Williams-Sonoma Inc. (NYSE:WSM) reported second-quarter earnings and revenue above Wall Street expectations, but its shares declined 4.6% in premarket trading despite the stronger-than-anticipated results.
The home furnishings retailer recorded adjusted earnings of $2.10 per share, ahead of the $2.06 consensus forecast. Revenue reached $1.96 billion, exceeding analysts’ expectations of $1.92 billion and increasing 6.7% from the same period last year.
Comparable brand revenue rose 6.2% during the quarter, highlighting continued demand across the company’s portfolio.
Tariff costs weigh on adjusted margins
Williams-Sonoma’s adjusted operating margin declined 60 basis points year over year to 17.3%, largely reflecting weaker merchandise margins as tariff expenses increased.
Those pressures outweighed benefits from greater supply chain efficiency and improved occupancy leverage.
On a GAAP basis, operating margin reached 22.9%, benefiting from $167.8 million of refunds related to previously paid International Emergency Economic Powers Act tariffs. The refunds were excluded from the company’s adjusted figures.
“We delivered a very strong second quarter,” said Laura Alber, President and Chief Executive Officer. “In Q2, our comp came in at 6.2%, with total revenue growth of 6.7%, and we drove an operating margin of 17.3% with earnings per share of $2.10.”
Williams-Sonoma raises fiscal 2026 outlook
Following the quarterly performance, Williams-Sonoma increased its expectations for fiscal 2026.
The retailer now forecasts annual net revenue growth of between 4.7% and 7.2%, while comparable sales are projected to increase between 4.0% and 6.5%. The midpoint of the revenue range implies growth of approximately 5.95%.
Williams-Sonoma also expects its full-year adjusted operating margin to range between 17.8% and 18.2%.
Tariffs and oil prices remain key assumptions
The company’s outlook assumes that existing tariffs will remain in effect throughout fiscal 2026. These include Section 232 duties, existing and newly introduced Section 301 tariffs, and tariffs affecting trade between Canada and the United States.
Williams-Sonoma is also factoring elevated oil prices through the end of the year into its projections.
While the company delivered an earnings and revenue beat and upgraded its annual outlook, pressure on merchandise margins from tariffs remains an important consideration for profitability, helping explain investor caution following the results.
Williams-Sonoma stock price
