WSM: Outperforming in a Fog of Tariff and Fuel Uncertainty — and Finally Adding Stores

Q1 comps accelerate to 4.8% and B2B hits a record, but guidance stays unchanged as management absorbs higher oil and tariff costs through supply chain savings — while signaling a pivot back to store growth.

WSM · Earnings Call · 2026-05-21

Williams-Sonoma (WSM) came into its fiscal first-quarter print with momentum, and the results did not disappoint. Comp sales rose 4.8%, with every brand positive, and the company again exceeded expectations on the operating margin line—16.2% versus the prior year's 16.2% (flat) despite absorbing higher tariffs and fuel costs. The stock has responded, rising roughly 25% over the past 90 days, even as it sits about 5% below its August peak. But what really stands out is the company's decision to keep full-year guidance unchanged despite the beat, pointing to an environment that remains too uncertain to bank on improvement. That conservatism is most visible in the company's stance on tariff refunds. As CFO Jeff Howie put it, “Our guidance does not contemplate recognizing any benefit from tariff refunds due to the uncertainty surrounding the timing and potential of recovery.” — Jeffrey E. Howie, Chief Financial Officer · 2026-05-21 This is a notable contrast to a broad retail cohort—Home Depot, Lowe's, Target, and others—that has been booking tariff refunds as a tailwind this quarter. WSM is deliberately leaving that upside on the table, preferring to manage through the noise. The company's own keyword trajectory has elevated higher oil prices and Ocean freight to the top of its mind, and management is leaning on supply-chain efficiency to offset the pressure. In the quarter, supply-chain savings delivered roughly 50 basis points of gross-margin benefit, including a favorable shrink accrual adjustment. “Q2 will probably be peak impact of the tariffs,” — Jeffrey E. Howie, Chief Financial Officer · 2026-05-21 Howie noted, but the company expects the effect to moderate in the back half as it laps the prior year's impact.

The growth engine

The stronger story, though, is the accelerating top line. West Elm posted an 8.5% comp, Pottery Barn turned positive at 1%, and the Williams-Sonoma brand continued its streak with a 5% comp. B2B delivered a record quarter, up 13.7%, with contract growth of 22%. Laura Alber credited a "broad based comp-lever improvement" that is not promotionally led.

It is broad based... it is not promotionally led,
Laura J. Alber, Chief Executive Officer · 2026-05-21

she said, pointing to newness and collaborations as the primary drivers. Perhaps the most significant strategic shift is the pivot back to store growth. After years of reducing its fleet, WSM is opening 20 new stores in 2026 and repositioning 90 more. The company expects to end the year net flat, but then grow store count 1-3% annually starting in FY27. This marks a deliberate move to leverage its physical footprint as a competitive advantage, especially with design services and the "take it home today" initiative. It's a change from the prior playbook of outright closures. Laura previewed this inflection on the prior call: “This year is an inflection point, and we are going to be net neutral at the end of the year.” — Laura Alber, Chief Executive Officer · 2026-03-18

The takeaway

WSM's operating model is clearly resilient, but the market is paying up for visibility. The stock's recent run suggests investors are looking past the tariff noise to the underlying momentum. Yet management's decision to hold guidance implies they see enough uncertainty to keep expectations grounded. With operating margin still near 16.5%—well above pre-pandemic levels—and a fortress balance sheet, the company is well-positioned to navigate the volatility. The tariff mitigation playbook is consistent with prior quarters; as Jeff noted last May, “We have a very effective tariff mitigation plan and we feel confident in our ability to be able to offset the tariff impact as we execute that plan...” — Jeff Howie, Chief Financial Officer (CFO) · 2025-05-22 In the end, WSM's Q1 is a testament to the power of a differentiated brand portfolio and disciplined execution. The company is absorbing higher input costs, managing tariffs prudently, and simultaneously reigniting its growth engine. For investors, the key may be watching whether the planned store expansion and continued newness can sustain this momentum into the second half.