Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Williams-Sonoma Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,034,060 – 23.02% × 3,907,227 = 134,576
The financial performance from 2019 to 2024 exhibits a significant transition from economic value destruction to substantial value creation, followed by a recent contraction in economic profit. The trajectory is characterized by a dramatic surge in operating profitability that initially offset rising capital costs, although recent trends indicate a tightening of economic margins.
- Net Operating Profit After Taxes (NOPAT) Trends
- A period of exponential growth is observed between 2020 and 2022, with NOPAT increasing from 399.37 million to a peak of 1.24 billion. This growth represents a significant expansion in operational efficiency and profitability. However, a downward trend emerged after 2022, with NOPAT declining to 1.03 billion by January 2024, suggesting a cooling of the operational momentum experienced in the prior years.
- Cost of Capital and Invested Capital Dynamics
- The cost of capital remained relatively volatile, increasing from 18.42% in 2019 to 23.02% by 2024. Concurrently, invested capital showed a general upward trajectory, remaining stable around 3.1 billion in the early period before rising to 3.91 billion in 2024. The simultaneous increase in both the cost of capital and the total capital base has heightened the threshold of profit required to generate positive economic value.
- Economic Profit Evolution
- Economic profit transitioned from negative values in 2019 and 2020—indicating that the company was not earning enough to cover its cost of capital—to a positive inflection point in 2021. Value creation peaked in 2022 at 500.06 million. A sharp decline is noted in the final period, where economic profit fell to 134.58 million in 2024. This contraction is the result of a compounding effect: declining NOPAT occurring alongside an increase in both invested capital and the cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Williams-Sonoma Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in gift card and other deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net earnings.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,390,621 × 3.80% = 52,844
5 2024 Calculation
Tax benefit of interest income (expense), net = Adjusted interest income (expense), net × Statutory income tax rate
= 23,682 × 21.00% = 4,973
6 Addition of after taxes interest expense to net earnings.
An analysis of the financial results from 2019 through 2024 reveals a trajectory of significant growth followed by a recent period of normalization. The metrics for Net Earnings and Net Operating Profit After Taxes (NOPAT) demonstrate a synchronized pattern of expansion, reaching a zenith in the 2022-2023 window before exhibiting a downward trend in the most recent fiscal year.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced a period of aggressive acceleration between 2020 and 2022. The value rose from $399.4 million in 2020 to a peak of $1.237 billion in 2022, representing a substantial increase in operational profitability. However, this peak was followed by a sequential decline, falling to $1.173 billion in 2023 and further to $1.034 billion in 2024.
- Net Earnings Trajectory
- Net earnings mirrored the NOPAT trend, with a notable surge occurring between 2020 and 2021, during which earnings nearly doubled from $356.1 million to $680.7 million. Earnings continued to climb, peaking at $1.128 billion in 2023. A contraction is evident in 2024, with net earnings decreasing to $949.8 million.
- Comparative Operational Analysis
- A consistent variance is observed between NOPAT and net earnings across all reporting periods. NOPAT remained higher than net earnings throughout the duration, indicating that core operating performance, when adjusted for capital structure effects, exceeded the final bottom-line profit. This gap was most pronounced during the high-growth period of 2022, where NOPAT exceeded net earnings by approximately $111 million.
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Cash Operating Taxes
Williams-Sonoma Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).
A significant upward trajectory in both tax-related metrics is observed from February 2019 through January 2023, followed by a moderate contraction in the final reporting period. The overall growth reflects a substantial increase in the tax burden over a five-year window, peaking in the period ending January 29, 2023.
- Provision for Income Taxes Trend
- The provision for income taxes exhibited a steady climb from 95,563 thousand USD in 2019 to a peak of 372,778 thousand USD in 2023. The most aggressive growth occurred between 2020 and 2022, during which the provision more than tripled. A subsequent reduction to 323,593 thousand USD was noted by January 28, 2024, indicating a decrease in estimated tax obligations.
- Cash Operating Taxes Trend
- Cash operating taxes followed a similar growth pattern, rising from 83,339 thousand USD in 2019 to 406,434 thousand USD in 2023. This represents a nearly fivefold increase over the period. Consistent with the tax provision, a downturn occurred in 2024, with cash taxes falling to 357,651 thousand USD.
- Provision versus Cash Outflow Variance
- While the provision for income taxes exceeded cash operating taxes in 2019, the relationship inverted starting in 2020. Throughout the subsequent four years, cash operating taxes remained consistently higher than the reported tax provision. This divergence suggests a trend of higher actual cash outflows for taxes relative to the accrued tax expense, which typically points to the settlement of prior period liabilities or specific timing differences in tax payments.
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Invested Capital
Williams-Sonoma Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of gift card and other deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
Invested capital exhibits an overall growth trend over the six-year period, increasing from 3,192,653 thousand US dollars in February 2019 to 3,907,227 thousand US dollars by January 2024. While the growth trajectory was non-linear, characterized by intermittent contractions in 2020 and 2022, the period concludes with a significant expansion of the capital base.
- Debt and Lease Obligations
- A general downward trend is observed in total reported debt and leases from February 2019 through January 2022, during which obligations declined from 1,784,151 thousand US dollars to 1,284,248 thousand US dollars. Despite a moderate increase in 2023, the final 2024 balance of 1,390,621 thousand US dollars remains substantially lower than the 2019 levels, indicating a long-term reduction in leveraged liabilities.
- Stockholders' Equity Trajectory
- Stockholders' equity demonstrates consistent and robust growth throughout the analyzed timeframe. Starting at 1,155,714 thousand US dollars in 2019, equity rose to 2,127,861 thousand US dollars by January 2024. Notable accelerations in equity accumulation are evident between 2020 and 2021, as well as between 2023 and 2024, reflecting a strong increase in the company's net worth.
- Capital Structure Shift
- The underlying composition of invested capital has undergone a fundamental shift. In February 2019, total debt and leases exceeded stockholders' equity. By January 2024, this dynamic reversed, with stockholders' equity becoming the dominant component of the invested capital. This transition indicates a strategic movement away from debt-reliance toward a more equity-heavy capital structure to support the business.
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Cost of Capital
Williams-Sonoma Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 18,916,324) | 18,916,324) | ÷ | 20,306,945) | = | 0.93 | 0.93 | × | 24.49% | = | 22.82% | ||
| Long-term debt3 | —) | —) | ÷ | 20,306,945) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,390,621) | 1,390,621) | ÷ | 20,306,945) | = | 0.07 | 0.07 | × | 3.80% × (1 – 21.00%) | = | 0.21% | ||
| Total: | 20,306,945) | 1.00 | 23.02% | ||||||||||
Based on: 10-K (reporting date: 2024-01-28).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 7,795,064) | 7,795,064) | ÷ | 9,238,722) | = | 0.84 | 0.84 | × | 24.49% | = | 20.67% | ||
| Long-term debt3 | —) | —) | ÷ | 9,238,722) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,443,658) | 1,443,658) | ÷ | 9,238,722) | = | 0.16 | 0.16 | × | 3.40% × (1 – 21.00%) | = | 0.42% | ||
| Total: | 9,238,722) | 1.00 | 21.09% | ||||||||||
Based on: 10-K (reporting date: 2023-01-29).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 10,630,071) | 10,630,071) | ÷ | 11,914,319) | = | 0.89 | 0.89 | × | 24.49% | = | 21.85% | ||
| Long-term debt3 | —) | —) | ÷ | 11,914,319) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 1,284,248) | 1,284,248) | ÷ | 11,914,319) | = | 0.11 | 0.11 | × | 3.20% × (1 – 21.00%) | = | 0.27% | ||
| Total: | 11,914,319) | 1.00 | 22.13% | ||||||||||
Based on: 10-K (reporting date: 2022-01-30).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 14,019,507) | 14,019,507) | ÷ | 15,553,668) | = | 0.90 | 0.90 | × | 24.49% | = | 22.08% | ||
| Long-term debt3 | 299,350) | 299,350) | ÷ | 15,553,668) | = | 0.02 | 0.02 | × | 2.79% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 1,234,811) | 1,234,811) | ÷ | 15,553,668) | = | 0.08 | 0.08 | × | 3.60% × (1 – 21.00%) | = | 0.23% | ||
| Total: | 15,553,668) | 1.00 | 22.35% | ||||||||||
Based on: 10-K (reporting date: 2021-01-31).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 3,246,162) | 3,246,162) | ÷ | 4,868,482) | = | 0.67 | 0.67 | × | 24.49% | = | 16.33% | ||
| Long-term debt3 | 299,818) | 299,818) | ÷ | 4,868,482) | = | 0.06 | 0.06 | × | 3.32% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 1,322,502) | 1,322,502) | ÷ | 4,868,482) | = | 0.27 | 0.27 | × | 3.80% × (1 – 21.00%) | = | 0.82% | ||
| Total: | 4,868,482) | 1.00 | 17.31% | ||||||||||
Based on: 10-K (reporting date: 2020-02-02).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,663,557) | 4,663,557) | ÷ | 6,447,708) | = | 0.72 | 0.72 | × | 24.49% | = | 17.72% | ||
| Long-term debt3 | 299,620) | 299,620) | ÷ | 6,447,708) | = | 0.05 | 0.05 | × | 3.21% × (1 – 21.00%) | = | 0.12% | ||
| Operating lease liability4 | 1,484,531) | 1,484,531) | ÷ | 6,447,708) | = | 0.23 | 0.23 | × | 3.21% × (1 – 21.00%) | = | 0.58% | ||
| Total: | 6,447,708) | 1.00 | 18.42% | ||||||||||
Based on: 10-K (reporting date: 2019-02-03).
1 US$ in thousands
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Williams-Sonoma Inc., economic spread ratio calculation, comparison to benchmarks
| Jan 28, 2024 | Jan 29, 2023 | Jan 30, 2022 | Jan 31, 2021 | Feb 2, 2020 | Feb 3, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 134,576) | 435,119) | 500,058) | 16,210) | (138,926) | (197,887) | |
| Invested capital2 | 3,907,227) | 3,497,304) | 3,332,675) | 3,503,840) | 3,110,082) | 3,192,653) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | 3.44% | 12.44% | 15.00% | 0.46% | -4.47% | -6.20% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -5.13% | -10.66% | -21.61% | -1.84% | — | — | |
| Home Depot Inc. | 12.88% | 16.94% | 21.39% | 12.23% | — | — | |
| Lowe’s Cos. Inc. | 18.68% | 13.68% | 21.65% | 9.20% | — | — | |
| TJX Cos. Inc. | 7.14% | 4.20% | 4.22% | -12.63% | — | — | |
Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 134,576 ÷ 3,907,227 = 3.44%
4 Click competitor name to see calculations.
The financial performance from 2019 to 2024 indicates a significant transition from economic value destruction to value creation, followed by a recent period of contraction in profitability relative to the cost of capital.
- Economic Spread Ratio
- A volatile trajectory is observed, beginning with negative spreads of -6.20% in 2019 and -4.47% in 2020, indicating that the return on invested capital was below the cost of capital. A reversal occurred in 2021 as the ratio turned positive at 0.46%, accelerating to a peak of 15.00% in 2022. This performance peaked in 2022 before trending downward to 12.44% in 2023 and further compressing to 3.44% by January 2024.
- Economic Profit
- Economic profit followed a similar pattern to the spread ratio, moving from deficits of -197.9 million USD in 2019 and -138.9 million USD in 2020 to a positive position in 2021. The company experienced a substantial surge in value creation, peaking at 500.1 million USD in 2022. A subsequent decline was noted in 2023 and 2024, with the final period ending at 134.6 million USD.
- Invested Capital
- Invested capital remained relatively stable between 2019 and 2023, fluctuating between 3.1 billion USD and 3.5 billion USD. A notable increase occurred in 2024, where invested capital rose to 3.9 billion USD. This expansion in the capital base coincided with the most significant decline in the economic spread ratio during the reported timeframe.
The alignment of increasing invested capital and decreasing economic profit in 2024 suggests a diminishing marginal return on capital deployed, resulting in a narrowed economic spread.
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Economic Profit Margin
Williams-Sonoma Inc., economic profit margin calculation, comparison to benchmarks
| Jan 28, 2024 | Jan 29, 2023 | Jan 30, 2022 | Jan 31, 2021 | Feb 2, 2020 | Feb 3, 2019 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | 134,576) | 435,119) | 500,058) | 16,210) | (138,926) | (197,887) | |
| Net revenues | 7,750,652) | 8,674,417) | 8,245,936) | 6,783,189) | 5,898,008) | 5,671,593) | |
| Add: Increase (decrease) in gift card and other deferred revenue | 94,675) | 31,459) | 74,606) | 83,551) | (832) | (10,162) | |
| Adjusted net revenues | 7,845,327) | 8,705,876) | 8,320,542) | 6,866,740) | 5,897,176) | 5,661,431) | |
| Performance Ratio | |||||||
| Economic profit margin2 | 1.72% | 5.00% | 6.01% | 0.24% | -2.36% | -3.50% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -3.00% | -6.01% | -11.28% | -0.79% | — | — | |
| Home Depot Inc. | 4.72% | 5.95% | 6.80% | 4.60% | — | — | |
| Lowe’s Cos. Inc. | 5.61% | 3.49% | 5.89% | 2.91% | — | — | |
| TJX Cos. Inc. | 2.78% | 1.72% | 1.71% | -8.79% | — | — | |
Based on: 10-K (reporting date: 2024-01-28), 10-K (reporting date: 2023-01-29), 10-K (reporting date: 2022-01-30), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-02-02), 10-K (reporting date: 2019-02-03).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × 134,576 ÷ 7,845,327 = 1.72%
3 Click competitor name to see calculations.
The financial trajectory from February 2019 to January 2024 is characterized by a shift from value destruction to a period of significant value creation, followed by a recent downturn. Between 2019 and 2020, economic profit remained negative, signifying that the entity failed to generate returns above its cost of capital. A structural turnaround occurred in 2021, transitioning the company into a phase of substantial value creation that reached its apex in 2022.
- Economic Profit Performance
- Economic profit transitioned from a deficit of 197.89 million USD in February 2019 to a peak of 500.06 million USD in January 2022. Although the 2023 figures remained robust at 435.12 million USD, a significant contraction was observed by January 2024, with economic profit falling to 134.58 million USD.
- Adjusted Net Revenue Trends
- A consistent upward trajectory in revenues was observed from February 2019 through January 2023, rising from 5.66 billion USD to a peak of 8.71 billion USD. This growth phase reversed in January 2024, as revenues declined to 7.85 billion USD, correlating with the simultaneous decrease in economic profit.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the broader profit trend, evolving from -3.50% in 2019 to a high of 6.01% in January 2022. The subsequent decline to 5.00% in 2023 and further to 1.72% in 2024 indicates a compression in the ability to generate economic value relative to the total revenue base.
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