Williams-Sonoma, Inc.
WSM · NYSE
Next quarter
Expected to report Nov 18, 2026 — estimated from last year’s reporting date.
Consensus is $2.16 EPS for Oct 2026 across 9 estimates, ranging $2.00 to $2.28.
WSM Jul 2026
- 2.44%
- $2.05
- $2.10
- —
- $1.96B
Reported results
- $1.96B
- $448.80M
- $338.11M
- $2.84
Highlights
- Sales momentum: Q2 net revenue rose 6.7% year over year to $1.960 billion, while comparable brand revenue increased 6.2%, ahead of the prior-year 3.7% comp.
- Adjusted earnings beat: Non-GAAP diluted EPS was $2.10 versus consensus of $2.05, a 2.44% surprise, and increased 5.0% from $2.00 a year ago.
- Tariff refund distortion: GAAP diluted EPS was $2.84, including a $167.8 million reduction in cost of goods sold from IEEPA tariff refunds and $6.3 million of related interest income; the company excluded these items from non-GAAP results.
- Broad-based brands: Comparable revenue grew 7.6% at Williams Sonoma, 6.4% at West Elm, 5.1% at Pottery Barn and 3.5% at Pottery Barn Kids and Teen.
- Underlying margin pressure: Non-GAAP operating margin declined 60 basis points year over year to 17.3%, as tariff costs reduced merchandise margins by 230 basis points despite supply-chain and occupancy leverage.
- GAAP profitability: GAAP operating income increased 36.8% to $448.8 million, with a 22.9% margin versus 17.9% a year ago, while GAAP diluted EPS rose 42.0% from $2.00.
- Raised outlook: Fiscal 2026 guidance now calls for revenue growth of 4.7% to 7.2%, comps of 4.0% to 6.5% and a non-GAAP operating margin of 17.8% to 18.2%; the outlook assumes no benefit from tariff refunds.
- Cash and inventory: Operating cash flow for the first 26 weeks was $695.9 million, including $200.2 million of tariff refunds and interest, while inventory increased only 1.0% year over year to $1.45 billion.
Analysis
Williams-Sonoma delivered a strong Q2 fiscal 2026 print, with adjusted EPS of $2.10 beating the $2.05 consensus by 2.44%. Revenue of $1.960 billion increased 6.7% from $1.837 billion a year ago and was up from $1.81 billion in the prior quarter. Comparable brand revenue accelerated to 6.2% from 3.7% last year, with all major brands growing. Adjusted EPS rose 5.0% year over year from $2.00 and 8.8% sequentially from $1.93.
The headline GAAP results were substantially amplified by tariff-related items. The company recognized $167.8 million of IEEPA tariff refunds through cost of goods sold and $6.3 million of related interest, partly offset by $47.5 million owed to vendors and a $10.0 million employee recognition contribution. Excluding those items, gross margin fell 160 basis points to 45.5% and operating margin fell 60 basis points to 17.3%, reflecting tariff-driven merchandise pressure. Nevertheless, employment leverage and sales growth supported the adjusted earnings beat. Management raised the full-year outlook, with the new margin range of 17.8% to 18.2% assuming tariffs remain in place and no additional refund benefit.
Broad-based brand growth
The quarter’s central operating message was that growth was broad rather than concentrated in one banner. Comparable brand revenue increased 6.2%, and management said every brand delivered growth while gaining share against the broader home industry.
- Pottery Barn: Revenue increased 6.4% to $770.8 million, with comparable revenue up 5.1% versus 1.1% a year ago.
- West Elm: Revenue rose 5.9% to $496.3 million, while comparable revenue grew 6.4% versus 3.3% a year ago.
- Williams Sonoma: Revenue increased 7.9% to $268.8 million, with comparable revenue up 7.6% versus 5.1% a year ago.
- Pottery Barn Kids and Teen: Revenue grew 3.7% to $297.4 million, with comparable revenue up 3.5% versus 5.3% a year ago.
- Other brands: Revenue increased 17.2% to $126.4 million, primarily reflecting Rejuvenation, Mark and Graham, international franchise operations, GreenRow and Dormify.
Tariff refund impact
The quarter’s GAAP earnings cannot be read as a clean measure of ongoing profitability. Williams-Sonoma collected substantially all of its initial $197.8 million IEEPA tariff refund claim by August 2, with only $3.2 million remaining as a receivable.
- Refund recognition: The company recorded $167.8 million as a reduction of cost of goods sold and $6.3 million of related interest income.
- Offsets: It recorded $47.5 million to reimburse vendors that had previously granted tariff-related concessions and $10.0 million for a one-time discretionary 401(k) contribution to eligible employees.
- Future benefit: A further $29.3 million of refund income was deferred in inventory and is expected to reduce cost of goods sold in Q3.
- Per-share effect: The refund income reduced Q2 GAAP EPS by $1.06 in the non-GAAP reconciliation, while vendor concessions added $0.30, employee recognition added $0.06 and related interest reduced EPS by $0.04.
Underlying margin performance
Excluding the tariff items, the business still expanded profit dollars but absorbed higher product costs. Non-GAAP operating income rose 3.2% year over year to $338.5 million, although margin declined to 17.3% from 17.9%.
- Gross margin: Non-GAAP gross margin was 45.5%, down 160 basis points. Merchandise margin declined 230 basis points, primarily because of tariff costs, partly offset by 30 basis points of supply-chain efficiencies and 40 basis points of occupancy leverage.
- Operating expenses: Non-GAAP SG&A rose 3.1% to $553.2 million, but the rate improved 100 basis points to 28.2%, led by 120 basis points of employment expense leverage.
- GAAP comparison: Including the tariff benefit, gross margin was 51.6% versus 47.1% a year ago and operating margin was 22.9% versus 17.9%. GAAP operating income increased to $448.8 million from $328.1 million.
- Taxes and interest: Non-GAAP interest income was $6.1 million, excluding the $6.3 million tariff-related interest benefit, and the non-GAAP tax rate was 27.4% versus 26.6% a year ago.
Cash flow and inventory
Cash generation remained a major financial strength, allowing the company to fund shareholder returns while maintaining inventory discipline. Cash and equivalents ended the quarter at $1.03 billion, compared with $985.8 million a year earlier.
- Operating cash flow: Cash flow from operations for the first 26 weeks was $695.9 million, up from $401.7 million in the prior-year period and including $200.2 million of tariff refunds and related interest.
- Inventory: Merchandise inventory was $1.45 billion, up 1.0% year over year after deferring $29.3 million of tariff refund income against inventory.
- Capital allocation: First-half share repurchases were $287.8 million and dividends were $175.4 million; the company said Q2 shareholder returns through dividends were $90 million.
- Store base: The company ended the quarter with 508 stores, after three openings and one closure during the quarter, versus 509 stores a year earlier.
Raised fiscal outlook
Management raised both the top- and bottom-line outlook to reflect strong year-to-date execution. The revised forecast explicitly assumes that current tariffs remain in place, oil prices stay elevated and no further benefit comes from tariff refunds or related interest.
- Revenue: Fiscal 2026 net revenue growth is now expected at 4.7% to 7.2%, with comparable brand revenue growth of 4.0% to 6.5%.
- Profitability: Full-year non-GAAP operating margin is expected at 17.8% to 18.2%, above the 17.3% margin delivered in Q2.
- Other assumptions: Annual non-GAAP interest income is expected to be approximately $25 million and the effective tax rate approximately 26%.
- Long-term framework: Williams-Sonoma maintained its expectation for mid-to-high single-digit annual revenue growth and a mid-to-high-teens operating margin.
