Williams-Sonoma, Inc. (NYSE:WSM) shares rose on Wednesday after the company reported fourth-quarter earnings that exceeded expectations, despite a revenue shortfall. The company also provided a stable outlook for fiscal 2026.

Fourth-Quarter Results: EPS Beat, Revenue Miss

Williams-Sonoma reported GAAP diluted EPS of $3.04, surpassing analyst estimates of $2.91. However, net revenue was $2.36 billion, below the $2.42 billion estimate and down from $2.46 billion a year ago, due to an extra week in the prior period.

Despite this, comparable brand revenue rose 3.2%. Operating income was $478 million, with an operating margin of 20.3%, down 120 basis points year over year.

Margins, Costs, and Tariff Effects

Turning to margins and costs, gross margin was 46.9%, down 40 basis points, primarily due to lower merchandise margins and occupancy deleverage.

Supply chain efficiencies and favorable inventory results partially offset these declines. SG&A expenses decreased 1.3% year over year to $627 million. Merchandise inventories increased 9.8% to $1.5 billion, including about $80 million in additional tariff costs.

Segment Performance and Store Count

Regarding segment performance, Pottery Barn generated $838 million in revenue, with comparable sales declining by 2.3%. West Elm had $486 million in revenue, with a 4.8% increase in comparable sales.

Williams Sonoma earned $579 million in revenue and saw comparable sales rise by 7.2%. Pottery Barn Kids and Teen recorded $330 million in revenue, with comparable sales up 4.0%. The company ended the quarter with 506 stores, down from 512 a year earlier.

Full-Year Results and Profitability Overview

Looking at the full year, in fiscal 2025, net revenues increased to $7.81 billion from $7.71 billion, with comparable brand revenue growth of 3.5%.

GAAP diluted EPS reached a record $8.84, up 0.6% year over year. Operating income was $1.42 billion, with an operating margin of 18.1%, down 50 basis points.

ROIC was 42.3%, and adjusted ROIC was 51.6%.

Flow, Capital Return, and Outlook

Additionally, the company generated $1.31 billion in operating cash flow and ended the year with $1.02 billion in cash. It returned nearly $1.2 billion to shareholders through $854 million in share repurchases and $316 million in dividends,

Williams-Sonoma approved a 15% increase in its quarterly dividend to 76 cents per share, payable May 22, 2026.

CEO Laura Alber stated, “We are proud of our strong finish to 2025. In Q4, our comp came in at +3.2%, and we delivered an operating margin of 20.3% with earnings per share of $3.04. Normalizing for the 53rd week last year and the tariff impact this year, we delivered substantial operating margin improvement versus last year.”

For fiscal 2026, the company expects net revenue growth of 2.7% to 6.7%. This means projected sales of $8.02 billion to $8.33 billion, compared to estimates of $8.14 billion.

Operating margins are projected between 17.5% and 18.1%.

WSM Price Action: Williams-Sonoma shares were up 6.13% at $193.34 at the time of publication on Wednesday, according to Benzinga Pro data.

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