Q1 2025 Williams Sonoma Inc Earnings Call

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Welcome to the Williams Sonoma, Inc. First quarter fiscal 2025 earnings conference call.

Operator: Welcome to the Williams-Sonoma Inc. First Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.

At this time all participants are in a listen only mode.

Operator: A question-and-answer session will follow the conclusion of the prepared remarks.

A question and answer session will follow the conclusion of the prepared remarks.

Jeremy Brooks: I would now like to turn the call over to Jeremy Brooks, Chief Accounting Officer and Head of Investor Relations. Please go ahead.

I would now like to turn the call over to Jeremy Brooks, Chief Accounting Officer, and head of Investor Relations. Please go ahead.

Speaker Change: Good morning, and thank you for joining our first quarter earnings call.

Jeremy Brooks: Good morning and thank you for joining our first quarter earnings call. Before we get started, I'd like to remind you that during this call, we will make forward-looking statements. With respect to future events and financial performance, including annual guidance for Fiscal 25 and our long-term outlook. We believe these statements reflect our best... However, we cannot make any assurances these statements will materialize. and actual results may differ significantly from our expectations.

Speaker Change: Before we get started I'd like to remind you that during this call. We will make forward looking statements with respect to future events and financial performance, including annual guidance for fiscal 'twenty, five and our long term outlook.

We believe these statements reflect our best estimates however, we cannot make any assurances these statements will materialize.

And actual results may differ significantly from our expectations.

Jeremy Brooks: The company undertakes no obligation to publicly update or revise any of these statements to reflect events or circumstances that may arise after today's call. Additionally, we will refer to certain non-GAAP financial... These measures should not be considered replacements for, and should be read together with, our GAP results. Also, with respect to year-over-year comparisons for the first quarter, we will make reference to our Q1 results last year, both with and without a benefit of $49 million. related to an out-of-period adjustment we recorded last year. We believe providing these disclosures is useful to understanding our quarterly financial results.

The company undertakes no obligation to publicly update or revise any of these statements to reflect events or circumstances that may arise after todays call.

Additionally, we will refer to certain non-GAAP financial measures.

We should not be considered replacements for and should be read together with our GAAP results.

Also with respect to year over year comparisons for the first quarter.

Speaker Change: We will make reference to our Q1 results last year, both with and without the benefit of $49 million related to an out of period adjustment we recorded last year.

Speaker Change: We believe providing these disclosures is useful to understanding our quarterly financial results.

Jeremy Brooks: This call should also be considered in conjunction with our filings with the FDC.

Speaker Change: This call should also be considered in conjunction with our filings with the SEC.

Speaker Change: Finally, a replay of this call will be available on our Investor Relations website.

Jeremy Brooks: Finally, a replay of this call will be available on our Investor Relations website.

Laura Alber: Now, I'd like to turn the call over to Laura Alber, our President and Chief Executive Officer. Thank you, Jeremy. Good morning, everyone, and thank you for joining the call. I'm excited to talk to you this morning about our first quarter. Before we get into our results, I want to take a minute to recognize our team for their contributions. Their passion, dedication, and talent continue to drive our results. We are proud to deliver strong results in the first quarter of 2025, driven by a positive top-line comp and continued strength in our profitability. In Q1, our comp came in above expectations at positive 3.4%, with all brands running positive comps.

Speaker Change: Now I'd like to turn the call over to Laura Alber, our President and Chief Executive Officer.

Laura Alber: Thank you Jeremy good morning, everyone and thank you for joining the call I'm excited to talk to you. This morning about our first quarter.

Laura Alber: Before we get into our results I wanted to take a minute to recognize our team for their contribution their passion dedication and talent continue to drive our results.

Laura Alber: We are proud to deliver strong results in the first quarter of 2025, driven by a positive topline comp and continued strength in our profitability.

Laura Alber: Q1, our comp came in above expectations at positive three 4% with all brands running positive comps and we exceeded profitability estimates with an operating margin of 16, 8% and earnings per share of $1 85 with earnings growth of eight 8%.

Laura Alber: And we exceeded profitability estimates with an operating margin of 16.8%, and earnings per share of $1.85, with earnings growth of 8.8%. In the quarter, we saw an acceleration of the positive comp trend coming out of Q4, despite consumer distraction with tariffs, continued geopolitical uncertainty, and no material improvement in housing markets. And we continue to outperform the industry, which declined 3% in Q1. Our growing outperformance was driven by an improvement in furniture sales, effective collaborations, and strong performance in our retail and e-commerce channels. As we continue into 2025, we are confident that we have laid the foundation for growth and profitability.

Laura Alber: In the quarter, we saw an acceleration of the positive comp trend coming out of Q4, despite consumer distraction with tariffs continued geopolitical uncertainty and no material improvement in housing market.

Laura Alber: And we continue to outperform the industry, which declined 3% in Q1.

Laura Alber: Our growing outperformance was driven by an improvement in furniture sales effective collaborations and strong performance in our retail and e-commerce channels.

Laura Alber: As we continue into 2025, we are confident that we have laid the foundation for growth and profitability.

Laura Alber: Even though there are significant macro and geopolitical uncertainties, we are focused on our three key priorities, returning to growth, elevating our world-class customer service and driving earnings.

Laura Alber: Even though there are significant macro and geopolitical uncertainty we are focused on our three key priorities we continue to grow.

Laura Alber: Our world class customer service and driving earnings.

Laura Alber: Now, let's review our strategies to continue our positive momentum from Q1 and delivered growth during the remainder of this year and beyond.

Laura Alber: Now let's review our strategies to continue our positive momentum from Q1 and deliver growth during the remainder of this year and beyond. First, we remain confident in delivering core brand growth supported by a strong pipeline of newness and compelling innovation. Our ability to differentiate through in-house design and a vertically integrated sourcing model continues to be a key advantage, enabling us to offer high-quality products at exceptional value. We recognize that the housing market, and therefore the furniture industry, may remain soft this year as interest rates are still high. Therefore, our growth strategy emphasizes a broad and inspirational non-furniture assortment, including seasonal and decorative accessories, textiles, and housewares.

Laura Alber: First we remain confident in delivering core brand growth supported by a strong pipeline of newness and compelling innovation.

Laura Alber: Our ability to differentiate through in house design and a vertically integrated sourcing model continues to be a key advantage.

Laura Alber: Enabling us to offer high quality products and exceptional value.

Laura Alber: We recognize that the housing market and therefore, the furniture industry may remain soft this year as interest rates are still high.

Laura Alber: Therefore, our growth strategy emphasizes abroad, and inspirational non furniture assortment, including seasonal and decorative accessories textiles and housewares.

Laura Alber: Also strategic collaboration is another critical part of our plan. These collaborations continues to expand new customer growth and drive sales.

Laura Alber: Also strategic collaborations, another critical part of our plan. These collaborations continue to expand new customer growth and drive sales. and most importantly, they drive relevance and excitement for our brands and customers. Our B2B program is also a key growth engine. B2B started the year strong, growing 8%, delivering another record-breaking quarter. Leveraging our design experience in commercial grade product assortment, we've built a strong and growing client base across multiple industries. Our B2B offering remains a powerful differentiator, and we are seeing continued momentum. We're also seeing positive traction and strong comps in our emerging brands – Rejuvenation, Mark & Graham, and Greenrow.

Laura Alber: And most importantly, they drive relevance and excitement for our brands and customers.

Laura Alber: Our <unk> program is also a key growth engine.

Laura Alber: <unk> started the year strong growing 8% delivering another record breaking quarter.

Laura Alber: Leveraging our design experience and commercial grade product assortment, we've built a strong and growing client base across multiple industries.

Laura Alber: Our b to B offering remains a powerful differentiator and we are seeing continued momentum.

Laura Alber: We're also seeing positive traction and strong comps in our emerging brands rejuvenation, Mark and Graham and Green room.

Laura Alber: With our proven ability to incubate and scale brands in-house, we're confident in the continued growth of these concepts and their ability to deliver profitably to our results. Alongside these growth drivers, we're focused on elevating every customer touchpoint in our channel experiences. One area of continued investment is our next generation of design services. We've introduced new tools, both online and in-stores, to help customers visualize and plan their space. We're also making meaningful progress in integrating AI across our digital platforms. From personalized emails to tailored homepages, we are enhancing the customer journey with smart, data-driven experiences. We believe AI will be a transformational force in our business.

Laura Alber: With our proven ability to incubate and scaled brands in house, we're confident in the continued growth of these concepts and their ability to deliver profitably to our results.

Laura Alber: Alongside these growth drivers we are focused on elevating every customer touch point and our channel experiences.

Laura Alber: One area of continued investment is our next generation of design services.

Laura Alber: Introduced new tools, both online and in stores to help customers visualize and plan their spaces.

Laura Alber: We're also making meaningful progress in integrating AI across our digital platforms.

Laura Alber: From personalize emails tailored homepages, we are enhancing the customer journey with smart data driven experiences.

Laura Alber: We believe AI will be a transformational force in our business and will be a leader in the use of AI in our industry.

Laura Alber: And we will be a leader in the use of AI in our industry. In our retail store, as the momentum continues, our strong Q4 retail comps continued into Q1 and were driven by an improved in-store experience with more inventory availability, fresh product assortments, enhanced design services, and engaging events. Our omni-channel capabilities are another core strength, and we are further optimizing them with AI. This includes improvements in sales performance, cost efficiency, and delivery speed. Looking ahead to the balance of the year, we are focused on delivering exceptional customer service with perfect orders that are on time, damage-free from start to finish.

Laura Alber: In our retail stores. The momentum continues our strong Q4 retail comps continued into Q1 and were driven by an improved in store experience with more inventory availability fresh product assortments enhanced design services and engaging events.

Laura Alber: Our omnichannel capabilities are another core strength and we are further optimizing them with AI. This includes improvements in sales performance cost efficiency and delivery speed.

Laura Alber: Looking ahead to the balance of the year, we are focused on delivering exceptional customer service with perfect orders that are on time damage free from start to finish.

Laura Alber: Our operational metrics are surpassing pre-pandemic levels and we are working to optimize these metrics even further. That includes reducing split shipments, lowering returns and damages, and streamlining our fulfillment process. From a cost perspective, we are committed to staying lean on headcount, using AI tools to drive productivity gains in areas that make sense. And in marketing, our in-house teams are finding ways to maximize ROI and deliver a strong impact with less investment.

Laura Alber: Our operational metrics are surpassing pre pandemic levels and we are working to optimize these metrics even further.

Laura Alber: That includes reducing split shipments lowering returns and damages and streamlining our fulfillment processes.

Laura Alber: From a cost perspective, we are committed to staying lean on head count using AI tools to drive productivity gains in areas that makes sense.

Laura Alber: In marketing our in house teams are finding ways to maximize ROI until they have a strong impact with less investment.

Laura Alber: In summary, there is no doubt that existing macroeconomic and geopolitical uncertainties are a focal point for the market. But volatility is not new in our industry, and we are confident in our ability to adapt and navigate whatever lies ahead. Therefore, we are optimistic about 2025. We are planning to gain market share, enhance the customer experience, and deliver strong earnings. Our commitment to our three key priorities remains unwavering.

Laura Alber: In summary, there is no doubt the existing macroeconomic and geopolitical uncertainties are a focal point for the market.

Laura Alber: But volatility is not new in our industry and we are confident in our ability to adapt and navigate whatever lies ahead.

Laura Alber: Therefore, we are optimistic about 2025, we.

Laura Alber: We are planning to gain market share.

Laura Alber: Hence the customer experience and deliver strong earnings.

Laura Alber: Our commitment to our three key priorities remains unwavering.

Laura Alber: Turning to guidance, I'd like to take a moment to walk through our current assumptions. We are reiterating the same outlook that we shared with you last quarter. Our guidance reflects that which we know today, and we are not assuming any significant upside or downside from broader macroeconomic sectors. As we said last quarter, our guidance incorporates our current initiatives and the existing tariff environment, which includes the tariffs that we discussed in March, and now the additional China tariff at 30%, and the global reciprocal tariff at 10%. It does not assume any other. If there are material changes in future tariffs, we will revisit our guidance.

Laura Alber: Turning to guidance I'd like to take a moment to walk through our current assumptions.

Laura Alber: We are reiterating the same outlook that we shared with you last quarter.

Laura Alber: Our guidance reflects that which we know today and we are not assuming any significant upside or downside from broader macroeconomic factors.

Laura Alber: As we said last quarter, our guidance incorporates our current initiatives and the existing tariff environment, which.

Laura Alber: Which includes the tariffs that we discussed in March and now the additional China tariffs at 30% and the global reciprocal tariffs at 10%.

Laura Alber: It does not assume any other tariffs.

Laura Alber: If there are material changes in future tariffs, we will revisit our guidance.

Laura Alber: For fiscal 2025, we continue to guide comp brand revenue growth of flat to positive 3%.

Laura Alber: For FYSBILL 2025, we continue to guide comp brand revenue growth of flat to positive 3% and operating margin in the range of 17.4% to 17.8%. As it relates to tariffs, we have been actively and aggressively managing through these additional costs with our six-point plan, which includes several key actions. First, we are successfully obtaining cost concessions from our strong vendor community. This includes reductions on current product pricing, but also reductions in price on the newness that we are bringing in and developing in the future. Second, we are actively resourcing goods to lower tariff countries, including further reductions from China.

Laura Alber: Operating margin in the range of $17 four to 17, 8%.

Laura Alber: As it relates to tariffs, we have been actively and aggressively managing through these additional costs with our six point plan, which includes several key actions.

Laura Alber: First we are successfully obtaining cost concessions from our strong vendor community. This.

Laura Alber: This includes reductions on current product pricing, but also reductions in price on the newness that we're bringing in and developing in the future.

Laura Alber: Second we are actively resourcing goods to lower tariff countries, including further reductions from China.

Laura Alber: Third, we are identifying further supply chain efficiencies in our network. Fourth, we are reducing SG&A expense through tight cost control and financial discipline. Fifth, we are expanding our Made in the USA assortment production and partnership. And lastly, we are carefully taking select price increases on products to offer strong value with a focus on maintaining competitive prices. We believe the six-point plan will allow us to absorb the additional tariffs since we last spoke and yet still reiterate our annual guidance today.

Laura Alber: Third we are identifying further supply chain efficiencies in our network.

Laura Alber: Fourth we are reducing SG&A expense through tight cost control and financial discipline.

Laura Alber: Fifth we are expanding our made in the USA assortment production and partnerships.

Laura Alber: And lastly, we are carefully taking selective price increases on products to offer strong value with a focus on maintaining competitive pricing.

Laura Alber: We believe the six point plan will allow us to absorb the additional tariffs since we last spoke and yet still reiterate our annual guidance today.

Laura Alber: Now, let's review our brands.

Laura Alber: Now let's review our brands. Pottery Barn ran a positive Q comp in Q1, and on a five-year basis, the brand ran a 46.7% comp. Powder Barn continues to increase innovation in their product lines and to launch more collaborations. The brand launched four strategic collaborations in the quarter with partnership with Kravit, Loveshack Fancy, Monique Lillier, and Mark Sykes. We continue to strengthen our proprietary designs with a focus on new and innovative furniture and easy decorating and entertaining updates for the home. The Powder Barn continues to see outside strength in seasonal offerings and we are pleased with the Easter and Valentine's Day results that the brand delivered.

Laura Alber: Pottery barn ran a positive comp in Q1 than a five year basis. The brand ran a 46, 7% comp.

Laura Alber: Pottery barn continues to increase innovation in our product lines and to launch more collaborations.

Laura Alber: The brand launched four strategic collaboration in the quarter with partnership with crowded loves Shaq Fancy Monique Olivier and Mark Sykes.

Laura Alber: We continue to strengthen our proprietary designs and our focus on new and innovative furniture and easy decorating entertaining updates for the home.

Laura Alber: The pottery barn continues to see outsized strength in seasonal offerings and we are pleased with the Easter and Valentine's day results that the brand delivered.

Laura Alber: We believe we are well positioned for the balance of 2025 due to increased newness exciting brand collaborations focus on seasonal decorating and entertaining and strong design services.

Laura Alber: We believe we are well positioned for the balance of 2025 due to increased newness, exciting brand collaborations, focus on seasonal decorating and entertaining, and strong design services.

Laura Alber: Now I'd like to talk to you about our pottery barn children's business, which ran a three 8% comp in Q1, representing the fifth straight quarter of positive comps.

Laura Alber: Now I'd like to talk to you about our Pottery Barn Children's Business, which ran a 3.8% comp in Q1, representing the fifth straight quarter of positive comps. And on a five-year basis, Pottery Barn Kids and Teens together ran 27.8% comp. These life stage businesses continue to show resilience in a tough macro environment. Nunes and Product Introductions, From Baby to Dorm, was a key lever in the quarter and drove most of its growth. Customers are responding to newsworthy introductions, from our latest collection of modern baby to our best ever Easter baskets and decor, and our expanded offering in dorms. Collaborations continue to be an area of growth, and we are pleased to have expanded our collection with Erin Lauder across the kids and teen brands.

Laura Alber: Five year basis pottery barn kids and teen together ran 27, 8% comp.

Laura Alber: This life stage businesses continued to show resilience in a tough macro environment.

Speaker Change: Newness in product introductions from David a dorm was a key lever in the quarter and drove most of the growth custom.

Speaker Change: Customers are responding to news were worthy introductions from our latest collection of modern baby.

Speaker Change: So our best ever Easter baskets, and decor, and our expanded offering and dorm.

Speaker Change: Collaborations continue to be an area of growth and we are pleased to have expanded our collection with air and water across the kids and teen brands.

Laura Alber: Additionally, our Love Shack Fancy collections continue to gain popularity with new styles in nursery and dorms. Innovation for us is more than product. It is in the channel experience, too. We have revamped tools that help inspire baby registry online, and it's increased our take-at-home-today products in our stores. We've also expanded in-store and online offerings and services for dorms, including pickup near campus at over 450 participating Williams-Sonoma Inc. stores, along with a first-of-its-kind concierge service for dorm delivery. We're encouraged by the customer response to our product and service innovations and have a robust pipeline ahead to fuel continued growth.

Speaker Change: Additionally, I love Shack P&C collections continue to gain popularity with new styles in nursery and dorm.

Speaker Change: Innovation for us is more than products it isn't the channel experience too.

Speaker Change: We have revamped tools that helped inspire baby registry online and it increased our take it home today products in our stores.

Laura Alber: We've also expanded in store and online offerings and services for dorm, including pick up near campus of over 450 participating Williams Sonoma, Inc. Stores, along with a first of its kind concierge service for dorm deliveries.

Laura Alber: We're encouraged by the customer response to our product and service innovation and have a robust pipeline ahead to fuel continued growth.

Laura Alber: Now, let's review West down.

Laura Alber: Now let's review West Elm. The brand ran positive 0.2% in Q1 with a five-year comp of 44%. We continue to make progress against the brand's four key pillars, product, brand heat, channel excellence, and operational efficiency. The West Elm brand continues to focus on its non-furniture categories as a percent to the total assortment, driving positive comps in lighting, bath, kids, and tech spouse. The brand continues to see success in new product introductions across all categories with both spring and summer newness driving double-digit positive comp to last year.

Laura Alber: The brand ran positive <unk>, 2% in Q1 with a five year comp a 44%.

Laura Alber: We continue to make progress against the brands four key pillars product brand heat channel excellence and operational efficiencies.

Laura Alber: The West Elm brand continues to focus on its non furniture categories as a percent to the total assortment driving positive comps and lighting that kids and textiles.

Laura Alber: The brand continues to see success in new product introductions across all categories with both spring and summer newness driving double digit positive comp to last year.

Laura Alber: And in March, West Elm launched a very exciting collaboration with award-winning designers Pearson Ward, featuring 165 pieces across furniture, textiles, and decorative accessories. The co-design line received widespread acclaim, earning top-tier press coverage, including an editorial feature in Art Digest and articles in leading publications such as Vogue, Domino, Better Homes and Garden, and New York Magazine. The line is on track to be one of West Elm's most commercially successful collaborations to date.

Laura Alber: And in March West Elm launched a very exciting collaboration with award winning designers Pearson Ward.

Speaker Change: 365 pieces across furniture, textiles, and decorative accessories.

Speaker Change: The co design mine received widespread acclaim are correct, earning top tier press coverage, including an editorial feature in our digest and articles in leading publications, such as Vogue Domino better homes, and Gardens, and New York Magazine.

Speaker Change: The line is on track to be one of West Elms, most commercially successful collaborations to date.

Speaker Change: Now, let's review the Williams Sonoma brand, we're thrilled to report another strong quarter for the brand, which ran a positive seven 3% comp.

Laura Alber: Now let's review the Williams-Sonoma brand. We're thrilled to report another strong quarter for the brand, which ran a positive 7.3% comp. On a five-year basis, the brand ran a 36.9% comp. Our customers at Williams-Sonoma continue to respond well to products that are both highly functional and aesthetically pleasing. We're excited to see that our curation and our creation of these items is working. We saw particular strength in the Cookware, Entertaining, and Housewares department, which outperformed. The Electrics category benefited from the launch of Breville Brass, an exclusive line of kitchen countertop appliances that combine Breville's cutting-edge technology with bold brass-colored trim and accents.

Speaker Change: On a five year basis, the brand ran a 36, 9% comp.

Speaker Change: Our customers at Williams Sonoma continue to respond well to products that are both highly functional and aesthetically pleasing.

Speaker Change: We're excited to see that our curation and our creation of these items is working.

Speaker Change: We saw particular strength in the cookware entertaining and housewares department, which outperformed the.

Speaker Change: The electric category benefited from the launch of Prevo Bras and exclusive line of kitchen, countertop appliances, the combined bravos cutting edge technology with bold brass colored trend and accents.

Laura Alber: The category also saw success with the launch of KitchenAid's new Butter Yellow Stand Mixer, another Williams-Sonoma exclusive. Our in-house product design team developed the new Williams-Sonoma Thermoclad Copper Pro Cookware Collection, which launched in early Q1. This best-in-class, high-performance cookware combines the heat conduction and control of copper with the durability and easy care of stainless. quickly becoming a bestseller.

Speaker Change: The category also saw success with the launch of Kitchenaid, new butter yellow stand mixer, another Williams Sonoma exclusive.

Speaker Change: Our in house product design teams developed a new Williams Sonoma thermal cloud copper pro Cookware collection, which launched in early Q1.

Laura Alber: Also, our stores hosted several successful book events for celebrities and celebrity chefs like Alton Brown, Morimoto, and Michael Simon. We look forward to continuing to invite our customers to meet their culinary heroes at our retail locations across the country throughout the rest of the year.

Laura Alber: We're also making progress on our Williams-Sonoma home brand. We continued our refresh and integration of our furniture assortment into our Williams-Sonoma stores. Also, we have increased the offer of in-house design textiles, printed bedding, novelty pillows, and occasional furniture pieces. Also, the brand benefited from an expansion of our popular collaboration with Aaron Lauder. We continue to believe we have an opportunity with Williams-Sonoma Home to disrupt the high-end furniture market.

Speaker Change: We're also making progress in our Williams Sonoma home brands.

Speaker Change: We continued our refresh and integration of our furniture assortment into our Williams Sonoma stores.

Speaker Change: Also we have increased the offer in house designed textile printed betting novelty pillows and occasional furniture pieces.

Speaker Change: Also the brand benefitted from an expansion of our popular collaboration with air and water.

Speaker Change: We continue to believe we have an opportunity with Williams Sonoma home to disrupt the high end furniture market.

Speaker Change: Now I'd like to update you on BTB.

Laura Alber: Now I'd like to update you on B2B. We continue to gain momentum in the hospitality space, including an impressive roster of Q1 projects with St. Regis, Hendry, Auberge, Sheraton, Hilton, Tapestry, Hyatt House, Westin, Spring Hill Suites, and Element Brands.

Speaker Change: We continue to gain momentum in the hospitality space, including an impressive roster of Q1 project with St. Regis Hendry Bearish, Sheraton Hilton Tapestry Hyatt House, Westin Springhill suites and element brands.

Speaker Change: In addition to the wins in the hospitality space. The team is focused on expanding our book of business, including wins in the education space with Tulane University Sports and entertainment with Gaylord Opryland, Waterpark and live nation, and a wide range of restaurant projects coast to coast, including Bagatelle in Montauk.

Laura Alber: In addition to the WINS and the hospitality space, the team is focused on expanding our book of business, including WINS in the education space with Tulane University, sports and entertainment with Gaylord, Opryland Waterpark, and Live Nation, and a wide range of restaurant projects coast to coast, including Bagatelle and Montauk to Regis Ova in Yonkville.

Speaker Change: So we just over.

Speaker Change: In Yountville.

Laura Alber: Now I'd like to update you on our emerging brands, which continue to drive strong growth and profitability.

Laura Alber: Now I'd like to update you on our emerging brands, which continue to drive strong growth and profitability. Our rejuvenation brand continues to exceed our expectations with another quarter of double-digit comps. Growth was fueled by continued strength in our core categories, cabinet hardware, lighting, and bath, all supported by our commitment to design forward high-quality products that meet the needs of home renovation and refresh projects. At Rejuvenation, product innovation continues to drive results. In Q1, we introduced Heritage Brass, a new finish inspired by the warmth of naturally aged metal across lighting, hardware, and bath, generating a strong customer response.

Speaker Change: Are we to the nation brand continues to exceed our expectations with another quarter of double digit comps.

Speaker Change: Growth was fueled by continued strength in our core categories cabinet hardware lighting and Bath all supported by our commitment to design for high quality products that meet the needs of home renovation and refresh projects.

Speaker Change: At Rejuvenation product innovation continues to drive results.

Speaker Change: In Q1, we introduced heritage breath, the Nu finish inspired by the warmth.

Speaker Change: Naturally aged metal across lighting hardware and Beth generating a strong customer response.

Laura Alber: We also expanded into new categories, including closet hardware and outdoor pillows, while vanities and seasonal textiles deliver double-digit comps. As we look to the rest of 2025, we're confident in Rejuvenation's continued momentum and long-term potential.

Speaker Change: We also expanded into new categories, including clause it hardware and also our pillows.

Speaker Change: Vanities and seasonal textiles delivered double digit comps.

Speaker Change: As we look to the rest of 2025, we're confident rejuvenation continued momentum and long term potential.

Speaker Change: And Mark and Graham the brand is leaning into more frequent gifting occasions and milestones as a key strategy.

Laura Alber: At Mark & Graham, the brand is leaning into more frequent gifting occasions and milestones as a key strategy. And the brand's two newest incremental businesses, Pet & Baby, have been very successful and are driving new customer acquisitions.

Speaker Change: And the brands to newest incremental businesses pet and baby had been very successful and are driving new customer acquisition.

Speaker Change: Turning to our newest brand Greenwell the brand delivered strong growth in Q1, driven by demand for vintage inspired beautiful colorful products.

Laura Alber: Turning to our newest brand, Greenrow, the brand delivered strong growth in Q1, driven by demand for vintage-inspired, beautiful, colorful products. This year we're excited to watch Green Row continue to grow through new and innovative products and materials, as well as some exciting partnerships.

Speaker Change: This year, we're excited to watch Green row continue to grow through new and innovative products and materials as well as some exciting partnerships.

Speaker Change: Lastly, I'd like to talk about our global business.

Laura Alber: Last, I'd like to talk about our global business. We continue to see strong growth across our strategic global markets. In Canada, we're driving growth through our compelling product offerings, complemented by our design and trade. In Mexico, we are expanding our footprint with four new store openings this quarter, West Elm in Puerto Vallarta and Pottery Barn Kids in West Elm in Metapex. We're also seeing continued growth across both existing retail and e-commerce channels.

Speaker Change: We continue to see strong growth across our strategic global markets in Canada, we're driving growth through our compelling product offerings complemented by our design and trade services.

Speaker Change: In Mexico, we are expanding our footprint with four new store openings this quarter West Elm unfortunate Vita and pottery barn pottery barn kids and west Elm and met a pack.

Speaker Change: We're also seeing continued growth across both existing retail and e-commerce channels.

Laura Alber: Are UK businesses gaining momentum, particularly in the trade segment? and we're excited to have announced the upcoming launch of the Pottery Barn brand this fall online.

Speaker Change: Our U K business is gaining momentum, particularly in the trade segment.

Speaker Change: And we're excited to have announced the upcoming launch of the pottery barn brand. This fall online.

Speaker Change: In summary, we are proud of our strong execution and outperformance in the first quarter.

Laura Alber: In summary, we are proud of our strong execution and outperformance in the first quarter. There's no doubt that uncertainty is top of mind for all of us, but we at Williams-Sonoma Inc. have been and will continue to be focused on our industry-leading channel experiences and our cultivation of a strong portfolio of brands.

Speaker Change: There's no doubt that uncertainty is top of mind for all of us, but we at Williams Sonoma, Inc. Have been and will continue to be focused on our industry, leading channel experiences and a cultivation of our strong portfolio of brands we.

Laura Alber: We are a house of innovation, fueling a product development machine that positions us as an industry leader with strong financial results. With our focus on our three key priorities, returning to growth, enhancing our world-class customer service, and driving earnings, we are set up well to continue executing in 2025.

Speaker Change: We are a house of innovation fueling our product development machine that positions us as an industry leader with strong financial resort results.

Speaker Change: Our focus on our three key priorities returning to growth enhancing our world class customer service and driving earnings we are set up well to continue executing in 2025.

Laura Alber: Before I hand it over to Jeff. I also want to take a minute to thank you again, our associates, but also to thank our vendors and our shareholders, whose partnerships are very much appreciated.

Jeff: Before I hand, it over to Jeff.

Speaker Change: I also wanted to take a minute to thank you again, our associates, but also to thank our vendors and our shareholders whose partnerships are very much appreciate it.

Jeffrey Howie: And with that, I'll turn it over to Jeff to walk you through the numbers and our outlook in more detail. Thank you, Laura. And good morning, everyone. We are proud to have delivered Q1 results exceeding expectations on both the top and bottom lines. Our results reflect the three key priorities we outlined for 2025. First, Returning to Growth. Our top line accelerated to a positive 3.4% comp in Q1. driven by innovation and newness across our core brand. double-digit comps in our emerging brands and strong growth in business-to-business. Second, elevating a world-class customer service. Our supply chain team yet again produced efficiencies and most importantly, improved customer service.

Speaker Change: And with that I'll turn it over to Jeff to walk you through the numbers and our outlook in more detail. Thank.

Jeff: Thank you Laura and good morning, everyone.

Speaker Change: We are proud to have delivered Q1 results exceeding expectations on both the top and bottom lines.

Speaker Change: Our results reflect the three key priorities, we outlined for 2025.

Speaker Change: First returning to growth.

Speaker Change: Our top line accelerated to a positive three 4% comp in Q1.

Speaker Change: By innovation and newness across our core brands.

Speaker Change: Double digit comps and our emerging brands and strong growth in business to business.

Speaker Change: Second elevating our world class customer service.

Speaker Change: Our supply chain team, yet again produced efficiencies and most importantly improved customer service.

Jeffrey Howie: And third, our focus on driving earnings. We tightly managed SG&A to deliver strong operating margin and EPS growth. Our results this quarter demonstrate the flexibility, strength, and durability of our operating model to drive market share gains and deliver highly profitable earnings in almost any environment.

Speaker Change: And third our focus on driving earnings.

Speaker Change: We tightly managed SG&A to deliver strong operating margin.

Speaker Change: And EPS growth.

Speaker Change: Our results this quarter demonstrate the flexibility strength and durability of our operating model.

Speaker Change: To drive market share gains and deliver highly profitable earnings in almost any environment.

Speaker Change: Now, let's dive into the numbers I will start with our Q1 results and then touch on guidance for 25.

Jeffrey Howie: Now, let's dive into the numbers. I'll start with our T1 results and then touch on guidance for 25. Q1 net revenues finished at $1.73 billion at a positive 3.4% comp, with all brands delivering positive comps in the quarter. Our revenue comps came in above the high end of our expectations. driven by positive comps in our furniture business and continued strength in our non-furniture category. With the home furnishings industry contracting approximately 3% in Q1, we gained market share, even as we maintained our penetration of full price selling. From a channel perspective, both the retail and e-commerce channels delivered positive comps, with retail up 6.2% comp and e-commerce up 2.1% comp.

Speaker Change: Q1, net revenues finished at $1 73 billion.

Speaker Change: At a positive three 4% comp.

Speaker Change: With all brands delivering positive comps in the quarter.

Speaker Change: Our revenue comps came in above the high end of our expectations.

Speaker Change: Driven by positive comps in our furniture business and continued strength in our non furniture categories.

Speaker Change: With the home furnishings industry constructing approximately 3% in Q1, we gained market share.

Speaker Change: Even as we maintained our penetration of full price selling.

Speaker Change: From a channel perspective, both the retail and e-commerce channels delivered positive comps with retail up six 2% comp and e-commerce up two 1% comp.

Speaker Change: As we move down the income statement to gross margin.

Jeffrey Howie: As we move down the income statement to gross margin, I'd like to remind everyone that last year in the first quarter of fiscal year 24, we recorded a $49 million out-of-period adjustment related to prior year's freight accrual. This benefited margin results by approximately 300 basis points in Q1-24. Q125's gross margin of 44.3% was 360 basis points lower than last year when including last year's 300 basis points at a period adjustment. Without last year's adequate adjustment, our gross margin was 60 basis points lower than last year. There were three main drivers behind the 60 basis points decline.

Speaker Change: To remind everyone that last year in the first quarter of fiscal year 'twenty four we recorded a $49 million.

Speaker Change: Period adjustment related to prior year's freight accruals.

Speaker Change: This benefited margin results by approximately 300 basis points in Q1 24.

Speaker Change: Q1, 'twenty farms gross margin of 44, 3% with 360 basis points lower than last year, when including last year's 300 basis points out of period adjustment.

Speaker Change: Without last year's out of period adjustment, our gross margin was 60 basis points lower than last year.

Speaker Change: There were three main drivers behind the 60 basis point decline.

Jeffrey Howie: Merchandise margins, supply chain efficiencies, and occupancy. First, merchandise margins declined 220 basis points. due to higher year-over-year input costs, including higher ocean freight and tariff mitigation costs. Second, supply chain efficiencies delivered 120 basis points of savings in Q1. We continue to realize expense savings across manufacturing, warehousing, and delivery from our focus on customer experience and efficiency. Key metrics, including returns, accommodation. Damages, replacements, and outbound shipping expense continue to improve year over year. And third, occupancy costs. We're essentially flat year-over-year in dollars and leverage 40 basis points from our revenue growth. Overall, our growth margin this quarter was in line with our expectations.

Speaker Change: Nice margins supply chain efficiencies and occupancy.

Speaker Change: First merchandise margins declined 220 basis points.

Speaker Change: Due to higher year over year input costs, including higher ocean freight and tariff mitigation costs.

Speaker Change: Second supply chain efficiencies delivered 120 basis points of savings in Q1.

Speaker Change: We continued to realize expense savings across manufacturing.

Speaker Change: Warehousing.

Speaker Change: And delivery from our focus on customer experience and efficiency.

Speaker Change: Key metrics, including returns.

Speaker Change: Accommodation.

Speaker Change: Damages.

Speaker Change: Placements and outbound shipping expense continued to improve year over year.

Speaker Change: And third occupancy costs were essentially flat year over year in dollars and leveraged 40 basis points from our revenue growth.

Speaker Change: Overall, our gross margin this quarter was in line with our expectations.

Speaker Change: Turning now to SG&A.

Jeffrey Howie: Turning now to SG&A. Our Q1 SG&A ran at 27.5% of revenue. 130 basis points lower than last year as we kept a tight lid on expenses. Employment expense leveraged 60 basis points due to higher revenues and lower incentive compensation. Q1 advertising expense was 60 basis points lower year over year. Our in-house marketing team is finding ways to drive more with less spend.

Speaker Change: Our Q1 SG&A ran at 27, 5% of revenues.

Speaker Change: 130 basis points lower than last year, as we kept a tight lid on expenses.

Speaker Change: Employment expense leveraged 60 basis points due to higher revenues and lower incentive compensation.

Speaker Change: Q1 advertising expense was 60 basis points lower year over year.

Speaker Change: In house marketing team is finding ways to drive more with less spend.

Jeffrey Howie: and is delivering a strong impact while leveraging ad Moving to the bottom line, we delivered earnings exceeding expectations. Including last year's 300 basis points at a period adjustment, Q1's operating margin of 16.8% came in 230 basis points below last year with EPS of $1.85. $0.14 lower than last year. Without last year's out-of-period adjustment, Q1's 16.8% operating margin finished 70 basis points higher than last year, with earnings per share of 8.8% year-over-year.

Speaker Change: And is delivering a strong impact while leveraging our cost.

Speaker Change: Moving to the bottom line, we delivered earnings exceeding expectations.

Speaker Change: Including last year's 300 basis point out of period adjustment Q1 operating margin of 16, 8% came in 230 basis points below last year with EPS of $1 85.

Speaker Change: 14 cents lower than last year.

Speaker Change: With that last year as out of period adjustment Q1, 16, 8% operating margin finished at 70 basis points higher than last year with earnings per share up eight 8% year over year.

Speaker Change: On the balance sheet, we ended the quarter with a cash balance of $1 billion.

Jeffrey Howie: On the balance sheet, we ended the quarter with a cash balance of $1 billion, with no outstanding debt. This was after we invested $58 million in capital expenditures supporting our long-term growth and returned $165 million to our shareholders to share repurchases and quarterly dividends. Merchandise inventories stood at $1.3 billion, up 10% to last year. Included in our inventory levels is a strategic pull forward of receipts. to reduce the potential impact of higher tariffs in fiscal year 2025. Without this pull forward, our inventory levels would have been materially in line with revenue growth.

Speaker Change: With no outstanding debt.

Speaker Change: This was after we invested $58 million and capital expenditures supporting our long term growth and returned $165 million to our shareholders through share repurchases and quarterly dividends.

Speaker Change: Merchandise inventories stood at $1 3 billion up 10% to last year.

Speaker Change: Included in our inventory levels is a strategic pull forward of receipts.

Speaker Change: To reduce the potential impact of higher tariffs in fiscal year 'twenty five.

Speaker Change: Without this pull forward or inventory levels would have been materially in line with revenue growth.

Speaker Change: Summing up our Q1 results.

Jeffrey Howie: Summing up our Q1 results. We've once again delivered strong earnings for our shareholders. I'd like to thank our talented, dedicated, and nimble team at Williams-Sonoma Inc for delivering these outstanding results in a remarkably uncertain environment.

Speaker Change: Once again delivered strong earnings for our shareholders.

Speaker Change: I'd like to thank our talented.

Speaker Change: Dedicated and nimble team at Williams Sonoma, Inc. For delivering these outstanding results in a remarkably uncertain environment.

Speaker Change: Now, let's turn to our 25 outlook.

Jeffrey Howie: Now, let's turn to our 25 outlets.

Jeffrey Howie: First, some housekeeping. 2024 was a 53-week year for Williams-Sonoma Inc. In fiscal year 25, we will report comps on a 52-week versus 52-week comparable basis. All other year-over-year compares will be 52 weeks versus 53 weeks. The additional week contributed 150 basis points to revenue growth and 20 basis points to operating margin to full year 24 results. Additionally, in the first quarter of fiscal year 24, we recorded a $49 million out-of-period adjustment related to prior year's freighted rules. This benefited operating margin results by approximately 300 basis points in Q1 and 70 basis points for the full year.

Speaker Change: First some housekeeping.

Speaker Change: 2024, It was a 53 week year for Williams Sonoma, Inc.

Speaker Change: In fiscal year 'twenty, we will report comp on a 52 week versus 52 week comparable basis.

Speaker Change: All other year over year compares will be 52 weeks versus 53 weeks.

Speaker Change: The additional week contributed 150 basis points to revenue growth in.

Speaker Change: 20 basis points to operating margin for full year 2004 results.

Speaker Change: Additionally, in the first quarter of fiscal year 'twenty, four we recorded a $49 million out of period adjustment related to prior years great accruals.

Speaker Change: This benefited operating margin results by approximately 300 basis points in Q1, and 70 basis points for the full year.

Jeffrey Howie: Our guidance for fiscal year 25, we use fiscal year 24 results without the out-of-period adjustment as a comparable basis.

Speaker Change: Our guidance for fiscal year 'twenty five we use fiscal year 'twenty four results without the out of period adjustment as a comparable basis.

Speaker Change: As we turn to guidance for fiscal year 'twenty five our message is the same as last quarter.

Jeffrey Howie: As we turn to guidance for fiscal year 25, our message is the same as last quarter. The tariff policy and macroeconomic environment is uncertain. Our focus is on what we can control, executing our three key priorities. returning to growth. elevating a world-class customer service and driving earnings. We're confident in our growth strategy. And we see opportunity to drive earnings from additional supply chain efficiencies and savings across SG&A. Our guidance assumes no meaningful changes in the macroeconomic environment. for Interest Rates for Housing Turnover.

Speaker Change: The tariff policy and macroeconomic environment is uncertain.

Speaker Change: Focus is on what we can control.

Speaker Change: Executing our three key priorities.

Speaker Change: Returning to growth.

Speaker Change: Elevating our world class customer service and driving earnings.

Speaker Change: We're confident in our growth strategies.

Speaker Change: And we see opportunity to drive earnings from additional supply chain efficiencies and savings across SG&A.

Speaker Change: Our guidance assumes no meaningful changes in the macroeconomic environment.

Speaker Change: Our interest rates for housing turnover.

Speaker Change: As a result, we are reiterating our guidance for fiscal year 'twenty five.

Jeffrey Howie: As a result, we are reiterating our guidance for fiscal year 25. We expect 2025 Net Revenue Comp. to be in the range of flat to positive 3%. with total net revenues in the range of down 1.5% to positive 1.5% due to the 53rd week impact from 24. We anticipate operating margins will be between 17.4% and 17.8%, which is materially flat, excluding the 20 basis points impact from the 53rd week in fiscal year 24.

Speaker Change: We expect 2025 net revenue comps to be in the range of flat to.

Speaker Change: The positive 3%.

Speaker Change: With total net revenues in the range of down one 5% to positive one 5% due to the 50 <unk> week impact from 24.

Speaker Change: We anticipate operating margins will be between 17, 4% 17.

Speaker Change: 17, 8%, which is materially flat, excluding the 20 basis points impact from the 50 <unk> week in fiscal year 2004.

Speaker Change: Regarding tariffs we.

Jeffrey Howie: Regarding tariffs... We are reiterating our guidance, even with absorbing incremental costs from the existing tariff environment. These in cost include the new tariffs on China of 30% and the reciprocal tariffs of 10%. along with the tariffs we spoke about in March, including the 25% tariff on steel and aluminum and the 25% tariff on Mexico and Canada. It does not assume any other tariffs. The strength of our operating model, combined with our six point tariff mitigation plan, enables us to maintain our guidance despite the addition of the reciprocal tariff. Our guidance reflects our best estimates of the tariff impact based upon the tariff outlook as of this call.

Speaker Change: We are reiterating our guidance, even with absorbing incremental costs from the existing tariff environment.

Speaker Change: These in costs include the new tariffs in China of 30%.

Speaker Change: The reciprocal tariffs of 10%.

Speaker Change: Along with the tariffs we spoke about in March, including the 25% tariff on steel and aluminum and a 25% tariffs in Mexico and Canada.

Speaker Change: It does not assume any other tariffs.

Speaker Change: The strength of our operating model combined with our six tariff mitigation plan enables us to maintain our guidance. Despite the addition of the reciprocal tariffs.

Speaker Change: Our guidance reflects our best estimates of the tariff impact based upon near term outlook as of this call.

Jeffrey Howie: The current tariff policy is uncertain and has been subject to multiple surprises and revisions.

Speaker Change: The current tariff policy is uncertain.

Speaker Change: And had been subject to multiple surprises and revisions.

Jeffrey Howie: If tariff policy changes, we may need to revisit our guidance essays.

Speaker Change: If tariff policy changes, we may need to revisit our guidance estimates.

Speaker Change: Turning now to capital allocation.

Jeffrey Howie: Turning now to capital allocation. Our plans for 2025 prioritize funding our business operations and investing in long-term growth. We expect to spend between $250 million and $275 million in capital expenditures in FY25. This represents a decrease of approximately 10% from prior guidance. as we keep a tight rein on all expenditure. due to the tariff and macroeconomic uncertainty. We intend to invest 85% of this capital spend in our e-commerce channel, retail optimization, and supply chain efficiency. We remain committed to returning excess cash to our shareholders in the form of increased quarterly dividend payouts and ongoing share repurchase.

Speaker Change: Our plans for 25 prioritize funding our business operations and investing in long term growth.

Speaker Change: We expect to spend between $250 million and $275 million and capital expenditures in fiscal year 'twenty five.

Speaker Change: This represents a decrease of approximately 10% from prior guidance.

Speaker Change: As we keep a tight rein on all expenditures due to the tariff and macroeconomic uncertainty.

Speaker Change: We intend to invest 85% of this capital spend and our E Commerce channel.

Speaker Change: Retail optimization and supply chain efficiency.

Speaker Change: We remain committed to returning excess cash to our shareholders.

Speaker Change: Increased quarterly dividend payouts and ongoing share repurchases.

Speaker Change: For dividends, we will continue to pay a quarterly dividend of <unk> 56 per share, which is a 16% increase year over year.

Jeffrey Howie: For dividends, we will continue to pay our quarterly dividend of $0.66 per share, which is a 16% increase year-over-year. We are proud to say that fiscal year 25 is the 16th consecutive year of increased dividend payout.

Speaker Change: We are proud to say this fiscal year 'twenty part is the 16th consecutive year of increased dividend payouts.

Jeffrey Howie: for sharing. We have $1.1 billion available under our share repurchase authorizations through which we will opportunistically repurchase our stock to deliver returns to our shareholders.

Speaker Change: For share repurchases, we have $1 1 billion available under our share repurchase authorizations to which we will opportunistically repurchase our stock to deliver returns to our shareholders.

Speaker Change: Looking further into the future beyond 25, we are reiterating.

Jeffrey Howie: Looking further into the future beyond 25, we are reiterating our long-term guidance of mid-to-high single-digit revenue growth with operating margins in the mid-to-high teens. Wrapping up Laura's and my comments, we're proud to have delivered another quarter of strong results for our shareholders that exceeded expectations. While tariff policy has produced uncertainty, we are encouraged by the momentum we see in our business. Our focus remains on our three key priorities, returning to growth, elevating our world-class customer service, and driving earnings. We are confident we will continue to outperform our peers. and Deliver Shareholder Growth for these five reasons that I've articulated before.

Speaker Change: Iterating, our long term guidance of mid to high single digit revenue growth with operating margins in the mid to high teens.

Speaker Change: Wrapping up Laura is in my comments, we're proud to have delivered another quarter of strong results for our shareholders that exceeded expectations.

Speaker Change: While tariff policy has produced uncertainty we are encouraged by the momentum we see in our business.

Speaker Change: Our focus remains on our three key priorities.

Speaker Change: Turning to growth.

Speaker Change: Elevating our world class customer service and driving earnings.

Speaker Change: We are confident we will continue to outperform our peers.

Speaker Change: And deliver shareholder growth for.

Speaker Change: For these five reasons could have articulated before.

Jeffrey Howie: Our ability to gain market share in a fragmented home furnishings industry. The strength of our in-house proprietary design. The Competitive Advantage of our digital-first but not digital-only channel strategy. the ongoing strength of our growth initiatives. and the resilience of our Fortress Foundation.

Speaker Change: Our ability to gain market share in the fragmented home furnishings industry.

Speaker Change: The strength of our in house proprietary design.

Speaker Change: The competitive advantage.

Speaker Change: Our digital first.

Speaker Change: But not digital Omnichannel strategy.

Speaker Change: The ongoing strength of our growth initiatives.

Speaker Change: The resilience.

Speaker Change: However, our fortress balance sheet.

Operator: With that, I'll open the call for questions.

Speaker Change: With that I'll open the call for questions.

Speaker Change: If you would like to ask a question. Please press star followed by the number one on your telephone keypad.

Operator: If you would like to ask a question, please press star followed by the number one on your telephone keypad. In the interest of time, we ask that you please limit yourself to one question and one follow up. Thank you.

Speaker Change: In the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.

Bradley Thomas: Our first question comes from Brad Thomas from KeyBank Capital Markets. Please go ahead. Your line is open.

Speaker Change: Our first question comes from Brad Thomas from Keybanc Capital markets. Please go ahead. Your line is open.

Brad Thomas: Hi, good morning, and congratulations on the strong quarter in a tough environment.

Bradley Thomas: Hi, good morning, and congratulations on the strong quarter and a tough environment. I wanted to ask about merchandise margins, and I was hoping you could just address the decline from last year. And for one, just clarify that there has been no change in your high level promotional strategy. And then perhaps talk a little bit more about how you think about promotions and clearance going forward. Thanks so much. Thanks, Brad. Thank you, Brad.

Brad Thomas: I wanted to ask about merchandise margins and I was hoping you could just address.

Brad Thomas: The decline from last year and for one just clarify that there has been no change in your high level promotional strategy and then perhaps talk a little bit more about how you think about promotions and clearance going forward. Thanks, so much.

Speaker Change: Thanks, Brad Thank you, Brad and good morning, Yes, let's zoom out and just talk about and then you in but really gross margin as a whole not do that and then I'll turn it over to Laura to talk about pricing.

Jeffrey Howie: Yeah, good morning. Yeah, let's zoom out and let's talk about MNU and really gross margin as a whole, and I'll do that, and then I'll turn it over to Laura to talk about pricing. Our gross margin in Q1 was 60 basis points lower than last year, but it was in line with our expectations. Our MMU itself was lower from higher input costs, but it was largely offset by supply chain savings and occupancy leverage. Two things I'd like to point out regarding the merchandise margin this quarter. First, we continue to see a very high level of full price selling.

Speaker Change: Gross margin in Q1 was 60 basis points lower than last year, but it was in line with our expectations are.

Brad Thomas: Our MMU itself was lower from higher input costs, but it was largely offset by supply chain savings and occupancy leverage.

Brad Thomas: Thanks, I'd like to point out regarding the merchandize margin this quarter first we.

Brad Thomas: <unk> to see a very high level of full price selling.

Jeffrey Howie: Our promotional stance has not changed. We do not do site-wide promotion. In fact, our penetration of full price selling slightly increased in the quarter. Second, our input costs were higher year over year from higher ocean freight and tariff mitigation costs. On ocean freight, we did not see a quarter over quarter increase in those costs, Q1 costs were basically the same as Q4, but what we were up against was lapping a very low period in Q1 of 24. On tariff mitigation costs, when the reciprocal tariffs were announced on 4-2, we took extremely aggressive action to get ahead of the tariff impact, and those actions impacted us in the quarter.

Brad Thomas: Our promotional stance has not changed we do not do site wide promotions in fact, our penetration of full price selling slightly increased in the quarter.

Brad Thomas: Second our input costs were higher year over year from higher Ocean freight and tariff mitigation costs on ocean freight we did not see a quarter over quarter increase in those costs Q1 costs were basically the same as Q4, but what we were up against was lapping a very low period in Q1 of 'twenty four.

Brad Thomas: On tariff mitigation costs when the reciprocal tariffs were announced on <unk> too we took extremely aggressive action to get ahead of the tariff impact and those actions impacted us in the quarter.

Brad Thomas: We will start to see the impact of a six point mitigation plan later this year.

Jeffrey Howie: We will start to see the impact of our six-point mitigation plan later this year. Offsetting this merchandise margin pressure were supply chain efficiencies and occupancy leverage. Supply chain efficiencies delivered 120 basis points of savings in Q1. We continue to realize expense savings across manufacturing, warehousing, and delivery. As I mentioned in my prepared remarks, key metrics including returns, accommodations, damages, replacements, and outbound shipping expense continue to improve year over year. Occupancy costs of $198 million were essentially flat and leveraged 40 basis points from our revenue growth.

Brad Thomas: Offsetting this merchandise margin pressure, where supply chain efficiencies and occupancy leverage.

Brad Thomas: Supply chain efficiencies delivered a 120 basis points of savings in Q1.

Brad Thomas: We continued to realize expense savings across manufacturing warehousing and delivery.

Brad Thomas: As I mentioned in my prepared remarks key metrics, including returns accommodations damages replacements and outbound shipping expense continued to improve year over year.

Brad Thomas: Occupancy cost of $198 million were essentially flat and leveraged 40 basis points from our revenue growth.

Brad Thomas: Here's the key point, Brad our Q1 results and why we believe we will be we will be able to withstand the margin pressure from the current tariff policy Thats ahead of us.

Jeffrey Howie: Here's the key point, Brad. Our key one results are why we believe we will be able to withstand the margin pressure from the current tariff policy that's ahead of us, especially given that our six-point tariff mitigation plan won't yield savings until future quarters. and it's why we're reiterating our guidance. I think that's more than covered it if you're waiting for me.

Brad Thomas: Especially given that our six point tariff mitigation plan savings until future quarters.

Brad Thomas: And it's why we are reiterating our guidance.

Speaker Change: I think Jeff weathering covenants Youre waiting for me.

Bradley Thomas: Thank you for answering the question, Jeff.

Speaker Change: Thank you for asking the question Jeff What's the next question. Please.

Operator: What's the next question?

Speaker Change: Our next question comes from Peter Benedict from Baird. Please go ahead. Your line is open.

Peter Benedict: Our next question comes from Peter Benedict from Baird. Please go ahead. Your line is open. Hey, guys. Good morning. Thank you for taking the question.

Peter Benedict: Hey, guys. Good morning, Thank you for taking the question.

Peter Benedict: I guess first question would just be on when you are taking price, you know, obviously, recognizing it's kind of the last resort here, but what's the philosophy? Is it that you try to cover and maintain kind of gross profit dollars on the item? Is there a view on gross margin rate? Just kind of trying to understand the philosophy when you and how you're going to deal with tariffs from a pricing perspective? That's my first question.

Speaker Change: I guess first question would just be on.

Speaker Change: When you are taking price, obviously, recognizing it's kind of a last resort here, but.

Brad Thomas: Whats the philosophy that you tried to cover and maintain gross profit dollars on the <unk>.

Brad Thomas: Item.

Brad Thomas: Is there a view on gross margin rate just kind of trying to understand the philosophy when.

Brad Thomas: When you and how youre going to deal with tariffs from a pricing perspective, that's my first question.

Brad Thomas: Yeah, I think as we.

Laura Alber: Yeah, I think as we think about pricing, it's not really only about tariffs, you know that over the last five years, we've had a really big change in the way we think about pricing. And we've substantially reduced the amount of commercial activity in our company, which has been important on a lot of levels, both for margin, but also for the customer, because they can count on the price being the same and not have to try to time their purchases based on different, you know, seasonal promotions. When we think about value, value to the consumer, it isn't just about price, it's about design, it's about quality, it's about the brand, it's about the service in that brand.

Speaker Change: Think about pricing, it's not really.

Speaker Change: Only about tariffs you know that over the last five years, we've had a really big change in the way, we think about pricing and we've substantially reduced the amount of commercial activity and a company which has been.

Speaker Change: Important on a lot of levels both for margin, but also for the customer because they can count on.

Speaker Change: Being the same and not have to try to time their purchases based on different.

Speaker Change: Seasonal promotions.

Speaker Change: When we think about value.

Speaker Change: Value to the consumer it isn't just about price. It's about design, it's about quality. It's about the brand. It's about the service in that brand and price is a factor, but it is not the only factor.

Laura Alber: And price is a factor, but it is not the only factor. And because of our our innovation machine, as you will, our design prowess, our vertically integrated structure. we are able to bring unique and exclusive products to market that no one else has. And we also are able to get better pricing from our vendors because we're going direct. We don't have an agent. We go direct to our vendors. And we buy usually in larger quantities than a lot of people, which also gives us a lot of opportunity. As we look at where we are today, it's no different than last year.

Speaker Change: And because of our.

Speaker Change: Our innovation machine as you will are designing products, our vertically integrated structure.

Speaker Change: We are able to bring unique and exclusive markets products to market that no one else has.

Speaker Change: And we also are able to get better pricing from our vendors because we're going direct we don't have an agent that go directly to our vendors and we buy.

Speaker Change: Really in larger quantities in a lot of people, which also gives us a lot of.

Speaker Change: Opportunity as we look at where we are today, it's no different than last year. We're always looking at our tire assortment you see where we are actually too high in price and two low impact and we make adjustment item by item, we don't make large sweeping.

Laura Alber: We're always looking at our entire store to see where we are actually too high in price and too low in price. And we make adjustments item by item. We don't make large sweeping margin target adjustments. We don't price based on cost. We price based on the environment. And what we're seeing today is we're seeing our newness, which has been a big strategy, as you know, Peter, has been really selling. And that product is coming in at margins that, you know, in most cases are really good. In some cases, there's more opportunity because we priced it too low.

Speaker Change: Margin target adjustments, we don't price based on cost.

Speaker Change: We price based on the environment.

Speaker Change: And what we're seeing today is were seeing our newness, which has been a big strategy as you know Peter has been really selling.

Speaker Change: And that product.

Speaker Change: It's coming in at margins that in most cases are.

Speaker Change: Really good in some cases, there's more opportunity because we priced too.

Laura Alber: We're overselling. And so we've taken some very carefully selected price increases on those things. Now, in addition to that, we still see an opportunity to improve our margins over time. because we can improve our markdown margin. The rate at which our markdowns are sold, the margin rate where our clearance and promotions are sold can improve and the percent of that bucket to the total can also improve. In other words, what I'm saying is even more reg price business and even higher margin on the sale bucket.

Speaker Change: Selling and so we've taken some very carefully selected price increases on those things now in addition to that we still see an opportunity to improve our margins over time.

Speaker Change: We can improve our markdown margin.

Speaker Change: The rate at which our markdowns.

Speaker Change: Margin rate, where our clearance and promotions are sold can improve and a percent of that bucket to the total can also improve in other words, what I'm, saying is even more reg price business and even higher margin on the sale bucket.

Laura Alber: Really excited that we're going into this year very clean on seasonal inventory. So that's a really good thing as we head into this year.

Speaker Change: Really excited that we're going into this year very clean on the <unk>.

Speaker Change: Inventory.

Speaker Change: So that's a that's a really that's a really good thing.

Speaker Change: As we head into this year.

Speaker Change: Our next question comes from Max <unk> from TD Cowen. Please go ahead. Your line is open.

Maksim Rakhlenko: Our next question comes from Maks Rakhlenko from TD Cowan. Please go ahead. Your line is open.

Max: Great. Thanks, a lot and congrats on nice quarter. So can you just provide more color on how we should think about merch margins for the rest of the year should we assume that the 220 basis point headwind was the high watermark and then it should ease as some of these tail winds get going or is this the right run rate for us.

Maksim Rakhlenko: Great, thanks a lot and congrats on next quarter. So can you just provide more color in how we should think about merge margins for the rest of the year? Should we assume that the 220 base point headwind was a high watermark and then it should ease as some of these tailwinds get going? Or is this the right run rate for us to consider ahead?

Speaker Change: Considering that.

Speaker Change: Yes, good morning Max.

Jeffrey Howie: Yeah, good morning, Maks. As you know, we do not guide the top. We do not guide the specific lines. We guide the top and bottom line because it gives us flexibility to respond to changes in the business. And you've seen us know the levers of pull to deliver results.

Speaker Change: As you know we do not guide the top we do not guide to specific mines, We guide to top and bottom line because it gives us flexibility to respond to changes in the business and you've seen us.

Speaker Change: No the levers to pull to deliver results. We are reiterating our guidance for fiscal year, 'twenty, five which had operating margins materially flat on the full year, excluding the impact of the 50 <unk> week from last year.

Jeffrey Howie: We are reiterating our guidance for fiscal year 25, which has operating margins materially flat on the full year, excluding the impact of the 53rd week from last year. What we have said, and I said this on the last call, is with inside of this, we do believe that we will see some lower gross margin from headwinds from the tariffs, but that will be offset by SG&A. But here's the thing. We have a lot of levers to pull. 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, which is why we are reiterating guidance today, including absorbing the incremental tariffs from the last time we gave guidance in March.

Speaker Change: What we have said and I said this on the last call is with inside of this we do believe that we will see some lower gross margin from headwinds from the tariffs but that will.

Speaker Change: We will be offset by SG&A.

Speaker Change: But here's the here's the thing we have a lot of levers to pull we have a very effective tariff mitigation plan.

Speaker Change: And we feel confident in our ability to be able to offset the tariff impact as we execute that plan, which is why we are reiterating guidance today, including absorbing the incremental tariffs from the last time, we gave guidance in March and that includes the 30% tariff on China and the 10%.

Jeffrey Howie: And that includes the 30% tariff on China and the 10% global reciprocal tariffs that now apply to almost every country across the globe. So given our Q1 results and how we were able to expand EBIT margins by 70 basis points, it's given us confidence in what we're seeing in the business that we believe we can maintain our guidance while absorbing these incremental tariff costs.

Speaker Change: Global reciprocal tariffs that now apply to almost every country.

Speaker Change: Around the globe.

Speaker Change: So given our Q1 results and how we were able to expand EBIT margins by 70 basis points. It has given us confidence and what we're seeing in the business that we believe we can maintain our guidance while absorbing the incremental tariff costs.

Speaker Change: Our next question comes from Jonathan Matuszewski from Jefferies. Please go ahead. Your line is open.

Jonathan Matuszewski: Our next question comes from Jonathan Matuszewski from Jeffreys.

Jonathan Matuszewski: Please go ahead. Your line is open. Great.

Jonathan Matuszewski: Okay, great. Good morning, nice quarter and thanks for taking my question I was hoping if you could add some more context for how demand trended throughout the quarter I think demand for some peers in the industry was down as much as double digits in April so curious.

Jonathan Matuszewski: Good morning. Nice quarter. And thanks for taking my question. I was hoping if you could add some more context for how demand trended throughout the quarter. I think demand for some peers in the industry was down as much as double digits in April. So curious, you know how your exit rate looked and if you're willing to share any color in terms of how the first few weeks of May are shaping up. Thanks. Yeah, Jonathan, I think everyone knows we don't go into the puts and takes of how our comps, what the comp cadence was across the quarter.

Jonathan Matuszewski: How your exit rate looked and if youre willing to share any color in terms of how the first few weeks of may are shaping up thanks.

Jonathan Matuszewski: Yes, Jonathan I think everyone knows we don't go into the puts and takes.

Speaker Change: How are comps.

Jonathan Matuszewski: With the comp cadence wise across the quarter.

Laura Alber: What we will say is, you know, we saw really strong results across all our brands during the quarter. In fact, every brand positive comped. And a really important nugget is furniture comped for the first time since Q4 22. So the first time in nine quarters. And what we're seeing is our consumer is responding to our products, our assortments, our marketing and our strategies. And we are taking market share because of this positive consumer response. And there's a lot of headlines out there. There's a lot of uncertainty.

Jonathan Matuszewski: We will say is we saw really strong results across all our brands during the quarter in fact every brand positive comps.

Jonathan Matuszewski: And really important nugget is furniture comp for the first time since Q4 'twenty two so the first time in nine quarters.

Jonathan Matuszewski: And what we're seeing is our consumer is responding to our products, our assortments, our marketing and our strategies and we are taking market share.

Jonathan Matuszewski: Cause of this positive consumer response.

Jonathan Matuszewski: And there's a lot of headlines out there there's a lot of uncertainty, but at Williams Sonoma, Inc. We're focused on what we can control, which is on executing our three key priorities, which is what is allowing us to deliver these excellent results and exceed expectations. Those three key priorities are number one return.

Laura Alber: But at Williams-Sonoma Inc, we're focused on what we can control, which is on executing our three key priorities, which is what is allowing us to deliver these excellent results and exceed expectations. Those three key priorities are, number one, returning to growth, which you saw on the top line this quarter. Number two, elevating our world-class customer service, which you saw through where we once again delivered supply chain efficiencies. And three, driving earnings, which we can do by tightly managing SG&A.

Jonathan Matuszewski: Turning to growth, which you saw on the top line this quarter number to elevating our world class customer service, which you saw where we once again delivered supply chain efficiencies and three driving earnings, which we can do by tightly managing SG&A.

Speaker Change: Our next question comes from Cristina Fernandez from Telsey Advisory Group. Please go ahead. Your line is open.

Cristina Fernandez: Our next question comes from Cristina Fernandez from Telsey Advisory Group. Please go ahead. Your line is open. Good morning and congratulations on the strong results.

Cristina Fernandez: Good morning, and congratulations on the strong results I wanted to see if you can talk.

Cristina Fernandez: I wanted to see if you can talk about resourcing. So China was 23% of your goods last year. How are you thinking about reducing that exposure? Is there any targets you have by year end or by next year? Can you share where that product is going? And do you expect any changes to your assortment as a result of resourcing? Yeah, thanks. You know, we've been very focused on being proactive and responding to changes in the trade environment forever. And, you know, even before the tariffs, we'd already significantly reduced our China source goods from 50 to 23 percent over the last few years.

Cristina Fernandez: About resourcing, So China was 23% plus your books last year, how are you thinking about reducing that exposure.

Speaker Change: Is there any targets you have by year end or by next year.

Speaker Change: Can you share what that product is going and do you expect any changes to your assortment.

Speaker Change: We saw resourcing.

Speaker Change: Yes.

Speaker Change: No we've been very focused on.

Speaker Change: In proactive in responding to changes in the trade environment Forever and you know even before the pathway that is significantly do start to then historic goods from 50% to 23% over the last few years.

Laura Alber: And, you know, since even then, when we said that we've made significant reductions. I think, you know, there are some categories China does really well. and you know what is going to happen with the trade environment is yet to be seen but what's good news for us is we have the flexibility now because we've resourced, double-sourced, triple-sourced many of our products to move depending on what is the long-term you know what what the long-term tariff environment becomes.

Speaker Change: So.

Speaker Change: Even then when we said that we have made significant reductions.

Speaker Change: I think.

Speaker Change: There are some categories, China does really well.

Speaker Change: And you know what.

Speaker Change: What is going to happen with the trade environment is yet to be seen.

Speaker Change: But what's good news for US is we have the flexibility now because we resource double first episode.

Speaker Change: Many of our products.

Speaker Change: To move depending on what is the long term.

Speaker Change: What's the long term tariff environment becomes so there's a lot of things that are.

Laura Alber: So there's a lot of things that are you know still up in the air I think for all of us to know but yes we've already reduced it from 23 substantially and where it settles will depend on what other announcements are made.

Speaker Change: You know its still up in the air I think for all of us to know, but yes, we've already reduced that from the 23 substantially and where it settles will depend on what other announcements Tonight.

Seth Sigmund: Our next question comes from Seth Sigmund from Barclays. Please go ahead. Your line is open. Hey, good morning, everyone. Thanks for taking the question. So I wanted to ask again about the inventory position of 10%. It sounds like some of that is strategic pulling some of the orders in early. Can you talk a little bit more about the complexion of that today? And I guess more importantly, to what extent do you think that may be helping drive conversion and sales? Obviously, in stock can be, you know, pretty important to the consumer here given typical lag time.

Speaker Change: Our next question comes from Seth Sigman from Barclays. Please go ahead. Your line is open.

Seth Sigman: Hey, good morning, everyone. Thanks for taking the question. So I wanted to ask again about the inventory position up 10%. It sounds like some of that is strategic pulling some of the orders in early can.

Seth Sigman: Can you talk a little bit more about the complexion of that today and I guess more importantly to what extent do you think that may be helping drive conversion and sales obviously in stock can be pretty important to the consumer here given typical lag time, so just any color on that would be helpful.

Seth Sigmund: So just any color on that would be helpful. Thank you.

Jeffrey Howie: Absolutely. Good morning, Seth. Yeah, our inventory ended the quarter at $1.3 billion, up 10 percent to last year. And as I mentioned in our prepared remarks, included in our inventory levels is a strategic pull forward of receipts to reduce the potential impact of higher tariffs in fiscal year 2025. To quantify that, it's about $60 to $70 million that we pulled forward. If you back that out, our inventory levels would have been materially in line with revenue growth. And without divulging our playbook, we were very aggressive when we saw the impact of the tariffs, particularly after the reciprocal tariffs.

Speaker Change: Absolutely good morning, Yeah, our inventory ended the year at one ended the quarter at $1 3 billion up 10% to last year and as I mentioned in our prepared remarks included in our inventory levels as the strategic pull quarter receipts to reduce the potential impact of higher tariffs in fiscal year 'twenty five.

Speaker Change: Quantify that it's about $60 million to $70 million that we pulled forward. If you backup that out our inventory levels would have been materially in line with revenue growth.

Speaker Change: The bulge in our playbook, we were very aggressive when we saw the impact of the tariffs, particularly after the cyclical tariffs.

Laura Alber: And we gave our inventory teams the authority to go out and grab whatever they could. And that's both foreign goods and domestic. So, what we could ship early from overseas that had already been produced, but maybe we intended to flow later in the year, we brought in. And then domestically, where we could obtain goods, we aggressively pursued that. And we think that will give us a benefit later in the year. And those goods are now on our books, tariff-free. You know, I think it's important to note, even take a step back, even with this 10% increase, our inventory levels are only up 23% versus 2019.

Speaker Change: And we gave our inventory teams.

Speaker Change: So we need to go out and grab whatever they could and thats, both foreign goods and domestic goods.

Speaker Change: So what we can ship early in from overseas and had already been produced but.

Speaker Change: But maybe if we intended to flow later in the year we brought in.

Speaker Change: And then domestically, where we could obtain goods.

Speaker Change: We aggressively pursued that.

Speaker Change: And we think that will give us the benefit later in the year.

Speaker Change: Those goods are now on our books tariff free.

Speaker Change: I think it's important to note.

Speaker Change: Step back even with this 10% increase our inventory levels are only up 23% versus 2019, and our revenue growth was up 40% over that time.

Laura Alber: And our revenue growth is up 40% over that time. And I'll also point out to everyone that unlike the fashion brands, unlike apparel, unlike footwear, the majority of what we sell is core and not seasonal. So, we don't have the same markdown risk as many other retailers. You know, sales go down, we can pull some leverage elsewhere. But we think by pulling this forward, it will really help us over the year, help mitigate the tariffs. And it's almost, Laura and I were debating, it's almost at the seventh point to our tariff mitigation plan.

Speaker Change: And I'll also point out to everyone.

Speaker Change: Unlike the fashion brands. Unlike apparel footwear the majority of what we sell this core are not seasonal. So we don't have the same markdown risks as many other retailers now sales slow down we can we can pull some levers elsewhere, but we think by pulling this forward.

Speaker Change: It will really help.

Speaker Change: Help us over the year helped mitigate the tariffs.

Speaker Change: Almost lowering our debating it's almost a seven point to our tariff mitigation plan.

Laura Alber: So, let me turn it over to Laura. Yeah, so just, Seth, you nailed it. Being in stock is really important to the consumer right now. People don't want to wait. They don't have to wait. Our in stocks are great. And even more importantly, our on-time deliveries are great. So, when you have the right inventory in the right place, you're able to reduce costs. It's all part of the supply chain excellence that we're driving through the P&L that you see in the margin line. It's part of because the inventory is in much better shape and is in the right places.

Speaker Change: So let me, yes, so our assistant Seth you nailed it.

Speaker Change: Being in stock is really important to the consider right now people don't want away. They don't have the way our in stocks are great and even more importantly, our on time delivery Oh, great. So when you have the right inventory in the right place you were able to reduce cost. It's all part of the supply chain excellence that we're driving.

Speaker Change: Through the P&L that you see.

Speaker Change: In the in the margin line as part of because the inventory is in much better shape and is in the right places and we're able to deliver four orders customers happy in fact.

Laura Alber: And we're able to deliver full orders. Customers are happy. In fact, the on-time numbers are at an all-time high right now, which is wonderful. That's a customer metric. But customer metric. are the most important metrics to us. On-time delivery is a key part.

Speaker Change: Time numbers at all time high right now.

Speaker Change: Is wonderful offer customer metric, but customer metrics.

Speaker Change: Alright, the most important metrics to us on time delivery.

Speaker Change: Is it is a key part and then as it relates to in store we've been stock.

Laura Alber: And then as it relates to in-store, we've been stocking more take-at-home-today products. in all of our brands. And it's driving substantial comp. So we're very pleased that that initiative, we thought it would work, it's working even better than expected. And, you know, as we said earlier, at the same time, our regular price business is strong and our clearance inventory as well. So we're sitting in a good place from an inventory perspective.

Speaker Change: Stocking more take it home today product.

Speaker Change: In all of our brands and it's driving substantial curve. So we're very pleased that that initiative. We thought it would work is working even better than expected.

Speaker Change: And.

Speaker Change: As we said earlier at the same time, our regular price business is strong and our clearance inventory as well. So we're sitting in a good place from an inventory perspective as a summary.

Speaker Change: Our next question comes from Simeon Gutman from Morgan Stanley. Please go ahead. Your line is open.

Simeon Gutman: Our next question comes from Simeon Gutman from Morgan Stanley. Please go ahead. Your line is open. Hey, good morning, guys. Good quarter. I guess I'll make it two parts. The first, the shape of the year with comps. Even before this quarter is 3-4. Did you always, did you expect it to improve throughout the year? That's the first question.

Simeon Gutman: Hey, good morning, guys good quarter.

Simeon Gutman: I guess I'll make it two parts the first the shape of the year with comps.

Simeon Gutman: Even before this quarter is three four did you always did you expect it to improve throughout the year. That's the first question and the second tariff mitigation cost maybe.

Simeon Gutman: And the second, tariff mitigation costs, maybe paraphrase or try to interpret this. So you're paying higher today for product because of the tariff Has that product sold or it's just capitalized cost that's affecting the cost of goods base and therefore, you know, it actually doesn't get any worse from here depending on where tariffs go, if you can just explain that.

Simeon Gutman: Maybe paraphrase or trying to interpret this so you are paying higher today for product because of the tariff.

Simeon Gutman: Has that product sold or it's the capitalized cost that's affecting the cost of goods base and therefore.

Simeon Gutman: It actually doesn't get any worse from from here, depending on what tariffs go if you can just explain that thank you.

Laura Alber: Yeah, let's talk about our growth posture, first and foremost. We've been working hard to strengthen our brand, incubate new brands, build our B2B business, drive our design services, improve our operations for customer service, all because We know that we need to grow. We want to grow and our brands have incredible loyalty and they are loved. And it's been, you know, the hangover of the housing market. hit the industry on furniture. This is the year that we have said our number one initiative has returned. We laid it out last year, we are here, we are driving positive comps and that is Everybody spoke.

Simeon Gutman: Let's talk about.

Simeon Gutman: Our growth posture first and foremost.

Simeon Gutman: We've been working hard to strengthen our brands and incubate new brands to build our <unk> business.

Simeon Gutman: Drive our design services improve operations for customer service all because.

Simeon Gutman: We know that we need to grow we want to grow and our brands have incredible loyalty and their love and it's been the hangover of the housing market.

Simeon Gutman: The industry on furniture.

Simeon Gutman: This is the year that we have said our number one initiative has returned to growth.

Simeon Gutman: We laid it out last year, we are here, we are driving positive comps and.

Simeon Gutman: That is <unk>.

Simeon Gutman: Everybody Okay.

Laura Alber: So there's a lot going on outside of our brands, but what we see is the customer is really responding to newness, innovation, collaboration, as I said, the experience. And I don't think there's many people doing what we're doing with the design quality value relationship. And so, as we think about our expectations, you know, our expectations are that we will outperform. Our expectations are that we will take market share this year, and we believe we can grow this year despite the difficult macro.

Simeon Gutman: So there's a lot going on outside of our brands, but what we see as the customer is really responding to newness innovation and collaboration.

Simeon Gutman: I said the experience and I don't think Theres, many people doing what we're doing with the design quality value relationship.

Simeon Gutman: And so as we think about.

Simeon Gutman: Our expectation.

Simeon Gutman: Our expectations are that we will outperform our expectations are that we will take market share. This year and we believe we can grow this year, despite the difficult macro backdrop.

Laura Alber: As it relates to quarters, less focused on the quarter-by-quarter, more focused on the long term, both the full year and also the opportunity, even longer than that, to more than double our total.

Simeon Gutman: As it relates to quarters.

Simeon Gutman: It's focused on a quarter by quarter more focused on the long term both the full year and also the opportunity even longer than that to more than double our total company.

Jeffrey Howie: And as part of your, to answer your second part of your question about the tariff mitigation costs, these were specific costs that we expensed in the quarter because they were related to things we took. You know, when the reciprocal tariffs were announced in 4-2, like I mentioned before, we took very aggressive actions. And these were short-term expenses. You know, we halted shipments from China. That comes with an expense. We edited assortment. That comes from an expense. All the different things we did, expediting, all that comes with an expense. But we do believe it will pay back in future quarters.

Simeon Gutman: And as part of your to answer your second part of your question about the tariff mitigation costs. These were specific costs that we expense in the quarter because they were related to things. We took you know when the reciprocal tariffs were announced in <unk> like I mentioned before we took very aggressive actions and these were short term expenses.

Simeon Gutman: We halted shipments from China.

Simeon Gutman: That comes with an expense we edited assortment that comes from an expense all the different things we did X studying all of that comes with an expense.

Simeon Gutman: But we do believe that will payback in future quarters as we just talked about on the inventory, we frontloaded a lot of goods.

Jeffrey Howie: As we just talked about on the inventory, we front-loaded a lot of goods. Those have now come in with zero tariff, and we'll be able to enjoy that benefit throughout the year. So all of these actions we're taking is why we are confident that we are able to absorb the incremental tariffs, specifically the 30% China tariff and the 10% global reciprocal tariffs, into our guidance without changing it. It's why we are reiterating our guidance today.

Simeon Gutman: Those have now come in with zero tariff and we'll be able to enjoy that benefit throughout the year.

Simeon Gutman: So all of these actions we're taking.

Simeon Gutman: And why we are confident that we are able to absorb the incremental tariffs typically at a 30%, China tariff and the 10% global reciprocal tariffs into our guidance without changing it.

Simeon Gutman: We are reiterating our guidance today.

Christopher Horvers: Our next question comes from Christopher Horvers from J.P. Morgan. Please go ahead. Your line is open. Thanks, and good morning. So, can you talk a little bit about, you know, how you think about the quarter in terms of all the puts and takes? You had a later spring. You have a consumer that does react to the stock market, which went through a tough period. But then, you know, furniture turned positive, and maybe there was some, you know, pull forward in some categories where the consumer got concerned about tariff pricing. So, to what extent do you think the strong comp that you posted was affected directionally to the positive or to the negative?

Speaker Change: Our next question comes from Christopher <unk> from Jpmorgan. Please go ahead. Your line is open.

Speaker Change: Thanks, and good morning, So can you talk a little bit about how you think about the quarter in terms of all the puts and takes you at a later spring if a consumer that does react to the stock market, which went through a tough period, but then.

Speaker Change: Furniture, and turn positive and maybe there were some.

Speaker Change: Pull forward.

Speaker Change: Some categories, where the consumer got concerned about tariff pricing so.

Speaker Change: To what extent do you think the strong comp that you posted was affected directionally to the positive or to the negative.

Christopher Horvers: And what do you think is driving furniture that flipped furniture turning positive finally?

Speaker Change: What do you think's driving furniture that flipped it.

Speaker Change: Furniture, turning positive finally.

Laura Alber: There's a lot in there.

Speaker Change: There's a lot in there I will let Jeff start yeah. So my simple answer to the question is what we saw in the quarter as our consumer are responding to our strategies our products our assortments our marketing.

Jeffrey Howie: I'm going to let Jeff start. Yeah, so my simple answer to the question is what we saw in the quarter is our consumer responding to our strategies, our products, our assortments, our marketing. We outperform the industry and gain market share, and that trend has been consistent for several quarters. We don't necessarily think there's a pull forward. I mean, there could be, but there's no way for us to quantify that. So we don't necessarily think that's a big factor here. We are executing on our priorities. We're executing what we set out to do. We saw that in the performance across all our brands.

Speaker Change: We outperformed the industry and gain market share and that trend has been consistent for several quarters.

Speaker Change: We.

Speaker Change: We don't necessarily think theres pull forward I mean, there could be but there's no way for us to quantify that.

Speaker Change: So we don't we don't necessarily think that's a big factor here.

Speaker Change: We are executing on our priorities, we're executing what we set out to do we saw that in the performance across all our brands newness and innovation is driving the performance in our core brands, our emerging brands delivered double digit growth <unk> had a very strong quarter as well as our continuing execution on.

Jeffrey Howie: Newness and innovation is driving performance in our core brands. Our emerging brands delivered double-digit growth. B2B had a very strong quarter as well. It's our continuing execution on our initiatives and the consumers responding to it. Chris, is there an additional question you want to ask there that we didn't answer? Did that give you enough information? I think that gives me enough.

Speaker Change: On our initiatives and the consumers responding to it Chris.

Speaker Change: Chris is there is an additional question you want to ask there that we didn't answer.

Speaker Change: Does that give you enough information.

Speaker Change: I think that gives us it gives me enough I did have a follow up on.

Jeffrey Howie: I did have a follow-up on the input cost side, Jeff. I think you said that you had an easy compare sort of last year, and so some of the headwinds to merge margins this year was an easy compare last year. You are weighted average cost, so as you proceeded through last year, was that sort of – that sort of easy compare got less easy such that that lap gets easier and the headwind on selling or merge margins? Because of that and the mitigation efforts in 1Q25, that diminishes as you look forward. That's correct, Chris. Yes.

Speaker Change: The input cost side, Jeff I think you said that you had an easy compare sort of last year and so some of the headwinds to to merch margins. This year was was an easy compare last year you our weighted average cost. So there is as you proceeded through last year was that.

Speaker Change: That's sort of easy compare got less easy such that that lap gets easier and the headwind on selling our merch margins.

Speaker Change: Because of that and the mitigation efforts and <unk> 25 that that diminishes as you look forward.

Speaker Change: That's correct, Chris Yes.

Jeffrey Howie: And that's embedded in our guidance. And if you take a look, we're guiding on the full year, operating margins materially flat, you know, ex the 53rd week, inclusive of absorbing all of these tariffs. So we do see that we can maintain that. That's why we're reiterating our guidance.

Speaker Change: And that's embedded in our guidance.

Speaker Change: And if you take a look regarding on a full year operating margins materially flat ex the 50 <unk> week.

Speaker Change: Inclusive of Saar being all of these tariffs.

Speaker Change: So we do we do see.

Speaker Change: That we can maintain that that's why we're reiterating our guidance today.

Kate Mcshane: Our next question comes from Kate McShane from Goldman Sachs. Please go ahead. Your line is open.

Speaker Change: Our next question comes from Kate Mcshane from Goldman Sachs. Please go ahead. Your line is open.

Speaker Change: Hi, This is Emily Gershon for Keith we wanted to ask about supply chain efficiencies. It looks like the benefit from supply chain efficiencies. This quarter was greater than that of the fourth quarter could you guys provide more detail around what drove this acceleration and then how should we think about the impact for the remainder of the year. Thank you.

Emily Gauchon: Hi, this is Emily Gauchon for Kate. We wanted to ask about supply chain efficiencies. It looks like the benefit from supply chain efficiencies this quarter was greater than that of the fourth quarter. Could you guys provide more detail around what drove this acceleration? And then how should we think about the impact for the remainder of the year? Thank you. Yeah, I mean, supply chain efficiency is another word for customer service. And if you think about Williams-Sonoma, I think the first thing that comes to mind is service and product, right? That's what you see and smell the amazing aromas in our stores and the incredible displays.

Speaker Change: Yes, let me supply chain efficiencies in other word for customer service and if you think about Williams Sonoma I think the first thing that comes to mind is service.

Speaker Change: Product right.

Speaker Change: What you see.

Speaker Change: Now the <unk>.

Speaker Change: Amazing aromas in our stores and the incredible displays and.

Laura Alber: And, you know, that's who we are. supply chain efficiencies means that we're able to execute that dream all the way from the inspiration in the store to the product in your home. And we're seeing lower returns and replacements. We're seeing better on-time delivery, less out-of-market shipments, all the things that have cost to the And we've been after this for years. We're making great progress. The supply chain team continues to outperform to their expectations, our expectations. And there's, you know, there's still more to go because we all know that delivering furniture is very difficult. It's much easier to deliver bathing And those who are going to continue to do it the best will own this category.

Speaker Change: That's who we are.

Speaker Change: Supply chain efficiencies means that we're able to execute that dream all the way from the inspiration in store to the product in your home.

Speaker Change: And we're seeing.

Speaker Change: Lower returns and replacements, we're seeing better on time delivery less out of market shipments all the things that have cost to them and we've been after this for years. So we're making great progress the supply chain team continues to outperform to their expectations are expectations.

Speaker Change: And as you know there's still more to go because we all know that delivering furniture is very difficult.

Speaker Change: It's much easier to deliver bathing suits.

Speaker Change: And those who are going to continue to do it the best well in this category and I think.

Laura Alber: And I think. that people really now trust us and they can count on us. And it's not only a cost saver, it's a sales.

Speaker Change: That people really know trust us and they can count on them not only the cost.

Speaker Change: Favre, it's a sales driver.

Speaker Change: So thank you for your question.

Robbie Ohms: Our next question comes from Robbie Ohms from Bank of America. Please go ahead, your line is open.

Speaker Change: Our next question comes from Robby <unk> from Bank of America. Please go ahead. Your line is open.

Speaker Change: Hi, This is matti check on for Robbie Thanks for taking our question.

Laura Alber: Hi, this is Maddie Chacon for Robbie Owens. Thanks for taking our question. I was just curious if you could share how much B2B is expected to contribute to comp this year and maybe any potential update on how you view the size of your B2B opportunity long-term as you expand your book. Thank you. Sure, yeah, you know, B2B has nice momentum. We're continuing to build our pipeline with new customers and give our existing customers great new things to buy. We're always developing great new projects and we see this as a $2 billion opportunity. Thank you for the.

Speaker Change: I was just curious if you could share how much b to b is expected to contribute to comp this year and maybe any potential update on how you view the size of your <unk> opportunity long term as you expand your book Thank you.

Speaker Change: Sure Yeah.

Speaker Change: <unk> has nice momentum, we're continuing to build our pipeline with new customers and give our existing customers great new things to buy we're always developing great new projects and we see this as a 2 billion dollar opportunity.

Speaker Change: Thank you for the question.

Speaker Change: We are out of time for questions today, I'd like to turn the call back over to Laura Albert for any closing remarks.

Operator: We are out of time for questions today.

Laura Alber: I'd like to turn the call back over to Laura Alber for any closing remarks. Yeah, thank you all so much. Really appreciate your support and being here today, and I hope you have a great Memorial Day weekend.

Laura Alber: Yeah. Thank you all so much really appreciate your support and being here today and I Hope you have a great Memorial day weekend.

Laura Alber: This concludes today's conference call. Thank you for your participation by now disconnect.

Operator: This concludes today's conference call. Thank you for your participation. Goodbye. Have a good afternoon.

Laura Alber: Okay.

Laura Alber: Yeah.

Laura Alber: Okay.

Laura Alber: Yeah.

Laura Alber: Yeah.