Williams-Sonoma Inc. reported adjusted diluted earnings per share of $2.10 for the second quarter of fiscal 2026, up 5% from the prior-year period and exceeding the $2.06 consensus estimate by $0.04. Total net revenue rose 6.7% year-over-year to $1.96 billion, surpassing the $1.92 billion forecast by $40 million.
Comparable brand revenue growth accelerated to 6.2%, marking the sixth consecutive quarter of positive growth. Operating income increased 3% to $338 million, while the operating margin narrowed to 17.3% from 17.6% a year earlier. Gross margin declined by 160 basis points to 45.5%, primarily due to tariff-related cost pressures. Selling, general and administrative expenses improved by 100 basis points to 28.2% of revenue.
Merchandise inventory stood at $1.45 billion, up 1% year-over-year. The company paid $90 million in dividends, an increase of 15% from the prior year, with a quarterly dividend of $0.76 per share. Year-to-date share repurchases totaled $288 million, equivalent to about 1.4% of shares outstanding. Return on equity remained elevated at 54%.
Tariff-related benefits contributed $174 million to the quarter’s results, following a $200 million refund received. Williams-Sonoma plans to reimburse $47 million to vendors and $10 million to associates’ 401(k) plans, with an additional $29 million of tariff-related benefit earmarked for third-quarter gross margin.
Brand performance varied, with Williams Sonoma leading at 7.6% comparable growth, followed by West Elm at 6.4% and Pottery Barn at 5.1%. Emerging brands such as Rejuvenation and Mark and Graham posted double-digit growth, while business-to-business revenue rose 14.5%.
Shares of Williams-Sonoma fell 1.73% in premarket trading to $230.67, extending declines from the prior session’s close of $234.74. The stock remains 9.5% below its 52-week high of $254.89 and trades at a P/E ratio of 26.
Management raised its full-year fiscal 2026 guidance, projecting comparable brand revenue growth of 4% to 6.5% and total net revenue growth of 4.7% to 7.2%. Operating margin guidance was increased to a range of 17.8% to 18.2%. Capital expenditures are expected to remain at approximately $275 million. The company noted that the second quarter represented the peak of tariff pressure, with easing expected in the second half, though higher fuel costs and a 150-basis-point shrink accrual headwind in the fourth quarter remain concerns.
