Here's What Investors Must Know Ahead of Williams-Sonoma's Q4 Earnings

Williams-Sonoma, Inc. WSM is scheduled to release its fourth-quarter fiscal 2025 results on March 18, before the opening bell.

In the last reported quarter, the company’s earnings and net revenues topped the Zacks Consensus Estimate by 4.8% and 1.5%, respectively. Year over year, the metrics grew 4.8% and 4.4%, respectively.

Williams-Sonoma reported better-than-expected earnings in each of the last four quarters, the average surprise being 8.6%.

How Are Estimates Placed for WSM?

For the fiscal fourth quarter, the Zacks Consensus Estimate for adjusted earnings per share (EPS) has increased to $2.89 from $2.88 over the past 30 days. The estimated figure indicates a decline of 11.9% from $3.28 per share reported in the year-ago quarter.

Williams-Sonoma, Inc. Price and EPS Surprise

Williams-Sonoma, Inc. price-eps-surprise | Williams-Sonoma, Inc. Quote

The consensus mark for net revenues is pegged at $2.40 billion, indicating a year-over-year decline of 2.5% from $2.46 billion.

Factors That Might Have Shaped WSM’s Q4 Performance

Revenues

Williams-Sonoma’s top-line performance is expected to have decreased year over year in the fiscal fourth quarter due to continued weakness in the home furnishings category and historically low housing turnover, which remains a key demand driver for furniture purchases. The challenging macro environment, including ongoing geopolitical uncertainty, is also likely to have weighed on consumer spending for big-ticket home products. In addition, rising tariff pressures across several sourcing regions are expected to have increased costs and created additional pressure on sales momentum during the quarter.

Segment-wise, our model predicts fiscal fourth-quarter revenues in the West Elm brand (24.9% of the third quarter of fiscal 2025 net revenues) to be $481.3 million, down 3.9% from the prior-year quarter level. Revenues for the namesake brand (14.7% of the third-quarter fiscal 2025 net revenues) and the Pottery Barn Kids and Teen brand (15.5% of the third-quarter fiscal 2025 net revenues) are expected to be down year over year by 0.9% to $567.9 million and 2.1% to $331.7 million, respectively. We expect revenues for the Pottery Barn brand (which represented 39.4% of the third quarter of fiscal 2025 net revenues) to be down year over year by 4.6% to $876.3 million.

Despite these pressures, certain internal initiatives might have provided some support. The company continues to invest in product innovation, supply-chain improvements and technology initiatives such as AI-driven tools and digital enhancements aimed at improving customer engagement and operational efficiency. In addition, continued traction in emerging brands and the B2B business might have helped partially offset the broader industry slowdown.

Margins

In the quarter to be reported, Williams-Sonoma’s bottom line and margins are likely to have declined year over year due to the rising impact of tariffs and continued cost pressures. Tariff policies have remained volatile, with higher import duties across key sourcing markets such as China, India and Vietnam. The incremental tariff rate increased significantly during the year, and management indicated that tariff costs are expected to have a much larger impact in the fiscal fourth quarter, which is likely to have weighed on profitability.

Moreover, higher employment-related expenses, including performance-based incentive compensation, along with increased digital advertising investments, are expected to have added to margin pressure during the period. These costs increased in the previous quarter as the company leaned into marketing initiatives to drive traffic and customer engagement.

Our model expects adjusted selling, general and administrative expenses (as a percentage of net revenues) to expand 240 basis points (bps) year over year to 28.2% during the quarter to be reported.

Nonetheless, WSM’s ongoing focus on supply-chain efficiencies and operational improvements is likely to have provided some support. Efforts aimed at improving logistics efficiency, lowering shipping-related costs and enhancing inventory management might have helped partially offset margin pressures in the period. We expect the gross margin to inch up 90 bps year over year to 45.3%.

Comps

Favorable impact from diversified product lines, new product introductions and collaborations is expected to have boosted the comps growth across all Williams-Sonoma’s key brands.

Our model expects Pottery Barn Kids and Teen’s comps growth to be 5%. The metric witnessed a 3.5% increase a year ago and a rise of 4.4% in the previously reported quarter. We expect Pottery Barn’s comps to grow 2.5% year over year. The same declined 0.5% a year ago, but grew 1.3% in the previously reported quarter.

Our model predicts West Elm’s comps to increase 3.0%. The metric witnessed a 4.2% increase a year ago and rose 3.3% in the last reported quarter. We expect the namesake brand’s comps to be up 4.3%. The metric witnessed a 5.7% increase a year ago and a rise of 7.3% in the previously reported quarter.

What Our Model Says for Williams-Sonoma

Our proven model predicts an earnings beat for Williams-Sonoma this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here.

WSM’s Earnings ESP: The company has an Earnings ESP of +0.35%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

WSM’s Zacks Rank: It currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks to Consider

Here are some other stocks from the Zacks Retail-Wholesale you may consider, as our model shows that these, too, have the right combination of elements to beat on earnings this season.

Dutch Bros BROS has an Earnings ESP of +0.33% and a Zacks Rank of 3 at present.

In the to-be-reported quarter, Dutch Bros’ earnings are expected to register a 7.1% year-over-year increase. Dutch Bros’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 41.6%.

The Cheesecake Factory Incorporated CAKE currently has an Earnings ESP of +1.04% and a Zacks Rank of 3.

In the to-be-reported quarter, Cheesecake Factory’s earnings are expected to increase 8.6% year over year. Cheesecake Factory’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.9%.

Domino's Pizza DPZ currently has an Earnings ESP of +0.19% and a Zacks Rank of 3.

In the to-be-reported quarter, Domino's earnings are expected to register a 0.5% year-over-year rise. Domino's earnings surpassed estimates in two of the trailing four quarters and missed twice, the average surprise being 1.1%.

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This article originally published on Zacks Investment Research (zacks.com).

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