Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Williams-Sonoma Inc., ROIC 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) | |||||||
| Net operating profit after taxes (NOPAT)1 | 1,034,060) | 1,172,531) | 1,237,417) | 799,145) | 399,368) | 390,105) | |
| Invested capital2 | 3,907,227) | 3,497,304) | 3,332,675) | 3,503,840) | 3,110,082) | 3,192,653) | |
| Performance Ratio | |||||||
| ROIC3 | 26.47% | 33.53% | 37.13% | 22.81% | 12.84% | 12.22% | |
| Benchmarks | |||||||
| ROIC, Competitors4 | |||||||
| Amazon.com Inc. | 15.71% | 9.75% | -2.09% | 18.50% | — | — | |
| Home Depot Inc. | 29.32% | 32.97% | 37.57% | 28.36% | — | — | |
| Lowe’s Cos. Inc. | 33.92% | 28.41% | 37.37% | 24.73% | — | — | |
| TJX Cos. Inc. | 21.95% | 18.64% | 18.30% | 1.20% | — | — | |
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 Invested capital. See details »
3 2024 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 1,034,060 ÷ 3,907,227 = 26.47%
4 Click competitor name to see calculations.
The financial trajectory from February 2019 to January 2024 is characterized by a significant expansion in operational profitability followed by a recent period of normalization and compression of returns.
- Net Operating Profit After Taxes (NOPAT)
- A substantial increase in NOPAT is observed starting in 2021, where profits rose from 399.4 million USD in 2020 to 799.1 million USD. This upward momentum peaked in January 2022 at 1.237 billion USD. However, a gradual decline occurred over the subsequent two fiscal years, with NOPAT receding to 1.034 billion USD by January 2024.
- Invested Capital
- Invested capital remained relatively stable between 2019 and 2023, fluctuating within a range of approximately 3.1 billion USD to 3.5 billion USD. A notable upward shift occurred in the final period, with invested capital increasing to 3.907 billion USD by January 2024, representing the highest level of capital employment within the analyzed timeframe.
- Return on Invested Capital (ROIC)
- ROIC exhibited an aggressive growth phase, ascending from 12.22% in 2019 to a peak of 37.13% in 2022. This surge was primarily driven by the rapid acceleration of NOPAT relative to a consistent capital base. Since the 2022 peak, a downward trend has emerged, with ROIC falling to 26.47% in 2024. This contraction is the result of the simultaneous decrease in operating profits and the expansion of the invested capital base.
In summary, the period was marked by a phase of exceptional capital efficiency that culminated in 2022. The subsequent decline in ROIC indicates a moderating trend as profitability softened while the capital required to generate those profits increased.
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Decomposition of ROIC
Williams-Sonoma Inc., decomposition of ROIC
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The Return on Invested Capital (ROIC) demonstrates a period of substantial expansion followed by a moderate correction. After remaining relatively stable between 2019 and 2020, ROIC experienced an accelerated increase, peaking at 37.13% in 2022 before trending downward to 26.47% by 2024. This trajectory is primarily attributed to shifts in operating profitability and asset efficiency rather than tax fluctuations.
- Operating Profit Margin (OPM)
- A strong positive trend is observed in operating profitability, which more than doubled from 8.36% in 2019 to a peak of 18.85% in 2022. While a slight contraction occurred in subsequent years, the margin remained elevated, ending at 17.74% in 2024, indicating a structural shift toward a higher profitability baseline compared to the 2019-2020 period.
- Turnover of Capital (TO)
- Capital efficiency improved steadily from 1.77 in 2019 to a peak of 2.50 in 2022. However, a notable decline is evident in the final period, with turnover falling to 2.01 in 2024. This reduction in asset turnover served as a primary driver for the decrease in overall ROIC during the latter part of the analyzed period.
- Effective Cash Tax Rate (CTR)
- The after-tax component, represented by 1 minus the effective cash tax rate, remained relatively stable, fluctuating between a high of 82.40% in 2019 and a low of 74.26% in 2023. This metric exerted minimal influence on the overall variance of ROIC, acting as a secondary factor relative to the volatility of margins and turnover.
- ROIC Decomposition and Synthesis
- The surge in ROIC between 2021 and 2022 was the result of a synergistic increase in both operating profit margins and capital turnover. The subsequent decline in ROIC from its 37.13% peak to 26.47% is predominantly explained by the compression of capital turnover, as operating margins remained relatively resilient. Consequently, the current ROIC remains significantly higher than pre-2021 levels, supported by the sustained improvement in operating margins.
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Operating Profit Margin (OPM)
Williams-Sonoma Inc., OPM 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) | |||||||
| Net operating profit after taxes (NOPAT)1 | 1,034,060) | 1,172,531) | 1,237,417) | 799,145) | 399,368) | 390,105) | |
| Add: Cash operating taxes2 | 357,651) | 406,434) | 331,401) | 239,557) | 115,929) | 83,339) | |
| Net operating profit before taxes (NOPBT) | 1,391,712) | 1,578,965) | 1,568,818) | 1,038,701) | 515,297) | 473,444) | |
| 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) | |
| Profitability Ratio | |||||||
| OPM3 | 17.74% | 18.14% | 18.85% | 15.13% | 8.74% | 8.36% | |
| Benchmarks | |||||||
| OPM, Competitors4 | |||||||
| Amazon.com Inc. | 11.38% | 7.84% | 0.01% | 9.14% | — | — | |
| Home Depot Inc. | 14.35% | 15.17% | 15.81% | 14.46% | — | — | |
| Lowe’s Cos. Inc. | 13.41% | 10.41% | 13.11% | 10.29% | — | — | |
| TJX Cos. Inc. | 11.37% | 9.87% | 9.95% | 1.83% | — | — | |
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 Cash operating taxes. See details »
3 2024 Calculation
OPM = 100 × NOPBT ÷ Adjusted net revenues
= 100 × 1,391,712 ÷ 7,845,327 = 17.74%
4 Click competitor name to see calculations.
The financial performance from February 2019 to January 2024 is characterized by a period of aggressive expansion in both scale and profitability, followed by a moderate contraction in the most recent fiscal year. A significant shift in operational efficiency occurred between 2020 and 2022, where operating margins expanded rapidly despite fluctuations in revenue growth.
- Revenue and Operating Profit Trends
- Adjusted net revenues grew steadily from 5.66 billion USD in 2019 to a peak of 8.71 billion USD in January 2023. Net operating profit before taxes (NOPBT) followed a similar upward trajectory but at a more accelerated pace, rising from 473.4 million USD in 2019 to 1.58 billion USD in 2023. This indicates that profit growth significantly outpaced revenue growth during this period. A reversal occurred in January 2024, with adjusted net revenues declining to 7.85 billion USD and NOPBT falling to 1.39 billion USD.
- Operating Profit Margin (OPM) Analysis
- The operating profit margin exhibited a dramatic increase, more than doubling from 8.36% in 2019 to a peak of 18.85% in January 2022. The most substantial margin expansion occurred between February 2020 (8.74%) and January 2021 (15.13%), suggesting a period of significant cost optimization or a shift toward higher-margin product mixes. After peaking in 2022, the OPM entered a slight downward trend, settling at 18.14% in 2023 and 17.74% in 2024.
- Operational Efficiency and Correlation
- A strong positive correlation is observed between the surge in NOPBT and the expansion of the OPM through 2022. While revenue growth provided the foundation, the disproportionate increase in NOPBT drove the margin expansion. The contraction observed in 2024 shows a simultaneous decline in both absolute revenue and operating profit, though the OPM remained relatively resilient, staying well above pre-2021 levels, which indicates that the structural efficiency gains achieved during the expansion phase were largely retained.
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Turnover of Capital (TO)
Williams-Sonoma Inc., TO 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) | |||||||
| 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) | |
| Invested capital1 | 3,907,227) | 3,497,304) | 3,332,675) | 3,503,840) | 3,110,082) | 3,192,653) | |
| Efficiency Ratio | |||||||
| TO2 | 2.01 | 2.49 | 2.50 | 1.96 | 1.90 | 1.77 | |
| Benchmarks | |||||||
| TO, Competitors3 | |||||||
| Amazon.com Inc. | 1.71 | 1.77 | 1.92 | 2.33 | — | — | |
| Home Depot Inc. | 2.73 | 2.85 | 3.15 | 2.66 | — | — | |
| Lowe’s Cos. Inc. | 3.33 | 3.92 | 3.68 | 3.16 | — | — | |
| TJX Cos. Inc. | 2.57 | 2.45 | 2.46 | 1.44 | — | — | |
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 Invested capital. See details »
2 2024 Calculation
TO = Adjusted net revenues ÷ Invested capital
= 7,845,327 ÷ 3,907,227 = 2.01
3 Click competitor name to see calculations.
The analysis of capital efficiency from February 2019 through January 2024 reveals a period of significant expansion in asset productivity followed by a contraction in the most recent fiscal year. A strong upward trajectory in capital turnover was maintained for several years, peaking in early 2022, before experiencing a notable decline.
- Revenue Growth and Asset Productivity
- Adjusted net revenues exhibited a consistent upward trend from 5.66 billion US dollars in 2019 to a peak of 8.71 billion US dollars in 2023. This growth phase coincided with a marked improvement in the ability to generate sales from the capital base. However, a reversal occurred in 2024, with revenues decreasing to 7.85 billion US dollars.
- Invested Capital Dynamics
- Invested capital remained relatively stable between 2019 and 2023, fluctuating within a range of 3.11 billion to 3.50 billion US dollars. A significant increase was recorded in 2024, where invested capital rose to 3.91 billion US dollars, representing the highest capital deployment across the analyzed six-year period.
- Turnover of Capital (TO) Ratio Trends
- The turnover ratio improved steadily from 1.77 in 2019 to a peak of 2.50 in 2022, reflecting enhanced operational efficiency. This high level of productivity was largely maintained in 2023 at 2.49. In 2024, the ratio declined to 2.01, a result of the simultaneous contraction in adjusted net revenues and the expansion of the invested capital base.
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Effective Cash Tax Rate (CTR)
Williams-Sonoma Inc., CTR 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) | |||||||
| Net operating profit after taxes (NOPAT)1 | 1,034,060) | 1,172,531) | 1,237,417) | 799,145) | 399,368) | 390,105) | |
| Add: Cash operating taxes2 | 357,651) | 406,434) | 331,401) | 239,557) | 115,929) | 83,339) | |
| Net operating profit before taxes (NOPBT) | 1,391,712) | 1,578,965) | 1,568,818) | 1,038,701) | 515,297) | 473,444) | |
| Tax Rate | |||||||
| CTR3 | 25.70% | 25.74% | 21.12% | 23.06% | 22.50% | 17.60% | |
| Benchmarks | |||||||
| CTR, Competitors4 | |||||||
| Amazon.com Inc. | 19.21% | 29.89% | 8,113.11% | 13.08% | — | — | |
| Home Depot Inc. | 25.07% | 23.63% | 24.46% | 26.23% | — | — | |
| Lowe’s Cos. Inc. | 23.97% | 30.32% | 22.46% | 23.91% | — | — | |
| TJX Cos. Inc. | 24.84% | 22.88% | 25.39% | 54.29% | — | — | |
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 Cash operating taxes. See details »
3 2024 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 357,651 ÷ 1,391,712 = 25.70%
4 Click competitor name to see calculations.
The financial trajectory between February 2019 and January 2024 demonstrates a period of substantial expansion in operational profitability and a corresponding increase in cash tax expenditures. A strong correlation is observed between the growth of Net Operating Profit Before Taxes (NOPBT) and the absolute volume of cash operating taxes paid.
- Net Operating Profit Before Taxes (NOPBT) Performance
- NOPBT exhibited an aggressive upward trend, increasing from 473.4 million USD in 2019 to a peak of 1.58 billion USD in 2023. The most significant acceleration occurred between 2020 and 2022, during which operating profit more than tripled. A moderate contraction followed in the 2024 period, with NOPBT declining to 1.39 billion USD.
- Cash Operating Taxes Trends
- Cash tax payments followed a growth trajectory closely aligned with NOPBT, rising from 83.3 million USD in 2019 to a peak of 406.4 million USD in 2023. This represents a nearly five-fold increase in cash outflows for taxes over the period. In 2024, cash operating taxes decreased to 357.7 million USD, mirroring the reduction in operating profit.
- Effective Cash Tax Rate (CTR) Dynamics
- The CTR shows a general upward progression, beginning at 17.60% in 2019 and reaching 25.70% by 2024. A notable increase occurred between 2019 and 2020, where the rate rose from 17.60% to 22.50%. After a period of relative stability between 2020 and 2022, the rate climbed to a peak of 25.74% in 2023 and remained nearly constant at 25.70% in 2024.
The stabilization of the CTR at approximately 25.7% in the final two years indicates a consistent tax burden relative to operating profits, despite the volatility observed in absolute NOPBT figures during the 2024 contraction.
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