Williams-Sonoma, Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Total revenue for the quarter ended August 2, 2026, was $1.96 billion, representing a 6.7% increase year-over-year compared to $1.84 billion in the prior year period.
• Comparable brand revenue grew 6.2% year-over-year, compared to 3.7% in the prior year quarter.
• GAAP gross margin was 51.6% (up 450 basis points year-over-year), driven by IEEPA tariff refunds net of concessions (+610 bps), occupancy leverage (+40 bps), and supply chain efficiencies (+30 bps), partially offset by lower merchandise margins (-230 bps) due to tariff costs.
• Non-GAAP gross margin was 45.5% (down 160 basis points year-over-year), driven by lower merchandise margins (-230 bps) primarily from tariff costs, partially offset by supply chain efficiencies (+30 bps) and occupancy leverage (+40 bps).
• GAAP SG&A rate was 28.7% (down 50 bps year-over-year) with total SG&A of $563 million (up 5.0%); non-GAAP SG&A rate was 28.2% (down 100 bps year-over-year) with total non-GAAP SG&A of $553 million (up 3.1%).
• GAAP operating income was $449 million with an operating margin of 22.9% (up 500 bps year-over-year); non-GAAP operating income was $338 million with an operating margin of 17.3% (down 60 bps year-over-year).
• GAAP diluted EPS was $2.84 (up 42.0% year-over-year); non-GAAP diluted EPS was $2.10 (up 5.0% year-over-year).
• Merchandise inventories were $1.45 billion, up 1.0% year-over-year, net of $29.3 million in deferred tariff refund income.
• Operating cash flow for the twenty-six weeks ended August 2, 2026, was $696 million, inclusive of $200.2 million collected from tariff refunds and related interest.
• Cash and cash equivalents stood at $1.03 billion as of August 2, 2026.

Guidance and Future Outlook

• Fiscal 2026 annual net revenue guidance raised to a range of +4.7% to +7.2% growth.
• Fiscal 2026 comparable brand revenue guidance raised to a range of +4.0% to +6.5% growth.
• Fiscal 2026 non-GAAP operating margin guidance raised to a range of 17.8% to 18.2%.
• Long-term outlook remains for mid-to-high single-digit annual net revenue growth with an operating margin in the mid-to-high teens.
• Fiscal 2026 guidance assumes all current tariffs (Section 232, existing Section 301, new Section 301 announced July 23, and Canada-U.S. tariffs) remain in place, elevated oil prices, and no benefit from tariff refunds or related interest.
• Fiscal 2026 non-GAAP interest income is expected to be approximately $25 million, with an effective tax rate of approximately 26%.

Business Segments and Product Lines

• All brands delivered growth in the second quarter.
• Pottery Barn comparable revenue grew 5.1% (vs. 1.1% prior year).
• West Elm comparable revenue grew 6.4% (vs. 3.3% prior year).
• Williams Sonoma comparable revenue grew 7.6% (vs. 5.1% prior year).
• Pottery Barn Kids and Teen comparable revenue grew 3.5% (vs. 5.3% prior year).
• Total store count increased to 508 at quarter-end from 506 at the beginning of the quarter (2 openings, 1 closing).

Market and Competitive Landscape

• The company reported gaining market share and outperforming the industry during the quarter.
• Results were delivered despite challenges from the housing market and other macroeconomic events.

Risks and Challenges

• Tariff costs continue to impact merchandise margins, though partially offset by refunds and efficiencies.
• The guidance assumes continued elevated oil prices and the persistence of all current trade tariffs.
• Forward-looking statements are subject to risks including changes in tax laws, trade policies, economic conditions, inflation, consumer disposable income, housing market conditions, and supply chain disruptions.

Management Commentary and Tone

• Laura Alber, President and CEO, described the quarter as "very strong," citing strong execution across brands, channels, and the team.
• Management stated that strategies are gaining momentum and results reflect the power of execution.
• The company expressed confidence in its priorities and plans for the remainder of 2026 and beyond, noting it is delivering compounding results.

Other Key Points

• Recognized $167.8 million in IEEPA tariff refund income (reduction of cost of goods sold) and $6.3 million in related interest income during the quarter.
• Recorded a $47.5 million provision to reimburse vendors for previously provided tariff-related concessions.
• Incurred a one-time $10.0 million tariff-related employee recognition cost via a discretionary 401(k) contribution.
• Deferred $29.3 million of tariff refund income as a reduction of inventory, expected to be recognized in Q3 2026.
• Substantially all of the initial $197.8 million tariff refund claim has been collected, with a remaining receivable of $3.2 million.
• Delivered $90 million in returns to stockholders through dividends during the quarter.
• Repurchased $287.8 million of common stock and paid $175.4 million in dividends during the twenty-six weeks ended August 2, 2026.