Williams-Sonoma, Inc. (NYSE:WSM) stock rose Wednesday as the retailer delivered stronger-than-expected third-quarter results, posting diluted EPS of $1.96 versus the $1.86 estimate and revenue of $1.883 billion, which topped the $1.866 billion forecast. The stock has since given up its gains and is now trading lower.
The company’s third-quarter performance was underpinned by steady consumer demand across its home furnishings portfolio, lifting comparable brand revenue by 4.0% and pushing GAAP diluted EPS up 4.8% from the same period last year.
Gross margin improved to 46.1%, up 70 basis points, supported by higher merchandise margins and supply chain efficiencies.
SG&A expenses increased 7.0% to $549 million, with a rate of 29.1%. Operating income reached $319 million, consistent with a 17.0% margin.
Pottery Barn’s revenue rose to $741.5 million, with a 1.3% comparable sales increase. West Elm revenue grew to $468.2 million with comps up 3.3%.
Williams-Sonoma revenue increased to $276.4 million, with 7.3% comparable store growth. Pottery Barn Kids and Teen generated $291.4 million with comps up 4.4%. Other brands contributed $105.2 million.
The company ended the quarter with $885 million in cash and $316 million in operating cash flow. Inventories increased 9.6% to $1.5 billion, reflecting incremental tariff costs and a planned pull-forward of receipts.
Williams-Sonoma returned $347 million to shareholders through $267 million in buybacks and $80 million in dividends.
The board reported $637 million remaining under the September 2024 repurchase plan and approved a new $1 billion authorization to begin once the current program is completed.
Following the results, Telsey Advisory Group’s Cristina Fernandez reaffirmed an Outperform rating on Williams-Sonoma and kept the price forecast at $225.
Outlook
The company reaffirmed its fiscal 2025 sales guidance of $7.751 billion to $7.982 billion, matching its outlook for 0.5% to 3.5% annual revenue growth, and comparing it with the $7.852 billion analyst estimate. Comparable brand revenue is expected to rise 2.0% to 5.0%.
Williams-Sonoma raised its operating margin forecast to 17.8% to 18.1%. Guidance reflects new Section 232 furniture tariffs, revised China tariffs of 20%, India tariffs of 50%, Vietnam tariffs of 20%, average tariffs of 18% elsewhere, and 50% tariffs on steel, aluminium, and copper.
The company expects about $35 million in annual interest income and a 26% effective tax rate, and continues to target mid-to-high single-digit long-term revenue growth with margins in the mid-to-high teens.
Price Action: WSM shares were trading lower by 2.82% to $175.65 at last check Wednesday.
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