Williams-Sonoma Earnings Beat, Raises Outlook

Williams-Sonoma, Inc. (NYSE: WSM) reported fiscal second-quarter 2026 earnings on Aug. 26 that exceeded estimates, prompting the company to raise its full-year revenue and margin guidance. Management attributed the results to broad-based brand strength and a one-time tariff refund that boosted GAAP margins.

Quarter Results and Margins

For the 13 weeks ended Aug. 2, 2026, Williams-Sonoma reported net revenues of about $1.96 billion, up 6.7% year over year. Comparable brand revenue rose 6.2%, accelerating from the first quarter. Pottery Barn generated approximately $770.8 million, and West Elm contributed about $496.3 million, together accounting for nearly two-thirds of net revenues. The company described the quarter as “very strong.”

GAAP gross margin expanded to 51.6%, an increase of roughly 450 basis points from the prior year, driven primarily by a $167.8 million reduction in cost of goods sold related to a refund of tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The company collected nearly all of an initial $197.8 million claim, leaving a receivable of about $3.2 million as of Aug. 2. These tariff refunds and related items are excluded from non-GAAP results.

Excluding the tariff refund, non-GAAP gross margin declined about 160 basis points to 45.5%, reflecting tighter merchandise margins. GAAP operating income was about $449 million, producing a 22.9% operating margin, up roughly 500 basis points year over year. Non-GAAP operating income was approximately $338 million, with a 17.3% margin, down about 60 basis points from the prior year.

GAAP diluted earnings per share (EPS) rose to $2.84, up about 42% from the prior year, while non-GAAP diluted EPS increased 5.0% to $2.10. The adjusted EPS exceeded consensus estimates.

Guidance and Cash Flow

Williams-Sonoma raised its fiscal 2026 outlook, projecting net revenue growth of 4.7% to 7.2% and comparable brand revenue growth of 4.0% to 6.5%. The company also increased its non-GAAP operating margin guidance to 17.8% to 18.2%, excluding the one-time tariff refund. Management cited market-share gains in a home furnishings market described as essentially flat, along with ongoing investments in technology and supply-chain initiatives.

Liquidity remained strong, with cash and cash equivalents of about $1.03 billion at quarter-end. Operating cash flow for the 26 weeks ended Aug. 2 was approximately $695.9 million, up from $401.7 million a year earlier. Merchandise inventories rose about 1% year over year to roughly $1.45 billion, net of deferred tariff refund income. The company returned about $90 million to shareholders during the quarter through dividends.