Williams-Sonoma got a boost in the second quarter from an IEEFA tariff refund, as the company beat Wall Street estimates on earnings and revenue with comparable sales advancing across its retail banners.
Net earnings were $338.1 million, or $2.84 per diluted share, versus $247.6 million, or $2 per diluted share, in the period a year prior. Adjusted for any one-time events, net earnings per diluted share were $2.10 versus $2 in the year-earlier period, the company reported.
A Zacks Investment Research analyst consensus estimate called for earnings of $2.05 and revenues of $1.91 billion.
Net revenues were $1.96 billion versus $1.84 billion in the year-previous quarter. Operating income was $448.8 million versus $328.1 million in the year-before period, while adjusted operating income was $338.5 million versus $328.1 million.
Williams-Sonoma company comparable sales increased 6.2% with Pottery Barn up 5.1%, West Elm up 6.4%, Williams Sonoma up 7.6% and Pottery Barn Kids and Teen up 3.5%.
During the second quarter, Williams-Sonoma recognized a refund of previously paid IEEPA tariffs, recording a reduction of cost of goods sold of $167.8 million and related interest income of $6.3 million. This income was partially offset by a provision of $47.5 million to reimburse certain vendors that previously provided tariff-related concessions and a one-time tariff-related employee recognition cost of $10 million. As of August 2, Williams-Sonoma deferred $29.3 million of the tariff refund income as a reduction of merchandise inventories, which the company anticipates recognizing as a reduction to cost of goods sold in the third quarter. Substantially all of an initial refund claim of $197.8 million was collected as of August 2, with a remaining tariff refund receivable of $3.2 million.
In regards to IEEPA tariff reimbursement, Jeff Howie, Williams-Sonoma executive vice president and CFO, provided more detail in the conference call, saying the company had filed for duty refunds of $198 million.
“In the second quarter, we received $200 million, including interest. We have received substantially all of our refunds. When ran through the income statement this quarter, we recognized $174 million into income.”
The total included $168 million “recorded as a reduction in cost of goods sold, and $6 million was booked as interest income. Against that, we are using $47 million to reimburse many of our vendor partners for discounts they gave us to mitigate the IEEPA tariffs. We also recorded $10 million in SG&A for a one-time contribution to all eligible employees’ 401k accounts in recognition of their efforts navigating the IEEPA tariffs. So, net-net, approximately $117 million of benefit to second quarter is GAAP pre-tax results. An unrecognized benefit of $29 million was recorded as a reduction of inventory on the balance sheet and will flow through gross margin in the third quarter as the related inventory is sold.
Williams-Sonoma updated its full-year guidance with the expectation of net revenues in the range of up 4.7% to 7.2%, comps in the range of up 4% to 6.5% and an operating margin between 17.8% to 18.2% versus the annum past. In its earlier outlook, the company anticipated annual net revenue growth in the range of 2.7% to 6.7%, with comps up 2% to 6% and an operating margin between 17.5% and 18.1%.
In announcing the financial results on a conference call, Laura Alber, Williams-Sonoma president and CEO, said, “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. Every brand delivered again in the quarter, driven by strong execution across our brands, our channels, and our team. 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. 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.”
Alber made a point of the company’s advances in aligning artificial intelligence with operations.
“We have recently launched our next AI-powered shopping assistant, Otto, across the Pottery Barn family,” Alber said. “Otto begins to bring the agentic discovery experience we’re building with Williams Sonoma’s Olive to the furniture brands. Both Olive and Otto are helping our customers with product recommendations, and they are increasing consumer engagement with our content design tools and free design service offerings. AI is an accelerator to our strategy and our productivity. We’re using it to drive sales, improve service and make our teams more effective. So many aspects of our tactile and taste-driven business cannot be replaced by AI, but our processes can certainly be enhanced by it, especially in supply chain and inventory management, and therefore, customer service.”
