Williams-Sonoma Raises Fiscal 2026 Outlook After Comp Acceleration
Comparable brand revenue rose 6.2% in the second quarter, and the company lifted its full-year comp range to 4.0% to 6.5%.
Williams-Sonoma, Inc. (WSM) raised its fiscal 2026 outlook after comparable brand revenue growth accelerated to 6.2% in the second quarter ended August 2, 2026, from 4.8% in the first quarter.
The home retailer now expects annual net revenue growth of 4.7% to 7.2% and comps of 4.0% to 6.5%, with a non-GAAP operating margin of 17.8% to 18.2%. The prior outlook, reiterated after the first quarter, had called for revenue growth of 2.7% to 6.7%, comps of 2.0% to 6.0%, and an operating margin of 17.5% to 18.1%. The company said the new guide assumes no benefit from tariff refunds or related interest.
President and Chief Executive Officer Laura Alber said every brand delivered again in the quarter, driven by execution across brands, channels, and the team, and that the company gained market share and continued to outperform the industry.
Net revenues were $1.96 billion, up 6.7% from $1.84 billion a year earlier. GAAP diluted earnings were $2.84 a share; non-GAAP diluted earnings were $2.10 a share. GAAP operating margin was 22.9%; non-GAAP operating margin was 17.3%.
GAAP gross margin was 51.6%, up 450 basis points from a year earlier. The company attributed the increase to IEEPA tariff refunds, net of tariff-related vendor concessions, of 610 basis points, occupancy leverage of 40 basis points, and supply-chain efficiencies of 30 basis points, partially offset by lower merchandise margins of 230 basis points, primarily from tariff costs. Non-GAAP gross margin was 45.5%, down 160 basis points from a year earlier. Occupancy costs were $208 million.
During the quarter, the company recorded a $167.8 million reduction to cost of goods sold related to refunds of previously expensed IEEPA tariffs and $6.3 million of related interest. Those items were offset by a $47.5 million provision to reimburse certain merchandise vendors that had previously provided tariff-related concessions and a $10.0 million one-time tariff-related employee recognition cost in the form of a discretionary 401(k) contribution. Substantially all of an initial $197.8 million refund claim had been collected as of August 2, 2026, leaving a remaining receivable of $3.2 million. The company deferred $29.3 million of refund income as a reduction of inventories and said it anticipates recognizing that amount as a reduction to cost of goods sold in the third quarter of fiscal 2026.
SG&A was $563 million on a GAAP basis, a 28.7% rate, and $553 million on a non-GAAP basis, a 28.2% rate. The GAAP rate was down 50 basis points from a year earlier, which reflected employment-expense leverage, net of the one-time 401(k) cost, of 70 basis points, partially offset by higher general and advertising expenses.
Pottery Barn net revenues were $770.8 million, with comps of 5.1%. West Elm contributed $496.3 million and comps of 6.4%. Williams Sonoma, including Williams Sonoma Home, posted $268.8 million and comps of 7.6%. Pottery Barn Kids and Teen net revenues were $297.4 million, with comps of 3.5%. Other brands, primarily Rejuvenation, Mark and Graham, international franchise operations, GreenRow, and Dormify, contributed $126.4 million.
Merchandise inventories were $1.45 billion, up 1.0% from the second quarter a year earlier, net of the $29.3 million of deferred tariff refund income. Cash and cash equivalents were $1.03 billion. Operating cash flow for the twenty-six weeks ended August 2 was $696 million, inclusive of $200.2 million of tariff refunds and related interest. The company returned $90 million through dividends in the quarter.
The store count ended at 508 locations after three openings and one closing. For fiscal 2026, the company expects annual interest income of approximately $25 million and an effective tax rate of approximately 26% on a non-GAAP basis. Over the long term, it continues to expect mid-to-high single-digit annual net revenue growth with an operating margin in the mid-to-high teens.