Williams-Sonoma (NYSE:WSM) executives said the company delivered “sustainable, profitable growth” in fiscal 2025, posting positive comparable brand revenue and record earnings per share while navigating an “uncertain and unpredictable” tariff environment and what management described as anemic housing turnover.
Fourth-quarter results: positive comps and 20% operating margin
For the fourth quarter of fiscal 2025, Williams-Sonoma reported net revenues of $2.36 billion and a comparable brand revenue increase of 3.2%. Chief Executive Officer Laura Alber said the company drove an operating margin of 20.3% and earnings per share of $3.04.
Howie said gross margin was 46.9%, down 40 basis points year over year, primarily due to a 170-basis-point decline in merchandise margins as higher tariffs flowed through cost of goods sold, along with occupancy deleverage tied largely to the prior-year 53rd week. He noted shrink contributed a 160-basis-point benefit from favorable physical inventory results, and supply chain efficiencies added 50 basis points. SG&A was 26.6% of revenue, up 80 basis points, which Howie attributed mainly to lapping an indirect tax resolution and an insurance settlement that benefited the prior year.
Full-year fiscal 2025: record EPS, strong cash flow, and shareholder returns
For fiscal 2025, the company reported net revenues of $7.8 billion with a comparable brand revenue increase of 3.5%. Operating margin was 18.1%, and diluted EPS rose 1% to a record $8.84. Management emphasized that all brands posted positive comps for the full year and that retail and e-commerce both contributed, with retail up 6.4% and e-commerce up 2.2%. Howie said e-commerce represented more than 65% of total revenues for the year.
Howie also highlighted balance sheet and cash flow metrics discussed on the call. The company ended the quarter with over $1 billion in cash and no outstanding debt. Merchandise inventories were $1.5 billion, up 9.8% year over year, including approximately $80 million of embedded incremental tariff costs; excluding those costs, Howie said inventories would have been in line with sales growth.
Williams-Sonoma generated more than $1.3 billion in operating cash flow and $1.1 billion in free cash flow during fiscal 2025, according to Howie. The company reinvested $259 million in capital expenditures and returned nearly $1.2 billion to shareholders, including $854 million in share repurchases (4% of shares outstanding at an average price of $174.70) and $316 million in dividends, reflecting a 13% year-over-year increase.
Brand performance highlights and focus areas
Alber described broad-based momentum across the portfolio in the quarter, while also calling out areas needing improvement. For the year, she said the company delivered positive top-line comps across all brands while increasing full-price selling and gaining market share.
- Pottery Barn: Q4 comp was -2.3%, though the full-year comp was +0.4%. Alber said the fourth quarter was disappointing, citing a larger mix of decorating assortment in Q4 and heavier reliance on last year’s programs that did not meet expectations. She said furniture performed better but could not offset softness in non-furniture. Management said it is refocusing the brand on its heritage aesthetic, strengthening the product pipeline, optimizing core assortment, rebuilding proprietary collections, and increasing “brand heat” through collaborations, influencers, storytelling, and store events. Alber said comp performance was “better” quarter to date.
- Pottery Barn Kids and Teens: Q4 comp was +4%, and full-year comp was +4.4%, with strength across furniture and non-furniture. Alber said collaborations and licensing were key drivers, including LoveShackFancy and the launch of an NHL collection. She also said Dormify is expected to launch in late April to expand into college and dorm.
- West Elm: Q4 comp was +4.8%, accelerating from Q3, and full-year comp was +2.9%. Alber attributed the improvement to gains across products, brand heat, and channel execution. She said West Elm plans five store openings in 2026 and highlighted a new collaboration with Emma Chamberlain.
- Williams Sonoma brand: Q4 comp was +7.2% and full-year comp was +6.9%. Alber said 2026 will mark the brand’s 70th anniversary and pointed to momentum in the core kitchen business, proprietary in-house design products, and in-store events, including celebrity chef and influencer signings.
- B2B: Alber said B2B had “another record-breaking quarter” up 13.7%, anchored by the company’s largest contract quarter in its history. Full-year B2B growth was 10%. She cited strength in hospitality and residential designer businesses and momentum in verticals such as higher education, sports, and entertainment.
- Emerging brands: Alber said Rejuvenation delivered another quarter of double-digit comp growth, driven by cabinet hardware, bath, and lighting, and reiterated her view that it could become the company’s next billion-dollar brand. Mark and Graham delivered positive comps and a “record-breaking holiday season.” She also noted GreenRow opened its first store in Soho, New York on March 6.
Tariffs, AI, and customer service: mitigation and efficiency themes
Tariffs were a central theme throughout the call. Alber said the company expects tariff uncertainty to continue in fiscal 2026 and outlined mitigation efforts including vendor negotiations, resourcing, supply chain efficiencies, cost improvements, and select pricing actions.
Howie said tariffs were the “big story” in the company’s fiscal 2026 margin outlook, stressing that the impact depends on how costs flow through weighted average cost of goods sold. He said the tariff impact is expected to be “heavily front-half weighted” and then moderate in the back half of the year as the company begins to lap prior-year tariff impacts. He added that guidance assumes tariff rates currently in effect remain in place, including Section 232, Section 301, and Section 122 tariffs at an announced 15% rate, and assumes Section 122 will be replaced by tariffs at a similar rate when it expires in July. He also said guidance does not contemplate a refund of IEEPA tariffs due to uncertainty around timing and process.
Management also emphasized expanding use of AI across e-commerce, operations, and customer care. Alber said AI is improving personalization, product discovery, ranking, and recommendations, while supporting friction reduction and conversion. She also said AI and analytics are improving forecasting, routing logic, and customer service workflows. In Q&A, executives pointed to AI tools supporting design services, and referenced “Olive” on the Williams Sonoma site as a culinary authority aimed at guiding customers from inspiration to shopping.
Fiscal 2026 guidance: comp growth of 2% to 6% and margin outlook
For fiscal 2026, management guided to comparable brand revenue growth of 2% to 6% (midpoint 4%) and operating margin of 17.5% to 18.1% (midpoint 17.8%). Howie added that the company expects total net revenue growth of 2.7% to 6.7%. Executives said guidance assumes no meaningful housing recovery and no meaningful changes in macro conditions, and does not include benefits from OB3 tax legislation.
The company also outlined a more aggressive retail investment plan. Howie said fiscal 2026 capital expenditures are expected to be approximately $275 million, with about 95% focused on e-commerce capabilities, retail fleet optimization, and supply chain efficiency. He described a “near doubling” of retail investment and said the company expects 19 store repositions and 20 new store openings in fiscal 2026—its most openings in a decade—while ending the year with approximately the same store count due to closures. Management said it anticipates store count growth of roughly 1% to 3% per year after fiscal 2026 and noted that guidance includes approximately 70 basis points of non-comp growth from real estate activity.
On capital returns, Howie said the board authorized a 15% increase in the quarterly dividend to $0.76 per share. He said fiscal 2026 will mark the company’s seventeenth consecutive year of dividend increases. He also noted $1.3 billion remains under current share repurchase authorizations, with repurchases expected to continue opportunistically.
About Williams-Sonoma (NYSE:WSM)
Williams‑Sonoma, Inc is a specialty retailer focused on the home and culinary markets, best known for premium cookware, kitchen tools and home furnishings. The company traces its roots to a single cookware store founded by Chuck Williams in 1956 in Sonoma, California, and has evolved into a multi‑brand home furnishings and housewares business. Its merchandise mix spans cookware and kitchen electrics, tabletop and food prep items, furniture, bedding, lighting and decorative accessories designed for both everyday use and higher‑end interiors.
The company operates a portfolio of consumer brands that target distinct segments of the home market.
