Williams-Sonoma Reports Strong Q1 2025 Results, Reaffirms Full-Year Outlook Despite Tariff Headwinds

Williams-Sonoma, Inc. (NYSE: WSM) announced solid first quarter fiscal 2025 results, with strong profitability and better-than-expected revenue growth, while reaffirming its full-year guidance.

Q1 2025 Highlights:
• Comparable brand revenue growth: +3.4%
• Net revenues: $1.73 billion, up 4.2% year-over-year
• Operating margin: 16.8%
• Diluted EPS: $1.85 (up 8.8% excluding a prior year freight adjustment)
• SG&A expenses: $475 million, or 27.5% of revenues (down 130bps from last year)
• Gross margin: 44.3% (adjusted -60bps YOY after excluding a prior year adjustment)
• Net income: $231 million
• Merchandise inventories: Up 10.3% to $1.3 billion, strategically pulled forward due to tariff concerns
• Cash position: $1.05 billion, despite $165 million returned to shareholders through buybacks and dividends

Brand Performance (Comparable Revenue Growth):
• Williams Sonoma: +7.3%
• Pottery Barn Kids and Teen: +3.8%
• Pottery Barn: +2.0%
• West Elm: +0.2%
• Total: +3.4%
Outlook:
• Full-year FY25 guidance reaffirmed:
o Net revenue range: -1.5% to +1.5%
o Comparable sales: flat to +3.0%
o Operating margin: 17.4% to 17.8%
• Guidance incorporates significant tariff impacts (30% on China, 25% on Mexico/Canada/steel/aluminum, 10% global reciprocal tariffs)
• Long-term goals remain unchanged: mid-to-high single-digit annual revenue growth and operating margins in the mid-to-high teens

Additional Notes:
• Q1 results include a retrospective adjustment from FY24 related to over-recognized freight expenses totaling $49 million, which impacted prior year comparables.
• A 2-for-1 stock split took effect on July 9, 2024; all share data reflects the split.
• The company ended Q1 with 508 stores, a net reduction of four locations during the quarter.

CEO Laura Alber cited strong performance across all brands and reaffirmed confidence in the company’s ability to adapt amid ongoing macroeconomic uncertainty.

Williams-Sonoma, Inc. reported strong fourth-quarter and fiscal year 2024 results, surpassing expectations in key financial metrics. The company achieved a 3.1% increase in comparable brand revenue for Q4, along with a record operating margin of 21.5% and diluted EPS of $3.28. For the full fiscal year, comparable brand revenue declined by 1.6%, but the company still delivered a record annual operating margin of 17.9% and full-year diluted EPS of $8.50.

CEO Laura Alber highlighted the company's focus on operational efficiency, strategic product launches, and robust demand in retail and online furniture sales. She expressed confidence in the company's strategies for 2025, emphasizing a return to growth, enhanced customer service, and strong earnings performance.

Q4 gross margin increased to 47.3%, benefiting from occupancy leverage (+80 bps), higher merchandise margins (+40 bps), and supply chain efficiencies (+10 bps). Operating income reached $530 million, up 140 basis points year-over-year, while SG&A expenses increased by 7.6%, primarily due to higher performance-based compensation and advertising. The additional week in Q4 2024 contributed approximately 5.1% to revenue growth and 60 basis points to operating margin.

For the full fiscal year, the company achieved an operating income of $1.43 billion and an operating margin of 18.6%, or 17.9% excluding a $49 million out-of-period freight adjustment recorded in Q1. The company maintained strong liquidity with $1.2 billion in cash and generated $1.4 billion in operating cash flow. It returned $1.1 billion to shareholders through $807 million in stock repurchases and $280 million in dividends. The board approved a 16% increase in the quarterly dividend, raising it to $0.66 per share.

Looking ahead to fiscal 2025, Williams-Sonoma expects net revenue growth between -1.5% and +1.5% due to the impact of an extra week in 2024. On a comparable 52-week basis, the company projects comps between flat and +3.0% and an operating margin between 17.4% and 17.8%. Over the long term, it continues to target mid-to-high single-digit annual net revenue growth with an operating margin in the mid-to-high teens.

During Q1 2024, the company corrected a historical over-accrual of freight expenses, resulting in a one-time adjustment of $49 million that benefited gross margin. In Q2, it also completed a 2-for-1 stock split.

Segment-wise, Q4 revenue growth was led by Williams Sonoma (+5.7%), West Elm (+4.2%), and Pottery Barn Kids and Teen (+3.5%), while Pottery Barn saw a slight decline (-0.5%). For the full year, Pottery Barn (-6.2%) and West Elm (-2.0%) reported declines, while Williams Sonoma (+2.4%) and Pottery Barn Kids and Teen (+3.0%) posted gains.

The company continues to focus on innovation, operational efficiencies, and strategic investments to drive long-term profitability while maintaining a disciplined approach to cost management and shareholder returns.