Williams-Sonoma, Inc. (NYSE:WSM) Q1 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A session reveal a positive sentiment overall. The company is taking strategic steps like stock repurchases, international expansion, and improving supply chain efficiencies. Despite some uncertainties like unclear guidance on merchandise margins and tariff impacts, the company is gaining market share, has strong B2B growth, and raised operating margin guidance. These factors, combined with a large stock repurchase plan and strategic investments in e-commerce, suggest a positive outlook, likely resulting in a 2% to 8% stock price increase over the next two weeks.

Key Financial Performance

Earnings Per Share (EPS) $1.85, an increase of 8.8% year-over-year, driven by strong operating performance and effective cost management.

Operating Margin 16.8%, a decrease of 230 basis points year-over-year, primarily due to last year's $49 million out-of-period adjustment which benefited margins significantly.

Net Revenues $1.73 billion, a positive 3.4% comp, with all brands delivering positive comps, driven by furniture sales and strong performance in non-furniture categories.

Gross Margin 44.3%, down 360 basis points year-over-year, impacted by a 300 basis point out-of-period adjustment last year; without this adjustment, gross margin was 60 basis points lower due to higher input costs.

SG&A Expense 27.5% of revenues, 130 basis points lower than last year, due to tight expense management and lower advertising costs.

Cash Balance $1 billion, with no outstanding debt, after investing $58 million in capital expenditures and returning $165 million to shareholders.

Merchandise Inventories $1.3 billion, up 10% year-over-year, reflecting a strategic pull forward of receipts to mitigate potential tariff impacts.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

New Product Launches: The electrics category benefited from the launch of Breville Brass, an exclusive line of kitchen countertop appliances, and KitchenAid’s new butter yellow stand mixer, both exclusive to Williams-Sonoma.

Innovative Product Development: The new Williams-Sonoma Thermo-Clad Copper Pro Cookware Collection launched in early Q1, combining copper heat conduction with stainless durability.

Market Expansion: In Mexico, four new store openings this quarter: West Elm in Porto Vallarta and Pottery Barn, Pottery Kids, and West Elm.

B2B Growth: B2B program grew 8%, delivering record-breaking quarter with strong client base across multiple industries.

Operational Efficiencies: Operational metrics are surpassing pre-pandemic levels, focusing on reducing split shipments, lowering returns and damages, and streamlining fulfillment processes.

Cost Management: Tight control on SG&A expenses, with Q1 SG&A at 27.5% of revenues, 130 basis points lower than last year.

Strategic Collaborations: Pottery Barn launched four strategic collaborations in Q1 with notable designers, enhancing brand relevance and customer excitement.

AI Integration: Investments in AI across digital platforms to enhance customer experience through personalized interactions.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Macroeconomic Uncertainty: The company acknowledges significant macroeconomic and geopolitical uncertainties that could impact business performance, including high interest rates and a soft housing market.

Tariff Pressures: The company is facing additional tariffs, including a 30% tariff on imports from China and a 10% global reciprocal tariff, which could affect pricing and margins.

Supply Chain Challenges: The company is actively identifying supply chain efficiencies to mitigate the impact of tariffs and higher input costs, indicating ongoing challenges in this area.

Competitive Pressures: Despite outperforming the industry, the company recognizes the competitive pressures within the home furnishings market, which contracted by approximately 3% in Q1.

Economic Factors: The company’s guidance assumes no significant changes in the macroeconomic environment, interest rates, or housing turnover, indicating reliance on stable economic conditions.

Cost Management: The company is focused on managing SG&A expenses tightly to maintain profitability amidst rising costs, reflecting challenges in cost control.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

Core Brand Growth: The company remains confident in delivering core brand growth supported by a strong pipeline of newness and compelling innovation.

B2B Program: The B2B program is a key growth engine, growing 8% in Q1 and leveraging design experience and commercial-grade product assortment.

Emerging Brands: Positive traction and strong comps in emerging brands like Rejuvenation, Mark and Graham, and Green Row.

AI Integration: Investments in AI across digital platforms to enhance customer experience and operational efficiency.

Customer Service: Focus on delivering exceptional customer service with perfect orders that are on time and damage-free.

Tariff Mitigation Plan: A six-point plan to manage tariff costs effectively.

Revenue Growth Guidance: Guidance for fiscal 2025 is flat to positive 3% comp brand revenue growth.

Operating Margin Guidance: Operating margin is expected to be in the range of 17.4% to 17.8%.

Capital Expenditures: Expected capital expenditures for fiscal year 2025 are between $250 million and $275 million.

Long-term Revenue Growth: Long-term guidance of mid- to high single-digit revenue growth.

Dividend Payout: Quarterly dividend of $0.56 per share, a 16% increase year-over-year.

Share Repurchase Authorization: $1.1 billion available for share repurchases.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

Quarterly Dividend: $0.56 per share, a 16% increase year-over-year, marking the 16th consecutive year of increased dividend payouts.

Share Repurchase Authorization: $1.1 billion available for opportunistic stock repurchases to deliver returns to shareholders.

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:I wanted to ask about merchandise margins, and I was hoping you could just address the decline from last year. And for one, just clarify that there has been no change in your high-level promotional strategy? And then perhaps talk a little bit more about how you think about promotions and clearance going forward?

A:Our gross margin in Q1 was 60 basis points lower than last year, but it was in line with our expectations. Our MMU itself was lower from higher input costs, but was largely offset by supply chain savings and occupancy leverage. We continue to see a very high level of full-price selling. Our promotional stance has not changed. We do not do site-wide promotions.

Q:I guess first question would just be on when you are taking price, obviously, recognizing it’s kind of the last resort here, but — how — what’s the philosophy that you try to cover and maintain kind of growth profit dollars on the item? Is there a view on gross margin rate? Just kind of trying to understand the philosophy when you — and how you’re going to deal with tariffs from a pricing perspective.

A:When we think about pricing, it’s not really only about tariffs. We’ve substantially reduced the amount of commercial activity in our company, which has done important on a lot of levels, both for margin but also for the customer because they can count on price being the same. We’re always looking at our entire assortment to see where we are actually too high at price and too low in price.

Q:So, can you just provide more color on how we should think about merch margins for the rest of the year? Should we assume that the 220 basis point headwind was a high watermark, then it should ease as some of these tailwinds get going? Or is it a rise run rate for us to consider ahead?

A:We do not guide to specific lines, we guide the top and bottom line because it gives us flexibility to respond to changes in the business. We are reiterating our guidance for fiscal year ’25, which has operating margins materially flat on the full year.

Q:I was hoping if you could add some more context to how demand trended throughout the quarter? I think demand for some peers in the industry was down as much as double digits in April. So, curious how your exit rate looked and if you’re willing to share any color in terms of how the first few weeks of May are shaping up?

A:We saw really strong results across all our brands during the quarter. In fact, every brand positive comp. Our consumer is responding to our products, our assortments, our marketing and our strategies.

Q:I wanted to see if you can talk about resourcing. So, China was 23% of your goods last year. How are you thinking about reducing that exposure? Is there any targets you have by year-end or by next year? Can you share where that product’s going? And do you expect any changes to your assortment as a result of resourcing?

A:We’ve already significantly reduced our China source of goods from 50% to 23% over the last few years. We have the flexibility now because we resource double source, triple sourced many of our products to move depending on what the long-term tariff environment becomes.

Q:So, I wanted to ask again about inventory position up 10%. It sounds like some of that is strategic, pulling some of the orders in early. Can you talk a little more about the complexion of that today? And I guess, more importantly, to what extent do you think that may be helping drive conversion and sales?

A:Our inventory ended the quarter at $1.3 billion, up 10% to last year. Included in our inventory levels is a strategic pull forward of receipts to reduce the potential impact of higher tariffs in fiscal year ’25.

Q:The first, the shape of the year with comps even before this quarter is 3.4%. Did you always — did you expect it to improve throughout the year? That’s the first question. And the second, tariff mitigation costs, maybe paraphrase or trying to interpret this, so you’re paying higher today for product because of the tariff. Has that product sold or it’s just capitalized cost that’s affecting cost of goods base?

A:We’ve been working hard to strengthen our brands, incubate new brands, build our B2B business drive our design services, improve our operations for customer service. We do believe it will pay back in future quarters.

Q:So, can you talk a little bit about how you think about the quarter in terms of all the puts and takes at a later spring? You have a consumer that does react to the stock market, which went through a tough period, but then furniture turned positive, and maybe there were some pull forward in some categories where the consumer got concerned about tariff pricing.

A:What we saw in the quarter is our consumer responding to our strategies, our product assortments, our marketing. We outperformed the industry and gained market share.

Q:I wanted to ask about supply chain efficiencies. It looks like the benefit from supply chain efficiencies this quarter was greater than that of the fourth quarter, could you guys provide detail around what drove this acceleration, and then how should we think about the impact for the remainder of the year?

A:Supply chain efficiency is, another words for customer service. We’re seeing lower returns and replacements. We’re seeing better on-time delivery, less out-of-market share.

Q:I was just curious if you could share how much B2B is expected to contribute to comp this year? And maybe any potential update on how you view the size of your B2B opportunity long-term as you expand your book?

A:B2B had nice momentum. We see this as a $2 billion opportunity.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance on merchandise margins for the rest of the year, stating they do not guide to specific lines and only provide top and bottom line guidance. Additionally, there was a lack of clarity on the exact impact of tariff mitigation costs, with management indicating that they would pay back in future quarters without detailing how.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

WSM Transcript

Williams-Sonoma, Inc. (WSM) Q3 2025 Earnings Call Transcript

Unknown11-19

The earnings call summary highlights both positive and negative factors. The company shows strong product development and global expansion, but faces significant tariff impacts and uncertain margin sustainability. The Q&A section reveals concerns about tariff effects and unclear future guidance. While there are optimistic aspects like AI integration and emerging brand growth, the lack of clear guidance and potential tariff impacts balance the sentiment, leading to a neutral outlook.

Williams-Sonoma, Inc. (WSM) Q3 2026 Earnings Call Transcript

Positive11-19

The earnings call highlights strong revenue growth guidance, effective tariff mitigation strategies, and optimistic global expansion plans. Product innovation and AI integration further bolster prospects. Despite tariff challenges, the company's strategic responses and stable operating margin guidance indicate resilience. The Q&A section supports this with positive sentiment on brand performance and effective cost management. Overall, these factors suggest a positive outlook for the stock price over the next two weeks.

Williams-Sonoma, Inc. (WSM) Q2 2025 Earnings Conference Call Transcript

Unknown8-27

The earnings call summary presents a mixed outlook. Financial performance shows stable cash balance and shareholder returns, but rising inventory levels and tariff impacts raise concerns. Product development is positive with innovation and strong brand performance. Market strategy is unclear, with management avoiding specifics in the Q&A. Expenses are under pressure due to tariffs, but financial health remains solid with no debt. Shareholder return plans are positive with increased dividends. Overall, the sentiment is neutral due to offsetting positive and negative factors, with no clear catalyst for significant stock movement.

Williams-Sonoma, Inc. (NYSE:WSM) Q1 2025 Earnings Call Transcript

Positive5-23

WSM Report

WILLIAMS SONOMA INC 10-Q

10-Q

2025-08-29

WILLIAMS SONOMA INC 10-Q

10-Q

2024-11-22

WILLIAMS SONOMA INC 10-Q

10-Q

2024-08-23

WILLIAMS SONOMA INC 10-Q

10-Q

2024-05-24

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.