Williams-Sonoma (NYSE:WSM) reported accelerating second-quarter fiscal 2026 sales growth across its brands and channels, raised its full-year revenue and operating-margin outlook, and said its performance reflected market-share gains in a home furnishings industry that was essentially flat during the period.
Comparable brand revenue increased 6.2% in the quarter, accelerating from 4.8% in the first quarter, while net revenue rose 6.7% year over year to $1.96 billion. On a non-GAAP basis, operating income increased 3% to $338 million, operating margin was 17.3%, and diluted earnings per share rose 5% to $2.10.
Williams-Sonoma plans to reimburse vendors $47 million for discounts provided to help mitigate tariff costs and recorded a $10 million one-time contribution to eligible employees’ 401(k) accounts. Howie said the net effect was about $117 million of benefit to second-quarter GAAP pretax results. An additional $29 million benefit was recorded as a reduction to inventory and is expected to flow through gross margin in the third quarter as inventory is sold.
Broad-Based Brand and Channel Growth
President and Chief Executive Officer Laura Alber said every brand posted a positive comparable-sales result. Pottery Barn’s comparable sales rose 5.1%, Williams Sonoma increased 7.6%, West Elm grew 6.4%, and the Pottery Barn children’s businesses increased 3.5%. The company’s emerging brands delivered double-digit growth, while business-to-business revenue increased 14.5%.
E-commerce comparable sales rose 6.5%, while retail comparable sales grew 5.5%. Howie said growth was driven by market-share gains and occurred alongside increased full-price selling rather than deeper discounting.
Alber attributed the performance to product newness, collaborations, stronger storytelling, expanded assortments, and higher-quality products. She said the company has focused on offering competitive prices while improving product quality and design.
At Pottery Barn, management cited improvement in direct-to-customer sales, furniture, digital shopping features, product imagery, and store performance. Alber said new and repositioned stores have been performing well. At West Elm, new summer and fall merchandise each generated double-digit comparable sales, while the Pierce & Ward and Emma Chamberlain collaborations supported customer engagement and customer acquisition.
The Williams Sonoma brand reported growth across its assortment, including kitchen divisions, food, and Williams Sonoma Home. The company also cited customer engagement initiatives including culinary events, book signings, skills classes, and its No Kid Hungry campaign.
In B2B, contract revenue grew 20% and trade revenue rose 12%, according to Howie. Contract represented 36% of the B2B business. The company said it is expanding in markets including cruise ships, senior living, and student housing, and cited completed projects involving Virgin Hotels in New York City, Signature Aviation’s Miami Executive Airport, the University of Texas at Austin’s Hardin House, and Napa’s Carneros Inn.
Tariffs Pressure Gross Margin, but Costs Expected to Moderate
Second-quarter gross margin declined about 160 basis points year over year to 45.5%. Merchandise margins fell about 230 basis points as tariffs increased the weighted-average cost of goods sold. Howie described the second quarter as the peak of the tariff impact on gross margin and said the company expects that pressure to moderate in the second half as it begins to compare against tariffs paid in the prior year.
Supply-chain efficiencies and occupancy leverage offset part of the tariff pressure. Supply-chain efficiencies, including a lower shrink accrual, contributed about 30 basis points despite higher fuel costs, while occupancy leverage added approximately 40 basis points as sales growth outpaced a 3% increase in occupancy dollars.
SG&A expense was 28.2% of revenue, representing approximately 100 basis points of leverage from the prior year. Employment expenses leveraged by 120 basis points, which Howie attributed to payroll management and incentive compensation. Advertising expense was 7.4% of revenue, up 10 basis points, as the company continued investing in social, collaborations, influencer partnerships, and other content-led channels.
Outlook Raised on Operational Momentum
Williams-Sonoma raised its fiscal 2026 outlook to comparable brand revenue growth of 4% to 6.5%, from its prior range of 2% to 6%. It now expects total net revenue growth of 4.7% to 7.2% and operating margin of 17.8% to 18.2%.
Howie said the guidance incorporates tariffs in effect at the time of the call, including Section 232, existing and newly announced Section 301 tariffs, and the latest tariffs between Canada and the U.S. The forecast also incorporates higher fuel costs, but excludes any benefit from the tariff refunds.
The company continues to assume no material change in macroeconomic conditions, housing turnover, or interest rates, and is not assuming a housing-market recovery. It expects approximately $275 million in capital expenditures for the year, with about 95% directed to retail, e-commerce, and supply chain. Store count is expected to be essentially flat this year before growing 1% to 3% annually beginning in fiscal 2027.
Williams-Sonoma ended the quarter with inventories up 1% year over year to $1.45 billion. The company paid $90 million in dividends during the quarter, a 15% increase from a year earlier, and said it repurchased $288 million of stock year to date. About $1.1 billion remained under its repurchase authorizations.
AI and Digital Tools Support Customer Engagement
Chief Technology and Digital Officer Sameer Hassan said the company’s artificial-intelligence tools are supporting sales and customer service. Engagement with Olive, the Williams Sonoma shopping assistant, rose 700% since the beginning of the year, while revenue associated with Olive increased 620%. Customers who engage with Olive convert at three times the rate of other customers, Hassan said.
The company also launched Otto, an AI-powered assistant for the Pottery Barn family of brands. Hassan said more than 70% of Otto engagements have been resolved without transferring customers to an employee. He added that visits with personalized e-commerce experiences generate roughly nine times the revenue of an average visit, compared with about two times last year.
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.
