Williams-Sonoma Q1 Earnings Call Highlights

Key Points

• Williams-Sonoma beat Q1 expectations with net revenue of $1.81 billion, comparable brand revenue growth of 4.8%, and diluted EPS of $1.93, while posting an operating margin of 16.2% despite tariff and fuel cost pressures.
• Brand performance was broadly strong, led by West Elm (+8.5%), Pottery Barn Kids and Teens (+4.5%), Williams Sonoma (+5%), and positive results across the rest of the portfolio, including double-digit growth in B2B and emerging brands.
• Management reaffirmed full-year guidance for fiscal 2026, but highlighted uncertainty around tariffs, interest rates, and housing; the company expects tariff impacts to be heaviest in the first half of the year, with Q2 likely the peak.

Williams-Sonoma NYSE: WSM reported stronger first-quarter fiscal 2026 sales and earnings, with management pointing to broad-based gains across its brand portfolio, improving performance in both furniture and non-furniture categories and continued benefits from supply chain efficiencies.

President and Chief Executive Officer Laura Alber said the company “is off to a strong start” after posting comparable brand revenue growth of 4.8% in the quarter. She said every brand delivered a positive comparable result, with strength across retail and direct-to-consumer channels.

Chief Financial Officer Jeff Howie said first-quarter net revenue was $1.81 billion. E-commerce comparable sales rose 4.8%, while retail comparable sales increased 4.7%. Howie said both one-year and two-year comparable sales accelerated from the fourth quarter, and both furniture and non-furniture categories posted positive comps.

Operating income was $292 million, with an operating margin of 16.2%. Diluted earnings per share were $1.93, up 4% from $1.85 a year earlier. Alber said the company delivered the margin “even while absorbing tariffs and higher fuel costs.”

Margins Pressured by Tariffs, Fuel Costs

Gross margin was 44%, down about 30 basis points from the prior year. Howie said merchandise margins declined 100 basis points, primarily because higher tariffs flowed through the company’s weighted average cost of goods sold. Full-price selling was essentially flat year over year.

Howie said ocean freight costs were pressured by higher oil prices, but the company partially offset those headwinds through supply chain efficiencies and occupancy leverage. Supply chain efficiencies, including a lower shrink accrual, provided about 50 basis points of gross margin benefit in the quarter. Occupancy costs leveraged approximately 20 basis points as sales growth more than offset a 3% increase in occupancy dollars.

SG&A expenses were 27.8% of revenue, up about 30 basis points from a year earlier. Employment expense deleveraged 30 basis points, advertising leveraged 10 basis points, and general expense deleveraged about 10 basis points, primarily due to timing.

Inventory totaled $1.46 billion, up 9% from last year. Howie said that figure included about $60 million of embedded incremental tariff costs, and that excluding those costs, inventories would have been in line with top-line growth.

Brand Performance Broadly Positive

Alber said Pottery Barn generated a positive 1% comparable sales result, with progress in furniture, lighting and textiles. She said the brand benefited from its spring and summer assortments, marketing changes and a renewed focus on Pottery Barn’s “heritage aesthetic.” The company also announced the promotion of Jennifer Keller to president of Pottery Barn and the departure of former Pottery Barn president Monica Bhargava.

Pottery Barn Kids and Teens delivered a 4.5% comparable increase, driven by product innovation and strength in furniture and non-furniture categories. Alber cited collaborations and licensing partnerships, including LoveShackFancy and Chris Loves Julia, as drivers. She also said momentum in baby was supported by furniture, gifting and improvements to the registry experience.

West Elm posted an 8.5% comparable increase. Alber said the brand benefited from product improvements, stronger brand engagement and channel execution. New furniture and non-furniture introductions performed well, and retail was a highlight. The company plans five West Elm store openings in fiscal 2026. Alber said the Emma Chamberlain collaboration brought “new energy” to the brand and connected with a younger customer.

The Williams-Sonoma brand reported a 5% comparable increase on top of a 7.3% gain last year. Alber highlighted momentum in kitchen products, proprietary in-house design, market exclusives and collaborations. During the quarter, the brand added Kelly Wearstler as a spokesperson for its exclusive Breville offering, launched a Stanley Tucci pizza oven from GreenPan and announced a food collaboration with Oakville Grocery.

B2B and Emerging Brands Continue to Grow

The company’s B2B division grew 13.7% and delivered what Alber described as another record quarter. Trade sales rose 9%, while contract sales increased 22%. Alber cited hospitality and development projects including Delano Miami Beach, Bernardus Lodge & Spa, Capital One Arena, Live Nation Philadelphia and upcoming work with the U.S. Open.

Rejuvenation and Mark and Graham both posted double-digit comparable growth. Alber said Rejuvenation benefited from project-led categories such as cabinet hardware, bath, lighting and mirrors, along with continued engagement from trade customers. She reiterated that management sees Rejuvenation as a potential “next billion-dollar brand.”

Mark and Graham continued to gain momentum as a destination for personalized gifts, while GreenRow delivered growth and opened its first store in March in SoHo. Alber said the company also saw strong performance in strategic global markets including Canada, Mexico and the U.K.

Guidance Reiterated Despite First-Quarter Beat

Williams-Sonoma reiterated its fiscal 2026 outlook, citing uncertainty around geopolitics, war, fuel prices, trade policy, tariffs, interest rates and the housing market. The company expects fiscal 2026 comparable brand revenue growth of 2% to 6%, with total net revenue growth of 2.7% to 6.7%. Operating margin is expected to be between 17.5% and 18.1%.

Howie said the guidance assumes no material changes in the macroeconomic environment, housing turnover or interest rates. It also assumes current tariffs remain in effect for the balance of the year, including Section 232 tariffs, current Section 301 tariffs and Section 122 tariffs. While Section 122 tariffs are set to expire in July, Howie said the company assumes they will be replaced with tariffs at a similar rate.

The company expects the tariff impact to be weighted toward the first half of the year, with the second quarter likely representing the peak impact. Howie said the company’s guidance does not include any benefit from tariff refunds because of uncertainty around timing and potential recovery.

Capital expenditures are expected to be about $275 million for the year, with roughly 95% focused on e-commerce, retail and supply chain. Williams-Sonoma expects year-end store count to be essentially flat to last year, followed by 1% to 3% annual store count growth beginning in fiscal 2027.

Capital Returns and Consumer Trends

During the first quarter, Williams-Sonoma returned $373 million to shareholders, including $288 million in share repurchases and $85 million in dividends. The dividend payment represented a 15% year-over-year increase, and Howie said fiscal 2026 marks the company’s 17th consecutive year of increased dividend payouts.

In response to an analyst question about the consumer, Alber said customers are responding to the company’s products and strategies across brands and channels. She said demand was visible in furniture, smaller-ticket items and collaborations, and added that the company’s product pipeline remains appealing and distinctive.

Asked whether the inflationary environment could lead to price increases, Alber said it was too early to comment. She said the company does not compete solely on price and continues to focus on product design, exclusives, quality and value.

Management also discussed continued investment in artificial intelligence, including tools for customer service, product discovery, room planning, image generation, design recommendations and supply chain productivity. Alber said the company has extended AI further into the customer journey and scaled personalization across its brand portfolio.

Howie reiterated the company’s long-term outlook for mid- to high-single-digit revenue growth and operating margins in the mid- to high-teens, citing market share gains, proprietary design, a “digital-first, but not digital-only” channel strategy, growth initiatives and the balance sheet.

About Williams-Sonoma NYSE: WSM

Williams‑Sonoma, Inc is a specialty retailer focused on the home and culinary markets, best known for premium cookware, kitchen tools and home furnishings. The company traces its roots to a single cookware store founded by Chuck Williams in 1956 in Sonoma, California, and has evolved into a multi‑brand home furnishings and housewares business. Its merchandise mix spans cookware and kitchen electrics, tabletop and food prep items, furniture, bedding, lighting and decorative accessories designed for both everyday use and higher‑end interiors.

The company operates a portfolio of consumer brands that target distinct segments of the home market.

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