will allow us to reduce costs and manage inventory levels in both the short- and long-term; the highly competitive nature of our industry; our beliefs about our competitive advantages and areas of potential future growth in the market; the seasonal variations in demand; our ability to recruit, retain and motivate skilled personnel; our ability to protect our intellectual property rights; our ability to comply with the laws, rules and regulations of the U.S. and multiple foreign jurisdictions in which we operate; factors, including but not limited to general economic conditions, inflationary pressures, consumer disposable income, rising fuel prices, recession and fears of recession, unemployment, war and fears of war, adverse weather, availability of consumer credit, conditions in the housing market, elevated interest rates, and consumer confidence in current and future economic conditions that can affect consumer spending; the impact of periods of decreased home purchases; challenges we may face growing our business-to-business division; our ability to anticipate consumer preferences and buying trends overall and as they relate to specific brands; effective inventory management; timely and effective sourcing of merchandise from our foreign and domestic suppliers and delivery of merchandise through our supply chain to our stores and customers; factors, including but not limited to fuel costs, labor disputes, union organizing activity, geopolitical instability, and acts of terrorism and war, that can affect the global supply chain, including our third-party providers; our belief in the adequacy of our facilities and the availability of suitable additional or substitute space; our ability to successfully manage our order-taking and fulfillment operations; our ability to protect our brand reputation; our ability to respond to the growing use of and also to adopt new technologies, including artificial intelligence; changes to our technology; uncertainties in e-marketing infrastructure and regulation; our belief in the reasonableness of the steps taken by us and our suppliers to protect the security and confidentiality of the information we collect; multi-channel and multi-brand complexities; our retail initiatives; our brands, products and related initiatives, including our ability to introduce new products, product lines, brands, and brand extensions, and bring in new customers; our belief in the ultimate resolution of current legal proceedings; challenges associated with our global presence and expansion efforts; shortages of raw materials used to make our products; the impact of non-adherence by our suppliers to our global compliance program and quality control standards; the effects of fluctuations in foreign currency rates and the impact of our hedging against such risks; our ability to maintain proper and effective internal controls; our compliance with financial covenants; disruptions in the financial markets; our ability to control employment, advertising, occupancy and other operating costs; the adequacy of our insurance coverage; our stock repurchase program; payment of dividends; the impact of new accounting pronouncements; our belief that our cash on hand and available credit facilities will provide adequate liquidity for our business operations; our belief regarding the effects of potential losses under our indemnification obligations; the effects of changes in our inventory reserves; our ability to deliver core-brand growth and growth from our emerging brands; our ability to drive long-term sustainable returns; our capital allocation strategy in fiscal 2026; our planned use of cash in fiscal 2026; projections of earnings, revenues, growth and other financial items; and statements of belief and statements of assumptions underlying any of the foregoing. You can identify these and other forward-looking statements by the use of words such as “will,” “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” or the negative of such terms, or other comparable terminology. The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in this document and our Annual Report on Form 10-K for the fiscal year ended February 1, 2026, and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.

The following discussion and analysis of our financial condition, results of operations, and liquidity and capital resources for the thirteen weeks ended MayAugust 3,2, 2026 (“firstsecond quarter of fiscal 2026”), as compared to the thirteen weeks ended MayAugust 4,3, 2025 (“second quarter of fiscal 2025”) and twenty-six weeks ended August 2, 2026 (“first half of fiscal 2026”), as compared to the twenty-six weeks ended August 3, 2025 (“first quarterhalf of fiscal 2025”), should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto. Explanations of changes in operational results are discussed in order of magnitude.

Beginning in fiscal 2025, the tariff landscape has evolved and impacted our business. While our tariff mitigation efforts reduced the overall effect, tariffs had a greater impact on our Condensed Consolidated Statement of Earnings in the first quarterhalf of fiscal 2026 than in the first quarterhalf of fiscal 2025 due to increased flow‑through of higher tariffs into cost of goods sold.

FirstSecond Quarter of Fiscal 2026 Financial Results

Net revenues in the firstsecond quarter of fiscal 2026 increased $75.3$123.0 million,million or 4.4%,6.7%, due to (i) company comparable brand revenue (“company comp”) growth of $78.6$109.4 million, or 4.8%,6.2% partially offset byand (ii) a decrease in non-comparable brand revenue of $3.3 million due to lower franchise net revenues and the closuregrowth of retail$13.6 stores.million. From a channel perspective, the company comp growth of 4.8%6.2% was driven by comp growth of 4.8%6.5% in our e-commerce channel and comp growth of 4.7%5.5% in our retail channel.

In the firstsecond quarter of fiscal 2026, Pottery Barn, our largest brand, sawdrove a comparable brand revenue (“brand comp”) growth of 1.0%5.1% driven bywith strength in furniture, textiles and lighting.

The Pottery Barn Kids and Teen brands sawdelivered a brand comp growth of 4.5%3.5% in the firstsecond quarter of fiscal 2026 driven by strength in furniture and non-furniture categories, collaborationscollaborations, baby offerings and babydorm offerings.assortments.

West Elm sawdrove a brand comp growth of 8.5%6.4% in the firstsecond quarter of fiscal 2026 driven bywith strength in retail, collaborations and new non-furniture and furniture and non-furniture products and collaborations.products.

The Williams Sonoma brand sawdrove a brand comp growth of 5.0%7.6% in the firstsecond quarter of fiscal 2026 driven bywith strength in the brand’s kitchen business supported by exclusive productscollaborations and collaborations.exclusive products.

As of MayAugust 3,2, 2026, we had $651.6$1.0 millionbillion in cash and cash equivalents and generated operating cash flow of $156.3$695.9 millionmillion, inclusive of the collection of tariff refunds and the related interest of $200.2 million, in the first quarterhalf of fiscal 2026. In addition to our cash balance, we also ended the firstsecond quarter of fiscal 2026 with no outstanding borrowings under our revolving line of credit. This strong liquidity position allowed us to fund the operations of the business, invest $57.7$116.4 million in capital expenditures and return $373.4$463.2 million through stock repurchases and dividends to stockholders in the first quarterhalf of fiscal 2026.

We remain focused on our three key priorities of (i) accelerating growth, (ii) delivering world-class customer service and (iii) driving earnings. We believe these three key priorities will set us apart from our competition and support long-term growth and profitability. Growth creates leverage in our operating model, and improved service supports reinvestment in our business and delivers earnings growth. We have a powerful portfolio of brands, serving a wide range of categories, aesthetics, and life stages and we have built a strong omni-channel platform and infrastructure, which we believe positions us well for the next stage of growth.

However, the current uncertain macroeconomic environment, including war, higher oil prices, the evolving tariff and trade policy landscape, a weakstagnant housing market, elevated interest rates, layoffs, inflationary pressure, economic uncertainty and global geopolitical instability could continue to impact our business. The tariff environment has materially changed over the last year, and we expect that uncertainty to continue inthroughout fiscal 2026. For information on risks, please see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026.

FirstSecond Quarter of Fiscal 2026 vs. FirstSecond Quarter of Fiscal 2025

Net revenues in the firstsecond quarter of fiscal 2026 increased $75.3$123.0 million or 4.4%,6.7%, due to (i) company comp growth of $78.6$109.4 million, or 4.8%,6.2% partially offset byand (ii) a decrease in non-comparable brand revenue of $3.3 million due to lower franchise net revenues and the closuregrowth of retail$13.6 stores.million. From a channel perspective, the company comp growth of 4.8%6.2% was driven by comp growth of 4.8%6.5% in our e-commerce channel and comp growth of 4.7%5.5% in our retail channel.

1Includes occupancy expenses of $203.6$208.0 million and $197.7$201.4 million for the firstsecond quarter of fiscal 2026 and fiscal 2025, respectively, and $411.6 million and $399.0 million for the first half of fiscal 2026 and fiscal 2025, respectively.

FirstSecond Quarter of Fiscal 2026 vs. FirstSecond Quarter of Fiscal 2025

Gross profit increased $27.6$147.3 million, or 3.6%,17.0%, compared to the firstsecond quarter of fiscal 2025. Gross margin decreasedincreased to 44.0%51.6% from 44.3%47.1% in the firstsecond quarter of fiscal 2025. This decreaseincrease in gross margin of 30450 basis points was primarily driven by (i) IEEPA tariff refunds, net of reimbursements to certain merchandise vendors that previously provided tariff-related concessions, of 610 basis points, (ii) the leverage of occupancy costs of 40 basis points resulting from higher sales, and (iii) supply chain efficiencies of 30 basis points, including a lower shrink accrual, partially offset by (iv) lower merchandise margins of 100230 basis points asprimarily adue result ofto the flow-through of tariffs into cost of goods sold, partially offset by (ii) supply chain efficiencies of 50 basis points, including a lower shrink accrual, and (iii) the leverage of occupancy costs of 20 basis points due to higher sales.sold.

FirstSecond Quarter of Fiscal 2026 vs. FirstSecond Quarter of Fiscal 2025

SG&A increased $26.6 million, or 5.6%,5.0%, compared to the firstsecond quarter of fiscal 2025. SG&A as a percentage of net revenues increaseddecreased to 27.8%28.7% from 27.5%29.2% in the firstsecond quarter of fiscal 2025. This increasedecrease of 3050 basis points was primarily driven by (i) an increase in employment expense of 30 basis pointsleverage due to anour investmentdisciplined inpayroll talent,management including higher performance-basedand incentive compensation, andnet of one-time tariff-related employee recognition costs in the form of a discretionary 401(k) contribution, of 70 basis points, partially offset by (ii) an increase in general expenses of 10 basis points,points partially offset byand (iii) an increase in advertising expense leverageexpenses of 10 basis points.

The effective tax rate was 22.5%25.1% for the first quarterhalf of fiscal 2026, compared to 23.0%24.9% for the first quarterhalf of fiscal 2025. TheThis decreaseincrease was primarily driven by (i) a higher disallowed executive compensation deduction in fiscal 2026, partially offset by (ii) higher excess tax benefit from stock-based compensation in the first quarterhalf of fiscal 2026,2026 partially offset byand (iiiii) athe highertax disallowedeffect executiveof compensationearnings deductionmix in fiscal 2026.change.

As of MayAugust 3,2, 2026, we held $651.6$1.0 millionbillion in cash and cash equivalents, the majority of which was held in money market funds and interest-bearing demand deposit accounts, and of which $47.8$40.7 million was held by our international subsidiaries. Consistent with our industry, our cash balances are seasonal in nature, with the fourth quarter historically representing a significantly higher level of cash than other periods.

During the thirteen and twenty-six weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, we had no borrowings under our Credit Facility. Additionally, as of MayAugust 3,2, 2026, issued but undrawn standby letters of credit of $13.6 million were outstanding under our Credit Facility. The standby letters of credit were primarily issued to secure the liabilities associated with workers’ compensation and other insurance programs.

Our Credit Facility contains certain restrictive loan covenants, including, among others, a financial covenant requiring a maximum leverage ratio (funded debt adjusted for operating lease liabilities to earnings before interest, income tax, depreciation, amortization and rent expense), and covenants limiting our ability to incur indebtedness, grant liens, make acquisitions, merge or consolidate, and dispose of assets. As of MayAugust 3,2, 2026, we were in compliance with our financial covenants under our Credit Facility and, based on our current projections, we expect to remain in compliance throughout the next 12 months.

We have three unsecured letter of credit facilities for a total of $35 million. Our letter of credit facilities contain covenants that are consistent with our Credit Facility. Interest on unreimbursed amounts under our letter of credit facilities accrues at a base rate as defined in the Credit Facility, plus an applicable margin based on our leverage ratio. As of MayAugust 3,2, 2026, no amounts were outstanding under our letter of credit facilities. TwoOn August 6, 2026, we renewed two of our letter of credit facilities totaling $30 million on substantially similar terms. The two letter of credit facilities mature on August 18, 2026,2027, and the latest expiration date possible for future letters of credit issued under these facilities is January 15, 2027.2028. One of the letter of credit facilities totaling $5 million matures on June 26, 2030, which is also the latest expiration date possible for future letters of credit issued under the facility.

For the first quarterhalf of fiscal 2026, net cash provided by operating activities was $156.3$695.9 million compared to $118.9$401.7 million for the first quarterhalf of fiscal 2025, and was primarily attributable to net earnings of $231.4$569.5 million (inclusive of the impact of tariff refunds and related interest of $174.1 million) adjusted for non-cash items, and an increase in accounts payable of $49.3 million (as a result of the provision of $47.5 million to reimburse certain merchandise vendors that previously provided tariff-related concessions), partially offset by a decrease in accrued expenses and other liabilities of $148.9$89.2 million (as a result of our annual bonus payout) and accounts payable of $82.4 million (as a result of supplier payment timing).million.

Net cash provided by operating activities for the first half of fiscal 2026 compared to the first quarterhalf of fiscal 2025 increased $37.4$294.2 million primarily due to an increase in giftnet cardearnings andadjusted otherfor deferrednon-cash revenueitems, lower spending on merchandise inventories of $14.9$113.6 million and an increase in accounts payable of $13.6$98.3 million. This increase was primarily due to the collection of IEEPA tariff refunds of $200.2 million, which includes related interest.

For the first quarterhalf of fiscal 2026, net cash used in investing activities was $57.7$116.4 million compared to $58.2$111.5 million for the first quarterhalf of fiscal 2025, and was primarily attributable to purchases of property and equipment, including investments in technology of $24.4 million, retail stores of $20.1$47.8 million, technology of $45.8 million and supply chain enhancements of $9.1$16.1 million.

For the first quarterhalf of fiscal 2026, net cash used in financing activities was $467.0$570.0 million compared to $230.0$521.1 million for the first quarterhalf of fiscal 2025, primarily driven by repurchases of our common stock of $287.8 million, payment of dividends of $175.4 million and tax withholdings remittance related to stock-based awards of $93.6 million and payment of dividends of $85.6$99.1 million.

Net cash used in financing activities for the first quarterhalf of fiscal 2026 increased by $237.0$48.9 million compared to the first quarterhalf of fiscal 2025, primarily due to an increase in repurchasestax withholdings remittance related to stock-based awards of our$31.2 commonmillion stockand an increase in payment of $197.8dividends of $19.5 million.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ significantly from these estimates. During the firstsecond quarter of fiscal 2026, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended February 1, 2026.