Williams-Sonoma Posts 20% EPS Jump in Q2

Key Points

• beat consensus GAAP estimates for Q2 FY2025, as all four major brands posted positive comparable sales growth.

• Gross and operating margins (GAAP) improved sharply, with diluted earnings per share (GAAP) up nearly 20% to $2.00.

• Management raised full-year revenue guidance but warned of higher tariff costs and noted a 17.7% increase in inventory.

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Williams-Sonoma (NYSE:WSM), the multi-brand home furnishings retailer behind Pottery Barn, West Elm, and its namesake kitchenware line, reported results on August 27, 2025. The company posted GAAP revenue of $1.84 billion, up 2.7 % from the prior year and surpassing Wall Street’s GAAP expectation of $1,828.88 million. Diluted earnings per share (GAAP) were $2.00, nearly 20 % higher than last year and well above consensus estimates. profit margins (GAAP operating margin) expanded despite ongoing global tariff pressures. Williams-Sonoma also raised its full-year guidance for revenue growth, but highlighted concerns around elevated inventory levels and escalating tariff costs. Overall, the quarter showed continued momentum and resilience, but management flagged near-term margin risks stemming from tariffs and supply chain strategy.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding Williams-Sonoma’s Business and Strategy

Williams-Sonoma runs a portfolio of brands that sell home furnishings, kitchenware, and décor, both online and through a network of retail stores. Its best-known banners are Pottery Barn, West Elm, Williams Sonoma, and Pottery Barn Kids & Teen. The company blends e-commerce, physical retail, and catalog sales to reach a broad range of customers across key life stages and styles.

Key areas of focus in recent years include building an omni-channel retail model, expanding its brand portfolio, and investing in supply chain efficiency. Success depends on delivering standout customer service, keeping supply chain and inventory costs in check, and maintaining high product quality and environmental standards.

Quarter in Review: Sales, Margins, and Strategic Operations

For the Net revenue (GAAP) totaled $1.84 billion, a 2.7 % year-over-year increase. as well as Wall Street consensus. Notably, all four top brands achieved positive comparable sales for the second consecutive quarter, a turnaround from declines last year. Pottery Barn saw a return to positive comp growth at 1.1%, while West Elm, the company’s brand for modern, urban furniture and décor, grew 3.3%. The Williams Sonoma brand comparable revenue grew 5.1%, and Pottery Barn Kids & Teen rose 5.3 %.

The Comparable brand revenue growth was 3.7%, which measures sales at stores and digital platforms open at least one year. Management attributed the gains to strong execution in both retail and digital channels, with supply chain reliability helping to support sales. Even so, total store count edged down to 509 from 521 in the prior year as the company continues to optimize its physical footprint.

Profitability metrics improved significantly. The Gross margin (GAAP) was 47.1%, up from 44.9% in Q2 FY2024, boosted by both higher merchandise margins and enhanced supply chain efficiency. Operating margin also widened to 17.9% (GAAP), a 2.4 percentage point increase. The selling, general, and administrative expense rate fell marginally, supported by savings in advertising and general costs. Diluted earnings per share (GAAP) rose nearly 20%, from $1.67 to $2.00, handily topping analyst expectations.

On the cost side, management directly addressed rising inventory levels, which grew 17.7% year-over-year. This was a deliberate strategy to mitigate tariff risk by building stock ahead of expected tariff hikes on goods sourced from China, India, and Vietnam. Management called out these inventory actions.

Williams-Sonoma returned $280 million to shareholders through $199 million of share repurchases and $81 million in dividends. Liquidity remains solid, with $986 million in cash and $903 million in remaining share repurchase authorization. Operating cash flow for the first half (26 weeks) of FY2025 was $401.7 million, down from $473.3 million in the prior year period, due in part to the inventory increase. The company declared a quarterly dividend, continuing a long-term trend of regular shareholder returns.

Brand Offerings, Strategic Focus, and Notable Initiatives

The company’s core brands include Pottery Barn, which targets casual, timeless home furnishings; West Elm, aimed at modern, urban consumers; Williams Sonoma, focused on premium kitchenware; and Pottery Barn Kids & Teen, which sells bedroom and study furniture for younger customers. Additional smaller brands include Rejuvenation and Mark and Graham.

In recent periods, Williams-Sonoma has concentrated on strengthening its omni-channel model. This integrates online and store experiences, offering customers versatile ways to browse, buy, and receive products. Physical stores play a dual role, serving as retail showrooms and fulfillment hubs to support digital sales. The company has kept its store count relatively steady, with some closures as part of normal optimization.

Another pillar of the strategy is supply chain efficiency. By working closely with domestic and international vendors and optimizing logistics, Williams-Sonoma aims to offset rising input costs and tariff exposures. It sources a large share of products internationally: 82% of merchandise is imported, with significant volumes from Asia. Recent quarters saw management pull forward inventory to protect against sudden changes in tariff rates.

Sustainability remains a consistent focus. The company has received industry recognition for responsible sourcing, design, and environmental programs. While this quarter’s release did not include new updates on sustainability projects, Williams-Sonoma continues to highlight its standing on lists such as Barron’s 100 Most Sustainable U.S. Companies and the Dow Jones Sustainability North America Index.

Forward Outlook and What to Watch Next

Williams-Sonoma raised its full-year guidance following the strong quarter. Net revenue is now expected to grow by 0.5 % to 3.5 % for fiscal 2025, up from a previous range that started at flat. Comparable brand revenue is guided to rise 2.0% to 5.0%. Operating margin is projected at 17.4% to 17.8%, consistent with prior guidance. Leadership emphasized that while top-line trends have improved, incremental margin gains will become harder to achieve due to rising tariff costs on goods imported from Asia and on key materials such as steel, aluminum, and copper.

No explicit changes were announced for the dividend policy this period; the company paid $81 million in dividends. Investors should continue monitoring the timing and scale of inventory unwinding, the ability of supply chain strategy to offset cost inflation, and any ongoing impacts from trade policy or tariff changes. With more than $900 million remaining in share repurchase authorization, Williams-Sonoma’s capital return program appears likely to remain in place, though future actions may depend on evolving macro and policy risks.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Williams-Sonoma. The Motley Fool has a disclosure policy.