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 – 23.21% × 3,907,227 = 127,201
The financial performance from February 2019 to January 2024 demonstrates a significant transition from economic value destruction to substantial value creation, followed by a recent contraction in economic profit.
- Net Operating Profit After Taxes (NOPAT)
- A substantial growth trajectory is observed between 2019 and 2022, with NOPAT increasing from 390,105 thousand dollars to a peak of 1,237,417 thousand dollars. This represents a more than threefold increase in operating profitability over three years. However, a downward trend emerged after January 2022, with figures declining to 1,034,060 thousand dollars by January 2024, indicating a cooling of the profitability surge.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable between 2019 and 2023, fluctuating around 3.1 to 3.5 billion dollars, before rising to a period high of 3,907,227 thousand dollars in January 2024. Concurrently, the cost of capital experienced a sharp increase from 17.44% in 2020 to 22.53% in 2021, maintaining an elevated plateau and reaching its peak at 23.21% in January 2024. The simultaneous increase in both the volume of capital employed and the cost to finance that capital has placed upward pressure on the threshold required to generate economic profit.
- Economic Profit Trends
- The period began with negative economic profit, recording losses of 202,567 thousand dollars in 2019 and 143,128 thousand dollars in 2020, signifying that NOPAT was insufficient to cover the cost of capital. A pivotal shift occurred in January 2021, when the company achieved a positive economic profit of 9,810 thousand dollars. This trend accelerated sharply in January 2022, reaching a peak of 494,033 thousand dollars. Despite this peak, economic profit declined in subsequent years, falling to 127,201 thousand dollars by January 2024.
The overall analysis indicates that while the organization successfully shifted to a value-creating state through a massive expansion in NOPAT, the most recent fiscal year shows a compression of economic profit. This compression is the result of a dual impact: declining operating profits coupled with an increasing cost of capital and a larger capital base.
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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 | × | 24.70% | = | 23.00% | ||
| 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 | 23.21% | ||||||||||
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 | × | 24.70% | = | 20.84% | ||
| 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 | 21.26% | ||||||||||
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 | × | 24.70% | = | 22.03% | ||
| 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 | 22.31% | ||||||||||
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 | × | 24.70% | = | 22.26% | ||
| 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 | 22.53% | ||||||||||
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 | × | 24.70% | = | 16.47% | ||
| 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 | 17.44% | ||||||||||
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 | × | 24.70% | = | 17.86% | ||
| 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 | 18.56% | ||||||||||
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 | 127,201) | 429,139) | 494,033) | 9,810) | (143,128) | (202,567) | |
| 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 | 3.26% | 12.27% | 14.82% | 0.28% | -4.60% | -6.34% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Amazon.com Inc. | -5.25% | -10.78% | -21.72% | -1.96% | — | — | |
| Home Depot Inc. | 12.86% | 16.92% | 21.37% | 12.21% | — | — | |
| Lowe’s Cos. Inc. | 18.66% | 13.66% | 21.63% | 9.18% | — | — | |
| TJX Cos. Inc. | 7.17% | 4.23% | 4.25% | -12.60% | — | — | |
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 × 127,201 ÷ 3,907,227 = 3.26%
4 Click competitor name to see calculations.
The analysis of economic value added from 2019 to 2024 reveals a volatile trajectory, characterized by an initial period of value destruction, a significant peak in value creation, and a subsequent contraction in economic efficiency.
- Economic Profit Trends
- A transition from negative to positive economic profit occurred between 2020 and 2021. After recording losses of 202,567 thousand USD in 2019 and 143,128 thousand USD in 2020, the company achieved a turnaround in 2021. Economic profit peaked in 2022 at 494,033 thousand USD before entering a downward trend, declining to 429,139 thousand USD in 2023 and further dropping to 127,201 thousand USD by January 28, 2024.
- Invested Capital Evolution
- Invested capital demonstrated relative stability between 2019 and 2023, fluctuating within a range of 3.11 billion USD to 3.50 billion USD. However, a significant increase is observed in the final period, with invested capital rising to 3,907,227 thousand USD in 2024. This represents the highest level of capital investment across the analyzed timeframe.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the fluctuations seen in economic profit, indicating the degree to which returns exceed the cost of capital. Negative spreads of -6.34% and -4.60% in 2019 and 2020 shifted to a marginal positive spread of 0.28% in 2021. The ratio reached a maximum of 14.82% in 2022, representing the peak of capital efficiency. This was followed by a contraction to 12.27% in 2023 and a sharp decline to 3.26% in 2024. The correlation between the rising invested capital and the falling spread ratio in 2024 suggests that the most recent capital expansions have not yet yielded proportional increases in economic profit.
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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 | 127,201) | 429,139) | 494,033) | 9,810) | (143,128) | (202,567) | |
| 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 | 1.62% | 4.93% | 5.94% | 0.14% | -2.43% | -3.58% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Amazon.com Inc. | -3.07% | -6.07% | -11.34% | -0.84% | — | — | |
| Home Depot Inc. | 4.71% | 5.95% | 6.79% | 4.60% | — | — | |
| Lowe’s Cos. Inc. | 5.61% | 3.49% | 5.88% | 2.91% | — | — | |
| TJX Cos. Inc. | 2.79% | 1.73% | 1.73% | -8.77% | — | — | |
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 × 127,201 ÷ 7,845,327 = 1.62%
3 Click competitor name to see calculations.
The financial trajectory from February 2019 to January 2024 reflects a significant cycle of recovery, peak value creation, and a subsequent contraction. The company transitioned from a period of negative economic value added to a peak in performance in 2022, before experiencing a downward trend in both absolute economic profit and profit margins through 2024.
- Economic Profit Trends
- A substantial recovery is evident between 2019 and 2022. Economic profit improved from a deficit of 202.6 million USD in 2019 to a positive 494.0 million USD in 2022. Following this peak, a progressive decline occurred, with economic profit falling to 429.1 million USD in 2023 and further dropping to 127.2 million USD by January 2024.
- Adjusted Net Revenue Growth and Contraction
- Revenues exhibited consistent growth for five consecutive years, rising from 5.66 billion USD in 2019 to a peak of 8.71 billion USD in 2023. However, this growth trend reversed in the final period, with revenues declining to 7.85 billion USD in 2024, coinciding with the reduction in economic profit.
- Economic Profit Margin Analysis
- The economic profit margin serves as a key indicator of value creation efficiency. The margin moved from a negative 3.58% in 2019 to a break-even point of 0.14% in 2021, reaching a maximum of 5.94% in 2022. The subsequent decline to 4.93% in 2023 and 1.62% in 2024 indicates a reduction in the company's ability to generate returns above its cost of capital relative to its revenue scale.
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