Williams-Sonoma, Inc. (NYSE:WSM) reported better-than-expected second-quarter 2026 results Wednesday and raised its full-year outlook.
Net revenue rose 6.7% year over year to $1.96 billion, beating the $1.93 billion estimate. Adjusted diluted earnings increased 5% to $2.10 per share, topping the $2.08 estimate. GAAP diluted earnings jumped 42% to $2.84 per share.
Brand Growth Broadens
Comparable brand revenue increased 6.2%, with growth across all major brands.
Pottery Barn revenue rose to $770.8 million, while comparable sales increased 5.1%. West Elm revenue reached $496.3 million, with comparable sales up 6.4%.
Williams Sonoma revenue increased to $268.8 million, with comparable sales rising 7.6%. Pottery Barn Kids and Teen revenue totaled $297.4 million, while comparable sales grew 3.5%.
Tariffs Shape Margins
GAAP gross margin expanded 450 basis points to 51.6%. IEEPA tariff refunds, occupancy leverage and supply chain efficiencies supported the increase.
However, adjusted gross margin fell 160 basis points to 45.5%. Tariff costs drove a 230-basis-point decline in merchandise margins.
GAAP operating income rose to $448.8 million, producing a 22.9% operating margin. Adjusted operating income totaled $338.5 million, while the adjusted margin fell 60 basis points to 17.3%.
The quarter included $167.8 million in IEEPA tariff refund income and $6.3 million in related interest.
A $47.5 million vendor reimbursement provision and a one-time $10 million employee recognition expense partly offset those benefits. Williams-Sonoma deferred another $29.3 million in tariff refund income, which it expects to recognize in the third quarter.
Cash Flow And Inventory
Merchandise inventories rose 1% year over year to $1.45 billion. Williams-Sonoma ended the quarter with 508 stores, compared with 509 a year earlier.
Operating cash flow totaled $695.9 million during the first 26 weeks of the year. That amount included $200.2 million in collected tariff refunds and related interest.
Cash and cash equivalents totaled $1.03 billion at the end of the quarter. The company returned $90 million to shareholders through dividends.
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Williams-Sonoma Raises 2026 Outlook
Williams-Sonoma raised its fiscal 2026 comparable revenue growth forecast to 4% to 6.5%. It now expects net revenue to grow 4.7% to 7.2%.
The company lifted its sales forecast to $8.17 billion to $8.37 billion from $8.02 billion to $8.33 billion. The midpoint is above the $8.18 billion analyst estimate.
Williams-Sonoma expects an adjusted operating margin of 17.8% to 18.2%.
Williams-Sonoma stressed that its upgraded outlook reflects underlying business momentum rather than its $200 million tariff refund.
The company said its non-GAAP guidance excludes the refund and related interest, calling the increase “operational.” It now expects comparable brand revenue growth of 4% to 6.5% and an operating margin of 17.8% to 18.2%.
The forecast assumes current tariffs remain in place, oil prices stay elevated and the company receives no benefit from tariff refunds or related interest.
Over the long term, Williams-Sonoma continues to target mid- to high-single-digit annual net revenue growth and a mid- to high-teens operating margin.
Williams-Sonoma Price Action
WSM Price Action: Williams-Sonoma shares were up 0.11% at $235.00 at the time of publication on Wednesday, according to Benzinga Pro data.
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