Williams-Sonoma(WSM) - 2026 Q2 - Quarterly Results

Second Quarter 2025 Results Overview Williams-Sonoma, Inc. reported strong Q2 2025 results, driven by comparable brand revenue growth, significant operating margin expansion, and increased diluted EPS Headline Financial Performance Williams-Sonoma, Inc. announced strong second quarter 2025 results, with comparable brand revenue growth, significant operating margin expansion, and increased diluted EPS, leading to an upward revision of the fiscal 2025 net revenue outlook Q2 2025 Headline Performance Metrics | Metric | Q2 2025 Performance | | :----------------------- | :------------------ | | Comparable Brand Revenue | +3.7% | | Operating Margin | 17.9% (+240bps YoY) | | Diluted EPS | $2.00 (+19.8% YoY) | - The company has raised its 2025 net revenue outlook[1] CEO Statement CEO Laura Alber highlighted the strong Q2 2025 performance, driven by positive comparable sales across all brands and channels, exceeding profitability estimates, and attributed this outperformance to strong execution and the company's robust omni-channel platform and brand portfolio, positioning it for future growth despite macroeconomic uncertainties - All brands achieved positive comparable sales, contributing to a +3.7% comp[3] - Outperformance was driven by positive comparable sales in both furniture and non-furniture categories, and strong performance in retail and e-commerce channels[3] - The company has a powerful portfolio of brands serving diverse categories and life stages, supported by a strong omni-channel platform and infrastructure[4] Q2 2025 Key Highlights Key financial and operational highlights for Q2 2025 include strong comparable brand revenue growth, significant gross margin expansion driven by higher merchandise margins and supply chain efficiencies, and improved operating income, with the company also maintaining a strong liquidity position and returning capital to stockholders through repurchases and dividends Q2 2025 Financial and Operational Highlights | Metric | Q2 2025 Value | Change YoY | | :--------------------------------- | :-------------- | :--------- | | Comparable Brand Revenue | +3.7% | | | Gross Margin | 47.1% | +220bps | | - Merchandise Margins | | +190bps | | - Supply Chain Efficiencies | | +30bps | | SG&A Rate | 29.2% | -20bps | | Operating Income | $328 million | | | Operating Margin | 17.9% | +240bps | | Diluted EPS | $2.00 | +19.8% | | Merchandise Inventories | $1.4 billion | +17.7% | | Cash and Cash Equivalents | $986 million | | | Operating Cash Flow | $283 million | | | Returns to Stockholders | $280 million | | | - Stock Repurchases | $199 million | | | - Dividends | $81 million | | - SG&A rate decreased by 20bps due to lower advertising and general expenses, partially offset by higher performance-based incentive compensation[4] - Merchandise inventories increased by 17.7% year-over-year, including a strategic pull forward of receipts to mitigate the impact of higher tariffs in fiscal 2025[4] Financial Outlook and Adjustments The company updates its fiscal 2025 outlook, reiterates long-term targets, and addresses a prior-period freight expense adjustment Fiscal 2025 Outlook The company has raised its fiscal 2025 net revenue guidance to reflect higher trends, while reiterating its operating margin guidance, acknowledging pressure from incremental tariff costs, with the outlook also detailing expectations for interest income, effective tax rate, and the fiscal year structure Fiscal 2025 Guidance Summary | Metric | Fiscal 2025 Guidance | | :----------------------- | :------------------- | | Net Revenues | +0.5% to +3.5% | | Comparable Sales | +2.0% to +5.0% | | Operating Margin | 17.4% to 17.8% | | Annual Interest Income | ~$30 million | | Effective Tax Rate | ~26.5% | - Incremental flow-through from higher net revenues is expected to be pressured by increased tariff costs, including additional tariffs on goods from China (30%), India (50%), Vietnam (20%), and steel/aluminum/copper (50%)[8] - Fiscal 2025 is a 52-week year, compared to a 53-week year in fiscal 2024, with comparable sales reported on a 52-week versus 52-week basis[8] Long-Term Financial Targets The company maintains its long-term financial targets, expecting sustained annual net revenue growth and a stable operating margin - Long-term annual net revenue growth is expected to be in the mid-to-high single digits[8] - Long-term operating margin is targeted in the mid-to-high teens[8] First Quarter 2024 Out-of-Period Freight Adjustment The company identified an over-recognition of freight expense totaling $49 million across fiscal years 2021-2023, which was deemed immaterial to prior periods and corrected in the first quarter of fiscal 2024 by reducing cost of goods sold and accounts payable - Over-recognized freight expense of $49 million was identified for fiscal years 2021, 2022, and 2023[5] - The cumulative error was determined not to be materially misstated for prior periods or projected fiscal 2024 results[5] - An out-of-period adjustment of $49 million was recorded in Q1 fiscal 2024 to reduce cost of goods sold and accounts payable[5] Company Information and Disclosures Company information, non-GAAP disclosures, forward-looking statement risks, and conference call details are presented About Williams-Sonoma, Inc. Williams-Sonoma, Inc. is recognized as the world's largest digital-first, design-led, and sustainable home retailer, operating a diverse portfolio of brands through e-commerce, catalogs, and retail stores, supported by a loyalty program and an international presence - Williams-Sonoma, Inc. is the world's largest digital-first, design-led, and sustainable home retailer[12] - The company's brand portfolio includes Williams Sonoma, Pottery Barn, West Elm, Pottery Barn Kids, Pottery Barn Teen, Williams Sonoma Home, Rejuvenation, Mark and Graham, and GreenRow[12] - Brands are marketed through e-commerce, direct-mail catalogs, and retail stores, with operations in the U.S., Puerto Rico, Canada, Australia, and the United Kingdom, plus international franchisees[12] SEC Regulation G — Non-GAAP Information This section clarifies the company's use of non-GAAP financial measures, stating they provide supplemental information for investors and management to analyze business performance, but are not a substitute for GAAP measures and may not be comparable to those of other companies - Non-GAAP financial measures are used to provide meaningful supplemental information for investors and facilitate evaluation of current period performance on a comparable basis with prior periods[9] - Management uses non-GAAP measures to analyze changes in underlying business from quarter to quarter[9] - Non-GAAP measures should be considered a supplement to, not a substitute for or superior to, GAAP financial measures and may not be comparable to similarly titled measures used by other companies[9] Forward-Looking Statements The press release contains forward-looking statements that are subject to risks and uncertainties, which could cause actual results to differ materially, with these risks including tariffs, economic conditions, consumer behavior, supply chain disruptions, and operating costs, as detailed in SEC filings - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially[10] - Key risks include the impact of current and potential future tariffs, general economic conditions (inflation, recession fears, interest rates), consumer preferences and buying trends, and global supply chain factors[11] - All financial results described are preliminary and subject to change until the Form 10-Q for the quarter ended August 3, 2025, is filed[11] Conference Call and Contact Information Details for the live conference call and webcast regarding the Q2 2025 results are provided, along with contact information for key financial executives - A live conference call was scheduled for August 27, 2025, at 7:00 A.M. (PT), accessible via webcast[7] - Contact information for Jeff Howie (EVP, Chief Financial Officer) and Jeremy Brooks (SVP, Chief Accounting Officer & Head of Investor Relations) is provided[8] Unaudited Condensed Consolidated Financial Statements Unaudited condensed consolidated financial statements, including earnings, balance sheets, cash flows, and retail store data, are presented Condensed Consolidated Statements of Earnings The unaudited condensed consolidated statements of earnings present the company's financial performance for the thirteen and twenty-six weeks ended August 3, 2025, and July 28, 2024, showing increases in net revenues, gross profit, operating income, and net earnings for the recent quarter Condensed Consolidated Statements of Earnings (Thirteen and Twenty-six Weeks Ended, in thousands) For the Thirteen Weeks Ended: | Metric (in thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Net Revenues | $1,836,760 | $1,788,307 | | Gross Profit | $864,623 | $803,940 | | Operating Income | $328,059 | $277,900 | | Net Earnings | $247,562 | $216,855 | | Diluted EPS | $2.00 | $1.67 | For the Twenty-six Weeks Ended: | Metric (in thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Net Revenues | $3,566,873 | $3,448,655 | | Gross Profit | $1,630,432 | $1,599,108 | | Operating Income | $618,772 | $595,012 | | Net Earnings | $478,825 | $477,271 | | Diluted EPS | $3.86 | $3.67 | Q2 Net Revenues and Comparable Brand Revenue Growth (Decline) by Brand This table details net revenues and comparable brand revenue growth or decline for each brand during Q2 2025 and Q2 2024 | Brand | Q2 2025 Net Revenues (in thousands) | Q2 2024 Net Revenues (in thousands) | Q2 2025 Comparable Brand Revenue Growth (Decline) | Q2 2024 Comparable Brand Revenue Growth (Decline) | | :---------------------- | :---------------------------------- | :---------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Pottery Barn | $724,579 | $725,323 | 1.1% | (7.1)% | | West Elm | $468,550 | $458,779 | 3.3% | (4.8)% | | Williams Sonoma | $249,053 | $239,867 | 5.1% | (0.8)% | | Pottery Barn Kids and Teen | $286,749 | $259,408 | 5.3% | 1.5% | | Other | $107,829 | $104,930 | N/A | N/A | | Total | $1,836,760 | $1,788,307 | 3.7% | (3.3)% | Condensed Consolidated Balance Sheets The unaudited condensed consolidated balance sheets provide a snapshot of the company's financial position at August 3, 2025, February 2, 2025, and July 28, 2024, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (As of, in thousands) | Item | August 3, 2025 | February 2, 2025 | July 28, 2024 | | :------------------------ | :------------- | :--------------- | :------------ | | Assets | | | | | Total Current Assets | $2,655,520 | $2,754,609 | $2,714,564 | | Total Assets | $5,228,368 | $5,301,607 | $5,181,939 | | Liabilities & Equity | | | | | Total Current Liabilities | $1,766,309 | $1,911,974 | $1,743,202 | | Total Liabilities | $3,078,672 | $3,159,188 | $2,945,849 | | Total Stockholders' Equity| $2,149,696 | $2,142,419 | $2,236,090 | - Merchandise inventories, net, increased from $1,217,693 thousand as of July 28, 2024, to $1,433,605 thousand as of August 3, 2025[18] - Cash and cash equivalents decreased from $1,265,259 thousand as of July 28, 2024, to $985,823 thousand as of August 3, 2025[18] Condensed Consolidated Statements of Cash Flows The unaudited condensed consolidated statements of cash flows detail the cash movements from operating, investing, and financing activities for the twenty-six weeks ended August 3, 2025, and July 28, 2024, showing a net decrease in cash and cash equivalents for the current period Condensed Consolidated Statements of Cash Flows (For the Twenty-six Weeks Ended, in thousands) | Cash Flow Activity | August 3, 2025 | July 28, 2024 | | :----------------------------- | :------------- | :------------ | | Net Cash Provided by Operating Activities | $401,678 | $473,283 | | Net Cash Used in Investing Activities | $(111,488) | $(70,959) | | Net Cash Used in Financing Activities | $(521,133) | $(398,222) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(227,154) | $3,252 | | Cash and Cash Equivalents at End of Period | $985,823 | $1,265,259 | - Cash used in financing activities significantly increased, primarily due to higher repurchases of common stock ($289,108 thousand in 2025 vs. $173,603 thousand in 2024) and increased payment of dividends ($155,994 thousand in 2025 vs. $135,768 thousand in 2024)[21] - Purchases of property and equipment increased to $110,293 thousand for the twenty-six weeks ended August 3, 2025, from $70,946 thousand in the prior year period[21] Retail Store Data The unaudited retail store data provides a breakdown of store counts by brand at the beginning and end of the second quarter of fiscal 2025, showing a slight increase in total store count during the quarter but a decrease compared to the prior year Retail Store Data by Brand | Brand | Beginning of Quarter (May 4, 2025) | Openings | Closings | End of Quarter (August 3, 2025) | As of July 28, 2024 | | :---------------------- | :--------------------------------- | :------- | :------- | :------------------------------ | :------------------ | | Pottery Barn | 180 | 1 | — | 181 | 185 | | Williams Sonoma | 154 | — | — | 154 | 158 | | West Elm | 119 | — | — | 119 | 122 | | Pottery Barn Kids | 44 | — | — | 44 | 45 | | Rejuvenation | 11 | — | — | 11 | 11 | | Total | 508 | 1 | — | 509 | 521 | - One new Pottery Barn store was opened during the quarter, resulting in a net increase of one store for the total company from the beginning to the end of Q2 2025[19] - The total number of stores decreased from 521 as of July 28, 2024, to 509 as of August 3, 2025[19]