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WILLIAMS SONOMA INC (WSM)·Q1 2026 Earnings Summary

Executive Summary

  • Williams-Sonoma delivered a solid Q1 2026: comparable brand revenue +3.4%, gross margin 44.3%, operating margin 16.8%, and diluted EPS $1.85, with all brands running positive comps and furniture turning positive for the first time since Q4 2022 .
  • Results beat Wall Street: EPS $1.85 vs $1.75 consensus, revenue $1.73B vs $1.67B, EBITDA $347.1M vs $338.0M; management reiterated FY25 guidance despite tariff uncertainty, underpinned by a 6-point mitigation plan . EPS, revenue, and EBITDA estimates from S&P Global.*
  • Key positives: robust full-price selling, 120bps supply chain efficiencies, and channel strength (retail +6.2% comp; e-commerce +2.1% comp) .
  • Guidance unchanged in Q1 (FY25 net revenues -1.5% to +1.5%; comps flat to +3%; operating margin 17.4%-17.8%), then raised top-line in Q2 and operating margin in Q3 as momentum built and mitigation progressed .
  • Potential stock catalysts: consistent multi-brand comp strength, tariff mitigation traction, AI-enabled customer/service improvements, and ongoing capital returns (repurchases/dividends) .

What Went Well and What Went Wrong

What Went Well

  • Positive comps across all brands and a return to positive furniture comps, signaling demand response to newness and innovation: “our consumer is responding to our products... we gained market share” .
  • Margin defense via operational excellence: “supply chain efficiencies delivered 120 basis points of savings” and occupancy leveraged 40bps; promotional stance unchanged with high full-price mix .
  • Strategic growth levers performing: B2B grew 8% and emerging brands posted strong growth; AI deployment across customer service, design tools, supply chain, and internal ops is already driving measurable impact .

What Went Wrong

  • Merchandise margins -220bps YoY due to higher input costs (ocean freight and tariff mitigation), partially offset by efficiencies; gross margin -60bps YoY ex last year’s $49M out-of-period freight benefit .
  • Tariff volatility elevated cost risk; Q1 actions to halt/resort shipments and pull forward receipts created short-term expense pressure, though expected to pay back later in the year .
  • Channel SG&A pressure expected later as company protects growth and service priorities amid rising tariffs, even as Q1 SG&A rate improved 130bps YoY .

Financial Results

MetricQ4 2024 (Feb 2, 2025)Q1 2026 (May 4, 2025)Q2 2026 (Aug 3, 2025)
Revenue ($USD Billions)$2.462 $1.730 $1.837
Gross Margin %47.3% 44.3% 47.1%
Operating Margin %21.5% 16.8% 17.9%
Diluted EPS ($)$3.28 $1.85 $2.00
Comparable Brand Revenue %+3.1% +3.4% +3.7%
Segment (Q1 2026)Net Revenues ($USD Millions)Comparable Brand Revenue Growth
Pottery Barn$695.1 +2.0%
West Elm$437.1 +0.2%
Williams Sonoma$257.5 +7.3%
Pottery Barn Kids & Teen$229.7 +3.8%
Other (Rejuvenation, Mark & Graham, Franchise, GreenRow)$110.7 N/A
Total$1,730.1 +3.4%
KPIsQ1 2026Q2 2026
Retail Channel Comp (%)+6.2% +7.3%
E-commerce Channel Comp (%)+2.1% +2.0%
Merchandise Inventories ($USD Billions)$1.335 $1.434
Cash & Cash Equivalents ($USD Billions)$1.047 $0.986
Stock Repurchases ($USD Millions)$90 $199
Dividends Paid ($USD Millions)$75 $81
Actual vs. Consensus (Q1 2026)ConsensusActual
EPS ($)$1.75*$1.85
Revenue ($USD Billions)$1.669*$1.730
EBITDA ($USD Millions)$338.0*$347.1

Values with asterisks retrieved from S&P Global.*

Notes:

  • Q1 comparisons to prior year are impacted by a $49M out-of-period freight adjustment recorded in Q1 FY24 that benefited prior-year margins and EPS ($0.29) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues (YoY)FY 2025-1.5% to +1.5% (Q4 FY24 baseline) Maintained in Q1 → Raised to +0.5% to +3.5% in Q2 → Reiterated in Q3 Raised (Q2)
Comparable Brand RevenueFY 2025Flat to +3.0% (Q4 baseline) Maintained in Q1 → Raised to +2.0% to +5.0% in Q2 → Reiterated in Q3 Raised (Q2)
Operating MarginFY 202517.4% to 17.8% (Q4 baseline) Maintained in Q1 and Q2 → Raised to 17.8% to 18.1% in Q3 Raised (Q3)
Interest IncomeFY 2025N/A~$30M (Q2) → ~$35M (Q3) Added/raised
Effective Tax RateFY 2025N/A~26.5% (Q2) → ~26.0% (Q3) Slightly lowered
Quarterly DividendFY 2025Increased to $0.66/share (Mar 2025) CFO referenced $0.56/share on Q1 call (potential split/retro adjustment discrepancy) Noted discrepancy

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2026, Q3 2026)Current Period (Q1 2026)Trend
AI/Technology initiativesAI assistant launched at PB Kids; scaling; supply chain and internal ops automation; “delivering results today” “We have made meaningful progress integrating AI across our digital platforms... transformational force” Strengthening
Supply chain/customer service“All-time best” customer service metrics; efficiency gains 120bps savings; focus on perfect orders, reducing splits/returns/damages Improving
Tariffs/macroIncremental tariff rate doubled to ~28%; detailed tariff list (China 30%, India 50%, Vietnam 20%, RoW avg 18%, steel/aluminum 50%, copper 50%) Guidance incorporates China 30%, global reciprocal 10%; 6-point mitigation plan outlined Headwinds rising; mitigation progressing
Product performance (Furniture)Furniture comps positive; newness pushed into positive Furniture comps positive for first time since Q4’22 Improving
B2B growth+10% comp; near record contract quarter +8% comp; record quarter; $2B long-term opportunity Strengthening
Global/RegionalStrong performance in Canada, Mexico, UK; Pottery Barn UK online launch planned Canada/Mexico/UK growth updates; expanded store openings Positive trajectory

Management Commentary

  • CEO: “In Q1, our comp came in above expectations at +3.4%... operating margin of 16.8% and EPS of $1.85... with all brands running positive comps” .
  • CEO on AI: “We have made meaningful progress in integrating AI across our digital platforms... enhance the customer journey with smart, data-driven experiences” .
  • CFO: “Gross margin... was 60 bps lower YoY (ex Q1’24 out-of-period benefit), with MMU lower from higher input costs, largely offset by supply chain savings and occupancy leverage” .
  • CFO on channels: “Retail up 6.2% comp and e-commerce 2.1% comp... maintained full-price selling” .
  • CFO on capex/capital returns: “Capex $250–$275M (85% to e-comm, retail optimization, supply chain); continue increased quarterly dividends and opportunistic repurchases ($1.1B authorization)” .

Q&A Highlights

  • Merchandise margin and promotions: No change to promotional stance; high full-price penetration; MMU pressured by ocean freight and tariff mitigation; efficiencies and occupancy leveraged offset .
  • Pricing philosophy: Surgical, item-by-item pricing focused on value, design, quality, service; selected increases where underpriced; aim to improve markdown margin and mix .
  • Tariff mitigation timing: Short-term expenses in Q1 to halt/resort shipments; pull-forward of lower-tariff receipts supports future quarters; confident guidance absorption .
  • Inventory and in-stock: Strategic pull-forward ~$60–$70M in Q1; improved on-time delivery at all-time highs; more “take-at-home today” driving comps .
  • Sourcing flexibility: China exposure reduced from ~50% historically to ~23%; multi-sourcing (double/triple) enables responsive shifts; expanding Made-in-USA capability .
  • B2B opportunity: Management reiterated ~$2B long-term opportunity as pipeline expands across hospitality, education, sports/entertainment .

Estimates Context

  • Q1 2026 beat across the board: EPS $1.85 vs $1.75 consensus; revenue $1.73B vs $1.67B; EBITDA $347.1M vs $338.0M; 20 EPS estimates and 17 revenue estimates underpin consensus breadth.*
  • Estimate revisions: With comps positive across brands and furniture returning to growth, models may raise FY25 top-line (already reflected in Q2 guidance raise) while margin estimates should consider tariff cost phase-in vs SG&A offsets .

Values with asterisks retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad-based top-line strength with all brands positive and furniture returning to growth is a notable inflection vs industry declines; supports market-share gain narrative .
  • The company’s operating model continues to defend margins via efficiency gains and occupancy leverage, even as merchandise margins face tariff/ocean freight pressures .
  • Tariff risk remains the key swing factor; mitigation actions (vendor concessions, resourcing, efficiencies, Made-in-USA, selective pricing) are visible and gaining traction .
  • AI adoption is substantive and tied to measurable CX and cost outcomes, differentiating WSM in a fragmented category .
  • Capital allocation remains shareholder-friendly (repurchases/dividends), supported by a fortress balance sheet and strong liquidity, though dividend disclosures show a minor inconsistency to monitor .
  • Near term: Positive comps, demand for newness, and channel execution are supportive; watch tariff flow-through and merchandise margin trajectory across Q2–Q3 .
  • Medium term: Multi-brand portfolio, B2B expansion, emerging brands (Rejuvenation, GreenRow), and AI-enabled operations underpin mid-to-high teen margin ambition and raised FY25 operating margin outlook in Q3 .