Williams-Sonoma's comparable sales rose 6.2% with every brand growing, but GAAP EPS of $2.84 (+42%) was inflated by a one-off IEEPA tariff refund; adjusted EPS rose 5% to $2.10 as tariffs still squeezed merchandise margins.
Revenue
$2.0B
+6.7% YoY
Net income
$338M
+36.6% YoY
Diluted EPS
$2.84
+42.0% YoY
Operating margin
22.9%
How WSM compares with Consumer Discretionary peers
Figure
WSM
Peer median
Rank
Revenue growth (YoY)
+6.7%
+6.0%
19th of 43
Operating margin
22.9%
15.6%
9th of 43
EPS growth (YoY)
+42.0%
+5.7%
12th of 41
Rank 1 = fastest revenue growth, highest operating margin, fastest EPS growth. Peers are the other Consumer Discretionary companies with a 2026 report on this site, each at its latest period we've analyzed; fiscal calendars differ, so periods are not always the same months.
Williams-Sonoma's second quarter of fiscal 2026 (the 13 weeks ended August 2, 2026, which the site files as Q2 2026) had two stories in it. The first is a one-off: the company got back $197.8 million in tariffs it had paid under the International Emergency Economic Powers Act (IEEPA), and that refund pushed reported earnings per share up 42% to $2.84. The second is the underlying business. Sales grew faster than they have in a while, with comparable brand revenue up 6.2% and every brand growing. But the tariffs still being charged on goods it imports ate into what it earns on each sale, so excluding the refund, operating profit grew only 3.2% and the operating margin slipped.
At a glance
Comparable brand revenue +6.2% (last year +3.7%). This is growth from brands, stores and websites that were already operating a year ago, so it measures real demand rather than new openings. It was the fastest of the last two quarters (Q1 was +4.8%), and all four major brands grew.
GAAP diluted EPS $2.84 vs adjusted $2.10. $0.74 of the $2.84 comes from the net tariff refund. On the adjusted figure, EPS grew 5.0%, and most of that came from a 3.8% lower share count.
Full-year sales guidance raised to +4.7% to +7.2% (from +2.7% to +6.7% in May). Management also raised its adjusted operating-margin range to 17.8%–18.2%. The guidance assumes no further tariff refunds and includes the new Section 301 tariffs announced on July 23.
Results versus a year ago
Metric
Q2 FY2026 (13 wks to Aug 2, 2026)
Q2 FY2025 (13 wks to Aug 3, 2025)
YoY Change
Net revenues
$1,959.8M
$1,836.8M
+6.7%
Comparable brand revenue growth
+6.2%
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Gross margin is the share of revenue left after the cost of the goods sold. At Williams-Sonoma that cost also covers shipping and store rent ("occupancy"). Operating margin is what is left after all running costs as well, before interest and tax. "Adjusted" figures are the company's own non-GAAP numbers, which remove the tariff-refund items. Source: Form 10-Q and the Q2 earnings release (Exhibit 99.1 to the August 26, 2026 8-K).
The tariff refund, and what it hides
In April 2026, Williams-Sonoma filed for a refund of $197.8 million in IEEPA tariffs paid across fiscal 2025 and 2026. In Q2 it booked:
+$167.8M as a reduction in cost of goods sold, for refunded tariffs it had already expensed
+$6.3M in interest on the refund
−$47.5M set aside to repay merchandise vendors who had absorbed part of those tariffs through price concessions
−$10.0M as a one-time discretionary 401(k) contribution to eligible employees, described as "tariff-related employee recognition"
That nets to roughly $117M pre-tax, or $0.74 per diluted share. Another $29.3M of refund income is still held on the balance sheet as a reduction of inventory. The company expects to recognise it as lower cost of goods sold in Q3, so reported Q3 gross margin will get a smaller version of the same boost. Almost all of the $197.8M claim was collected in cash during the quarter ($200.2M including interest). Only $3.2M was still receivable.
With the refund taken out, the gross margin picture reverses. According to the 10-Q, the 450bp rise in reported gross margin was made up of +610bp from the net refund, +40bp from spreading store rent over higher sales, and +30bp from supply-chain efficiencies (including a lower shrink accrual). Those gains were partly offset by −230bp of lower merchandise margins, "primarily due to the flow-through of tariffs into cost of goods sold." Tariffs reach the income statement with a delay because they sit in inventory cost until the goods are sold. So tariffs being paid now are still weighing on margins, even while the refund of earlier tariffs flatters them.
Takeaway: Leave the one-off refund aside and the quarter shows demand improving while tariff costs keep pressure on profitability. Comparable sales grew 6.2%, but adjusted operating income grew only 3.2%. Adjusted net income was up about 1% ($250.3M vs $247.6M), so the 5% adjusted EPS growth came mostly from having 3.8% fewer shares outstanding.
Brand by brand
Brand
Q2 net revenue
YoY
Brand comp Q2 FY26
Brand comp Q2 FY25
Pottery Barn
$770.8M
+6.4%
+5.1%
+1.1%
West Elm
$496.3M
+5.9%
+6.4%
+3.3%
Williams Sonoma (incl. WS Home)
$268.8M
+7.9%
+7.6%
+5.1%
Pottery Barn Kids and Teen
$297.4M
+3.7%
+3.5%
+5.3%
Other (Rejuvenation, Mark and Graham, GreenRow, Dormify, franchise)
$126.4M
+17.3%
n/a
n/a
Pottery Barn, the largest brand at 39% of revenue, improved the most: its comp rose from +1.1% a year ago to +5.1%. Management cites "strength in furniture, textiles and lighting." Furniture is the category most exposed to the housing market, which the 10-Q calls "stagnant," so furniture-led growth at Pottery Barn stands out.
West Elm (+6.4%) extended its recovery. Its year-to-date comp is +7.4%, the highest of any brand, compared with +1.8% in the first half of last year. The company credits retail, collaborations and new furniture and non-furniture products.
Williams Sonoma (+7.6%) was led by its kitchen business, supported by collaborations and exclusive products.
Pottery Barn Kids and Teen was the only brand to slow, to +3.5% from +5.3% a year earlier, despite growth in dorm and baby products.
The emerging brands (Rejuvenation, Mark and Graham, GreenRow) posted "double-digit brand comp growth on a combined basis." The "Other" line grew 17.3%.
By channel, e-commerce comp grew 6.5% and stores grew 5.5%. Stores are not shrinking in importance: the store count was flat year on year at 508, and retail comp grew 5.5%. The 10-Q does not break out the share of revenue from each channel this quarter.
What the headline numbers hide
EPS quality: Adjusted pre-tax earnings rose only 2.2% ($344.5M vs $337.1M). Two things held back the step from pre-tax profit to EPS. Adjusted interest income fell to $6.1M from $9.1M, and the adjusted tax rate rose to 27.4% from 26.6%. The diluted share count fell 3.8%, from 123.6M to 118.9M, after H1 buybacks of 1.61M shares for $287.8M. That is what turned roughly 1% adjusted net income growth into 5% adjusted EPS growth. The company bought back no shares in Q2 itself. It has $50.8M left under its September 2024 authorization plus a new $1.0B authorization, about $1.1B in total.
Cash conversion is strong, even without the refund. H1 operating cash flow was $695.9M, compared with $401.7M a year earlier. Excluding the $200.2M in refund collections leaves about $495.7M. That is still above adjusted H1 net income of about $481.6M, and ahead of last year's operating cash flow. The 10-Q attributes the rest of the improvement to lower inventory spending ($113.6M less) and higher accounts payable. H1 free cash flow (operating cash flow minus $116.4M capex) was about $579M including the refund. H1 returns to shareholders were $463.2M, and the quarterly dividend rose 15% to $0.76.
Inventory is lean. Merchandise inventories were $1.447B, up 1.0% year on year while sales grew 6.7%. Adding back the $29.3M deferred refund that is netted against inventory, the rise is about 3.0%, still below sales growth. That points to low markdown risk going into the second half.
Receivables grew fast, but the amount is small. Accounts receivable reached $146.2M, up 26.6% from $115.5M, much faster than sales. That includes the $3.2M tariff receivable. The filing gives no other explanation, and the balance is under 8% of quarterly revenue, so this is something to watch rather than a problem.
Costs: Adjusted SG&A (selling, general and administrative costs: staff, advertising, other overhead) fell to 28.2% of revenue from 29.2%, mostly because employment costs grew more slowly than sales. Stock-based compensation ran higher in H1 ($61.5M vs $47.0M).
Guidance: raised, with tariffs still assumed
Fiscal 2026 guidance
May 21, 2026 (Q1)
Aug 26, 2026 (Q2)
Net revenue growth
+2.7% to +6.7%
+4.7% to +7.2%
Comparable brand revenue
+2.0% to +6.0%
+4.0% to +6.5%
Operating margin
17.5% to 18.1%
17.8% to 18.2% (non-GAAP)
Effective tax rate
~25.5%
~26% (non-GAAP)
Interest income
~$25M
~$25M (non-GAAP)
The new ranges assume that every current tariff stays in place: Section 232, the existing and newly announced Section 301 tariffs, and US–Canada tariffs. They also assume elevated oil prices and no further tariff-refund benefit. The long-term target is unchanged: mid-to-high single-digit annual revenue growth and a mid-to-high-teens operating margin.
Our read: Sales grew 5.6% in the first half, and the low end of the new guidance is +4.7% for the full year. So the second half can grow more slowly than the first and still meet it, which makes the revenue range look achievable. Margin is harder. The H1 adjusted operating margin was 16.7%, below the full-year range of 17.8%–18.2%, so the second half has to run above 18%. Q4 is seasonally the strongest quarter, and management had said in May that tariff costs would be "front-loaded in the first half," so a better second half is plausible. The new July Section 301 tariffs work against it. The number to watch in Q3 (fiscal quarter ending around November 1, 2026) is the adjusted merchandise margin. If the tariff hit shrinks from the −230bp seen this quarter, the margin guidance holds. If it doesn't, the pressure from newly announced tariffs is outlasting the benefit of earlier ones rolling off. Reported Q3 results will again be boosted by the $29.3M deferred refund, so compare adjusted figures.
Fiscal-period note: Williams-Sonoma's fiscal year 2026 runs from February 2, 2026 to about January 31, 2027. The figures here are its "second quarter of fiscal 2026," the 13 weeks from May 4 to August 2, 2026, compared with the 13 weeks ended August 3, 2025.