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WILLIAMS SONOMA INC (WSM)·Q3 2026 Earnings Summary

Executive Summary

  • Q3 2026 (13 weeks ended Nov 2, 2025) delivered solid top-line and profitability: revenue $1.8828B (+4.6% YoY), gross margin 46.1% (+70 bps YoY), operating margin 17.0% (+10 bps YoY), and diluted EPS $1.96 (+4.8% YoY). Comps were +4.0%, with positive comps across all brands .
  • Results beat Wall Street: EPS $1.96 vs $1.87 consensus*, revenue $1.883B vs $1.866B consensus*, and EBITDA $376.7M vs $368.8M consensus*; strength was driven by full‑price selling, supply chain efficiencies, and delayed tariff flow-through. Management raised FY25 operating margin guidance to 17.8%–18.1% (from 17.4%–17.8%) .
  • Key positives: retail channel comp +8.5%, B2B +9%, Williams‑Sonoma brand +7.3% comp; inventory well‑positioned for holiday; new $1.0B buyback added to authorization (~$1.6B total) .
  • Watchouts: tariff headwinds to be larger in Q4; incremental tariff rate has risen to ~29% from 14% earlier this year; SG&A rate up 60 bps YoY on incentives and advertising .
  • Near-term stock catalysts: margin guidance raise and buyback support sentiment; tariff trajectory and holiday promo discipline vs demand elasticity are the swing factors .

What Went Well and What Went Wrong

What Went Well

  • Positive comps across all brands and both furniture/non‑furniture, with retail comp +8.5% and e‑commerce +1.9% in Q3; Williams‑Sonoma brand led at +7.3% comp .
  • Gross margin up 70 bps YoY to 46.1% on merchandise margin expansion (+60 bps) and supply chain efficiencies (+30 bps), more than offsetting higher occupancy costs (+20 bps) .
  • Strategic quote (CEO): “We are raising our bottom-line guidance 40 basis points to an operating margin of 17.8%-18.1%… despite substantial tariff headwinds” .

What Went Wrong

  • SG&A rate rose to 29.1% (+60 bps YoY) on incentive compensation and higher advertising; SG&A dollars increased to $548.6M (+7.0% YoY) .
  • Tariffs still a material headwind; management expects a “substantially larger impact” in Q4 as higher-cost receipts flow through COGS; incremental tariff rate now ~29% vs 14% earlier in the year .
  • Occupancy costs increased 5.9% YoY ($207M), adding 20 bps headwind to gross margin due to retail outperformance .

Financial Results

WSM reports fiscal Q3 2026 as “third quarter 2025” (13 weeks ended Nov 2, 2025). Trend comparisons show prior year (Q3 2025), prior quarter (Q2 2026), and current period.

MetricQ3 2025 (YoY base)Q2 2026Q3 2026 (current)
Revenue ($USD)$1,800,668,000 $1,840,000,000 $1,882,814,000
Gross Margin %45.4% 47.1% 46.1%
Operating Margin %16.9% 17.9% 17.0%
Diluted EPS ($)$1.87 $2.00 $1.96
Comparable Brand Revenue (Comp %)(2.9%) 3.7% 4.0%

Estimates vs Actual (Q3 2026)

MetricConsensus*Actual
Revenue ($USD)$1,865,654,010*$1,882,814,000
Primary EPS ($)$1.87193*$1.96
EBITDA ($USD)$368,829,930*$376,654,000*

Values with asterisk retrieved from S&P Global.

Segment Net Revenues and Comps (brand-level, current vs prior year)

BrandNet Revenues – Prior Year (Q3 2025 base)Net Revenues – Current (Q3 2026)Comp – Prior Year (Q3 2025 base)Comp – Current (Q3 2026)
Pottery Barn$718,240,000 $741,526,000 (7.5%) 1.3%
West Elm$450,490,000 $468,243,000 (3.5%) 3.3%
Williams‑Sonoma$252,125,000 $276,417,000 (0.1%) 7.3%
PB Kids & Teen$287,259,000 $291,382,000 3.8% 4.4%
Other (Rejuvenation, Mark & Graham, GreenRow)$92,554,000 $105,246,000 N/A N/A
Total$1,800,668,000 $1,882,814,000 (2.9%) 4.0%

Selected KPIs

KPIQ2 2026Q3 2026
Retail comp (%)7.3% 8.5%
E‑commerce comp (%)2.0% 1.9%
SG&A ($mm)—$548.6
SG&A rate (%)—29.1%
Occupancy costs ($mm)—$207
Operating cash flow (quarter, $mm)$283 $316
Cash & Equivalents (period-end, $mm)$986 $884.7
Merchandise inventories ($mm)$1,400 $1,530.9
Inventory includes tariff/pull-forward ($mm)$90 (20 tariff + 70 pull-forward) $78 (48 tariff + 30 pull-forward)
Share repurchases ($mm, quarter)$199 $267
Dividends paid ($mm, quarter)$81 $80

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Margin %FY 202517.4%–17.8% 17.8%–18.1% Raised
Comparable Brand Revenue GrowthFY 2025+2% to +5% +2% to +5% Maintained
Total Net Revenues GrowthFY 2025+0.5% to +3.5% +0.5% to +3.5% Maintained
Interest Income ($mm)FY 2025~$30 ~$35 Raised
Effective Tax Rate (%)FY 2025~26.5% ~26.0% Lowered
Capex ($mm)FY 2025$250–$275 $250–$275 Maintained
Quarterly Dividend ($/share)FY 2025$0.66 $0.66 Maintained
Share Repurchase Authorization ($bn)Ongoing~$0.9 available New +$1.0 authorization (total ~$1.6) Raised
Incremental Tariff Rate (%)FY 2025~28% ~29% Raised

Notes: FY24 was a 53‑week year (+150 bps rev, +20 bps OM to full year; Q4 2024 +510 bps rev, +60 bps OM). FY25 comps will be reported on 52‑vs‑52 week basis; other YoY compares are 52 vs 53 weeks .

Earnings Call Themes & Trends

TopicPrevious (Q1 2026)Previous (Q2 2026)Current (Q3 2026)Trend
AI/technologyEarly AI integration in marketing/design; plan to lead with AI AI customer service assistant rollout; supply chain and ops AI; ROI emerging AI chat resolves >60% of chats, handle times cut 23→5 min; launch of “Olive” culinary companion; SG&A and top-line benefits Accelerating deployment and impact
Supply chainEfficiency savings (120 bps in Q1), better on-time, fewer splits/damages “All-time best” service metrics; 30 bps GM benefit +30 bps GM from efficiencies; continued improvements; ACDC DC ramp helps holiday Sustained improvement
Tariffs & mitigation6‑point plan; re-sourcing; selective pricing; FY25 OM 17.4%–17.8% Incremental tariff rate doubled to 28%; maintained OM guide Incremental tariff ~29%; larger Q4 margin impact expected; OM guide raised on YTD strength Headwinds rising but mitigated
Pricing/promotionsFull‑price stance; reduced promo emphasis Select price increases; focus on value; elasticity varies by SKU/category Maintain promo discipline into holiday; “great price selling,” fewer promos targeted Discipline maintained
Channels (Retail vs DTC)Retail up 6.2%, e‑comm up 2.1% Retail +7.3%, e‑comm +2.0% Retail +8.5%, e‑comm +1.9% Retail momentum improving
B2BRecord Q1; +8% comp +10% comp; strong contract business +9% comp; notable wins (Google, WeWork, TurboTax, PayPal) Consistent double‑digit strength
Inventory strategyStrategic pull‑forward; inventory up 10% YoY Inventory up 17.7%; ~$70M pull-forward, $20M tariff capitalized Inventory up 9.6%; $48M tariffs + $30M pull-forward in inventory Proactive positioning
Housing/macroExpect soft furniture industry; focus on non‑furniture growth Furniture comps turn positive; macro still weak Housing still very weak; some optimism for 2026; furniture strength continues Macro static; execution offsets

Management Commentary

  • CEO: “We are proud to deliver strong results… comp came in above expectations at 4%, with another quarter of positive comps in all brands. Operating margin came in at 17%,… EPS of $1.96” .
  • CFO: “Our gross margin results this quarter exceeded our expectations… tariff mitigation efforts more than offset the headwinds” .
  • CFO: “Incremental tariff rate has more than doubled from 14% earlier this year to 29% today” .
  • CTO: “AI automation [is] reducing payroll costs… cutting out‑of‑market shipments, improving routes… driving SG&A leverage and demand” .
  • CEO: “We continue to gain market share and outperform the industry… [and] are raising our bottom‑line guidance” .

Q&A Highlights

  • Pricing elasticity: Management emphasized SKU/category differentiation and service experience as key to pricing power; selective increases where underpriced, careful not to impair accessibility .
  • Tariff timing and Q4 impact: Delayed effective dates and inventory front‑loading reduced Q3 impacts, but Q4 margin headwinds will be “substantially larger”; guidance embeds best estimates .
  • Unit growth and store strategy: Continuing mid‑single‑digit closures overall; offensive posture for West Elm/Rejuvenation/GreenRow; repositioning to lifestyle centers; more remodels/new stores planned .
  • Holiday strategy and promotions: Maintain “great price selling” and fewer promos than last year; Black Friday deals planned via vendor partnerships; balance demand vs margin .
  • SG&A and AI: Incentive comp and digital advertising raised SG&A in Q3; AI initiatives reducing payroll/vendor costs and boosting conversion—expected compounding benefits into 2026 .

Estimates Context

  • Q3 2026 delivered beats: EPS $1.96 vs $1.87193 consensus*; revenue $1.8828B vs $1.8657B consensus*; EBITDA $376.7M vs $368.8M consensus*. The beats were driven by stronger merchandise margins, supply chain efficiencies, full‑price selling, and delayed tariff flow‑through .
  • Estimate implications: Near‑term consensus may increase for FY25 operating margin after guide-raised to 17.8%–18.1%; Q4 margin expectations should incorporate larger tariff impact and 53rd‑week lap effects called out by management .

Values with asterisk retrieved from S&P Global.

Key Takeaways for Investors

  • Strong execution: Broad‑based comp strength and margin expansion despite tariffs; sustained retail momentum suggests store investments are paying off .
  • Bold: Raised FY25 operating margin guidance to 17.8%–18.1% and authorized an incremental $1.0B buyback—supportive of EPS and multiple .
  • Tariff trajectory is the key swing factor: Expect larger Q4 margin headwind as higher‑tariff inventory flows through; mitigation and pricing strategy credibility remain high .
  • AI is becoming material: Demonstrable SG&A and top-line benefits (chat resolution >60%, handle times 23→5 min); watch for scaling into holiday and 2026 .
  • Segment mix favorable: Williams‑Sonoma brand +7.3% comp; West Elm +3.3%; PB Kids/Teen +4.4%—suggests diversified drivers into holiday .
  • Trading lens: Near-term upside tied to holiday execution and promo discipline; buyback provides downside support; monitor tariff headlines (India/IEEPA) and Q4 margin print .
  • Medium-term thesis: Multi-brand, vertically integrated, digital-first platform plus supply chain excellence and AI leverage positions WSM to outgrow and outperform in a recovering housing cycle .