Williams-Sonoma (NYSE:WSM) reported second-quarter fiscal 2026 results above Wall Street expectations and raised its full-year outlook, as comparable brand revenue increased 6.2%.
The home furnishings retailer reported adjusted diluted earnings per share of $2.10, compared with analyst estimates of $2.05. Total revenue rose 6.7% to $1.96 billion, topping expectations of $1.91 billion.
GAAP diluted EPS was $2.84, up 42% from a year earlier, while GAAP operating income was $449 million, resulting in an operating margin of 22.9%. On a non-GAAP basis, operating income was $338 million, with an operating margin of 17.3%, down from 17.9% a year earlier.
Gross margin was 51.6% on a GAAP basis, up 450 basis points year over year, primarily reflecting the impact of International Emergency Economic Powers Act tariff refunds. On a non-GAAP basis, gross margin was 45.5%, down 160 basis points, largely due to lower merchandise margins related to tariff costs.
Williams-Sonoma recorded $167.8 million in tariff refunds as a reduction of cost of goods sold during the quarter, along with $6.3 million in related interest income. These amounts were partially offset by a $47.5 million provision to reimburse certain merchandise vendors that had previously provided tariff-related concessions and a $10 million one-time employee recognition cost.
As of August 2, the company had collected substantially all of its initial $197.8 million tariff refund claim, with $3.2 million remaining as a receivable. It also deferred $29.3 million of tariff refund income as a reduction to merchandise inventories, which it expects to recognize as a reduction to cost of goods sold in the third quarter.
Merchandise inventories increased 1% year over year to $1.45 billion. Williams-Sonoma ended the quarter with $1 billion in cash and generated $696 million in operating cash flow, including the collection of $200.2 million in tariff refunds and related interest.
“We delivered a very strong second quarter. In Q2, our comp came in at 6.2%, with total revenue growth of 6.7%, and we drove an operating margin of 17.3% with earnings per share of $2.10,” Williams-Sonoma CEO Laura Alber said.
“Every brand delivered again in the quarter, driven by strong execution across our brands, our channels, and our team.”
The company raised its fiscal 2026 guidance and now expects annual net revenue growth of 4.7% to 7.2%, with comparable revenue growth of 4.0% to 6.5%. It expects a full-year non-GAAP operating margin between 17.8% and 18.2%.
The outlook assumes current tariffs remain in place throughout fiscal 2026 and does not include any benefit from tariff refunds or related interest. Williams-Sonoma also expects approximately $25 million in annual interest income and a non-GAAP effective tax rate of approximately 26%.
“Our strategies continue to gain momentum, and our results reflect the power of our execution. We gained market share, continued to outperform the industry, and raised our annual outlook on both the top and bottom lines,” Alber wrote.
“We are delivering compounding results despite the housing market and other macroeconomic events, and we remain confident in our priorities and plans for the remainder of 2026 and beyond.”
Shares of Williams-Sonoma were set to open almost 5% lower on Wednesday, likely reflecting profit taking following the report.