Williams-Sonoma(NYSE:WSM) reported fiscal 2025 second-quarter earnings on Tuesday, Aug. 27, noting a 3.7% comparable sales increase and an operating margin of 17.9% with positive comps across all brands. Earnings per share grew nearly 20% year over year to $2, and the company raised full-year revenue guidance while maintaining operating margin guidance due to doubling tariff pressures.
AI adoption accelerates operational gains at Williams-Sonoma
The company’s vertically integrated model and proprietary data infrastructure are enabling measured deployment of artificial intelligence (AI) across customer service, supply chain, and back-office automation. Early AI initiatives include customer-facing service tools and next-generation digital design utilities, supporting improved conversion and measurable cost savings.
“AI is not just a future opportunity for us; it is delivering results today. We believe it positions Williams-Sonoma, Inc. to lead our industry in applying AI with both creativity and discipline. AI is not just a future opportunity for us. It is delivering results today, and we believe it positions Williams-Sonoma to lead our industry in applying AI with both creativity and discipline.”
— Laura Alber, Chief Executive Officer
This rapid, ROI-positive AI adoption differentiates the company from most specialty retailers and supports its long-term margin expansion and customer experience leadership.
Tariff volatility limits margin upside for Williams-Sonoma
Full-year operating margin guidance remains at 17.4% to 17.8%, unchanged despite a top-line guidance raise, due to the company absorbing a sharp increase in incremental tariff rates (from 14% in the first quarter of fiscal 2025 to 28% as of the second quarter ended Aug. 3, 2025). The average incremental tariff rate across major sourcing countries doubled, with varied rates for China (30%), India (50%), Vietnam (20%), and others.
“At our Mayearnings call our incremental tariff rate was 14%. As of today’s call, it has doubled to 28%. This includes the additional 30% China tariffs, 50% India tariff, 20% Vietnam tariff, an average 18% tariff on the rest of the world, as well as the 50% steel and aluminum tariffs and the 50% copper tariff. We believe the strength of our operating model combined with the six-point mitigation plan that Laura shared with you enables us to maintain our guidance despite the doubling of tariffs since our lastearnings call”
— Jeff Howie, Chief Financial Officer
Maintaining profitability against this external shock signals margin resilience and reinforces the value of the company’s flexible sourcing network and six-point cost mitigation strategy.
Emerging brands, B2B, and innovation drive above-industry growth
While industry home furnishing sales declined, the company delivered broad-based positive comps, underscored by double-digit growth in Rejuvenation (its seventh consecutive quarter), B2B, and emerging brands such as Mark and Graham and Green Row. Strategic category expansion, proprietary product launches, and exclusive collaborations sustained this outperformance.
“Our B2B business remains an important part of our growth strategy. B2B grew 10% in Q2, with both trade and contract performing. We continue to build a loyal, expanding client base across multiple industries by leveraging our design expertise and commercial-grade product range. Our emerging brands, including Rejuvenation, Mark and Graham, and Greenrow, together also continue to grow double digits. We have a proven ability to build and scale brands, and we are particularly excited about Rejuvenation, which drove its seventh consecutive quarter of double-digit comps in Q2.”
— Laura Alber, Chief Executive Officer
Diversified growth engines beyond core retail bolster long-term sales durability and reinforce the company’s leadership in scaling niche concepts into major profit contributors.
Looking Ahead
Management raised full-year comparable brand revenue guidance to 2% to 5% growth but reiterated operating margin guidance at 17.4% to 17.8%, explicitly incorporating doubled tariff rates and related mitigation actions. Capital expenditure is projected at $250 million to $275 million, with 85% allocated to e-commerce, retail optimization, and supply chain investments. The company maintains long-term guidance of mid- to high-single-digit revenue growth and mid- to high-teen operating margins, based on sustained brand momentum and continued execution despite macro and policy uncertainty.
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This article was created using Large Language Models (LLMs) based on The Motley Fool’s insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Williams-Sonoma. The Motley Fool has a disclosure policy.
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