Williams-Sonoma Inc. reported fiscal second-quarter 2026 earnings that exceeded Wall Street estimates, though its stock slipped in premarket trading as tariff-related costs weighed on margins.
The San Francisco-based home furnishings company posted adjusted diluted earnings per share of $2.10, up 5% year-over-year and surpassing the $2.06 estimate by $0.04. Total net revenue rose 6.7% to $1.96 billion, beating expectations of $1.92 billion by $40 million. Comparable brand revenue growth accelerated to 6.2%, up from 4.8% in the prior quarter.
Gross margin contracted to 45.5%, down 160 basis points from a year ago, primarily due to tariff-related cost pressures. Operating income increased 3% to $338 million, while the operating margin held at 17.3%. Selling, general and administrative expenses improved to 28.2% of revenue, a 100-basis-point leverage gain.
Chief Executive Officer Laura Alber highlighted strong execution across brands and channels, noting the company delivered profitability amid a volatile environment. "We delivered this profitability while continuing to manage through a volatile environment, which includes war, ever-changing tariffs, rising interest rates, and broader macro uncertainty," she said.
Williams-Sonoma received $200 million in tariff refunds during the quarter, including $174 million recognized in its income statement. Of that, $168 million reduced cost of goods sold, while $6 million was recorded as interest income. The company allocated $47 million to reimburse vendor partners for tariff-mitigating discounts and $10 million to employee 401(k) plans. An additional $29 million in tariff-related benefits remains on the balance sheet for Q3.
The company 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 is now expected to range between 17.8% and 18.2%, while capital expenditures remain unchanged at about $275 million.
Shares of Williams-Sonoma fell 1.73% to $230.67 in premarket trading, following a 52-week range of $165.51 to $254.89. The company maintained a quarterly dividend of $0.76 per share, up 15% year-over-year, and repurchased $288 million in stock year-to-date.
