With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-435-Williams-Sonoma

The publicly traded consumer retail company sells kitchenware and home furnishings in more than 600 brick-and-mortar stores. It also successfully pivoted to ecommerce during the worst of 2020's pandemic lockdowns, which helped it grow revenue by 15% year-over-year; Williams-Sonoma climbed 64 spots on this year's list.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-486-Williams-Sonoma

This speciality retailer sells products for the home through brands including Williams Sonoma, Pottery Barn, and West Elm.

As we face unprecedented collective challenges, cooperation has become a business superpower.

25.CTW20.Williams-Sonoma

This furniture and housewares chain closed all 600-plus stores as the pandemic surged this spring. But unlike most of its retail peers, Williams-Sonoma paid staff for the duration of the store closures, and eschewed furloughs. The decision didn’t blunt its momentum: Williams-Sonoma recorded near-record profits in its most recent quarter, helped in part by store veterans who pivoted to e-commerce roles.

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This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Specialty retailer Williams-Sonoma sells cooking, dining, and home products from kitchenware to furniture to home decor. Founded in 1956, the company now includes its namesake brand, Williams Sonoma, but its largest is Pottery Barn. It also runs West Elm, Pottery Barn Kids, and Pottery Barn Teen.

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Williams-Sonoma (WSM): Company Profile, Stock Price, News, Rankings

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Williams-Sonoma

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Welcome to the Williams Sonoma Inc. Fourth Quarter and Fiscal Year twenty twenty four Earnings Conference Call. At this time, all participants are in listen only mode. A question and answer session will follow the conclusion of the prepared remarks. I would now like to turn the call over to Jeremy Brooks, Chief Accounting Officer and Head of Investor Relations.

Good morning, and thank you for joining our fourth 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 twenty 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.

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 measures. These measures should not be considered replacements for and should be read together with our GAAP results. A detailed reconciliation of non GAAP measures to the most directly comparable GAAP measure appears in Exhibit one to the press release we issued earlier this morning. This call should also be considered in conjunction with our filings with the SEC.

Finally, a replay of this call will be available on our Investor Relations website. Now, I'd like to turn the call over to Laura Elbert, 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 about our results today. Before we get into our results, I'd like to acknowledge the accomplishments of the entire team at Williams Sonoma Inc. The results we are about to share with you today reflect their creativity, focus and hard work.

We are proud with our strong finish to 2024. In Q4, our comp came in above expectations at positive 3.1%. Also in the quarter, we exceeded profitability estimates with an operating margin of 21.5% and earnings per share of $3.28 In Q4, we saw acceleration in our comp trend despite no material improvement in the housing market. After many quarters of running negative comps, our total comp was positive and I want to say it again, our total comp was positive 3.1% in Q4 and we outperformed the industry decline of 2% in the quarter. This outperformance was driven by a strong seasonal assortment, effective collaborations and improvement in furniture sales and strong performance in both retail and online.

Turning to the full year, our comp ran down 1.6% with a five year comp at 34% positive. In 2024, we delivered a record annual operating margin of 17.9% with full year earnings per share of $8.5 We hit our 2024 annual guidance, which we raised twice in 2024 and we beat Wall Street estimates on both the top and bottom lines. This performance was due to the strength of our operating model, our supply chain efficiencies, our focus on full price selling and cost control from our company wide financial discipline. As we enter 2025, we are confident that we've laid the foundation for growth and profitability. Even though there are significant macro and geopolitical uncertainties, we are focused on our strategies to deliver in 2025 and beyond.

Now let's talk about what those strategies include. First, we believe we will deliver core brand growth due to increased levels of newness and exciting innovation. We are able to differentiate ourselves competitively through our in house design capabilities and vertically integrated sourcing organization. These differentiators give us a unique ability to offer high quality products at compelling price points. Also, we recognize housing may not improve this year and therefore a key component of our growth strategy is our robust non furniture assortment that includes inspirational seasonal and decorative accessories, textiles and housewares.

We believe this puts us in a much better competitive position than our peers who are overly dependent on furniture. A key part of our strategy is our outside partnerships and collaborations. These exciting partnerships like Monique Leer and Potter Barn, Love Shack Fancy in our children's business, Stanley Tucci in our Williams Sonoma kitchen business and Marcus Sandelson in West Elm attract new customers and drive sales with our current customers. Next, B2B is an important growth driver. B2B leverages our strength in design and commercial grade product offerings.

And we have built an incredible book of business the last few years in the commercial space and several industry verticals. Our active offering of design to delivery services is a competitive advantage as we continue to build our project pipeline. And we are off to a strong start with new customers this year. Another component of our growth will come from expansion of our emerging brands, Rejuvenation, Green Row, Williams Sonoma Home and Mark and Graham. We have the in house competency and ability to incubate and build new brands.

And let me remind you that all of our brands, even our largest Pottery Barn, were once emerging brands. In addition to these growth strategies, we are focused on offering the best channel experiences. A key investment we are making is in our next generation of design services. The new tools we have launched online and in stores assist our customers in developing design plans for any style or size of home. And we continue to improve these tools.

For example, in Q4, we launched our proprietary Shop by Style functionality, which we'll be rolling out across all of our brands. We are also incorporating AI into our digital capabilities like personalized emails and customized home pages. We believe we'll be a leader in the use of AI in our operations and in our industry and that AI will be a key component in driving record sales and margin. Also, we are continuing to see improved performance in our stores. Our positive comp in Q4 was primarily driven by retail as a result of our enhanced in store experience with inspiring new products, improved in stock inventory levels and next level design services and events.

We continue to unlock the power of our omni channel services and this is another area where we are using AI to optimize sales, cost and delivery speed. In 2025, we will also continue our progress in delivering world class customer service. The perfect order, damage free, on time, every time. Even with metrics better than before the pandemic and in some cases record breaking, our supply chain team continues to challenge the status quo and come up with new ways to reduce costs. In 2025, we will continue to limit out of market and multiple shipments to reduce customer accommodations to lower returns and damages and to reduce replacements.

This part of retail execution is often overlooked, but is the key to profitability and customer satisfaction. We believe 2025 will be a year of additional optimization and efficiency, particularly in our new distribution center in Arizona, where we have more to go in terms of unlocking the benefits of cost efficiencies and faster, more automated deliveries. Moving to other earnings drivers, we'll be tight unemployment in 2025 with a focus on using AI to offset headcount growth. Also in marketing, there is opportunity this year to leverage spend by using efficiencies in our in house marketing program. In total, we are optimistic for 2025.

We are focused on driving positive comps and expanding operational improvements. Even in a difficult environment, our initiatives are gaining momentum and we are optimistic and confident about our business. Our focus will remain on our three key priorities, returning to growth, enhancing customer service and driving earnings. Turning to guidance, let's spend a minute talking about our assumptions. We aren't planning for any significant upside or downside from the external macro environment.

Our guidance reflects what we know today incorporating our initiatives and the current tariffs of China at 20%, Mexico and Canada at 25% and the additional tariffs on metals and aluminum of 25%. Our guidance does not include any additional tariffs nor does it include a housing recovery. For 2025, we are guiding our comps to be flat to positive 3% with operating margin between seventeen point four percent and seventeen point eight percent. Now, let's review our brands. Pottery Barn ran a negative 0.5% comp in Q4, substantially improving over Q3.

On a five year basis, the brand ran a positive 37.6% comp. In 2024, Pottery Barn significantly reduced promotional activity, improving margin and setting the groundwork for growth with new product introductions and increased collaborations. Looking to 2025, the brand has an exciting lineup of newness and noteworthy collaborations with industry leaders like Love Chef Fancy that launches very soon and we are building on our successful new furniture launches and have an expanded outdoor assortment. Also, we are uniquely positioned in the market with our leading products in seasonal decorating and entertaining and our innovation in textiles and our strength in print and pattern continues. In 2025, another competitive advantage for Pottery Barn is to leverage our domestic upholstery capabilities located in the Southeastern United States.

Our Sutter facilities offer high quality manufacturing with industry leading delivery times. Sutter services all of our brands, but Pottery Barn has the highest percent to total. Now, I'd like to talk to you about our Pottery Barn children's home furnishings brand, which ran a positive 3.5% comp in Q4 with a five year comp of 24.6%. In 2024, kids and teens together ran positive comps every quarter. Success has been driven by our key growth drivers dorm, baby and co labs.

In Q4, we saw record results from our expanded seasonal decor offering as customers came to our children's brands to celebrate the holidays, give gifts and decorate nurseries and dorm rooms. Product collaborations were another highlight with particular strength in the Love Shack Fancy, Chris Love's Julia and Rifle Paper collections. Looking to 2025, we've built a powerful pipeline of newness and newsworthy launches. We recently launched Modern Baby and Pottery Barn Kids offering a fresh aesthetic to the brand. In the weeks ahead, our Pottery Barn dorm collection will also launch with new looks and a dramatically expanded assortment.

Now let's review West Elm. We are thrilled to report a substantial improvement in comp to positive 4.2% in Q4. On a five year basis, the brand ran a 21.7% comp. We have made strong progress against our four key pillars: product, brand heat, channel excellence and operational efficiencies. In Q4, holiday newness drove double digit positive comps with strength in both furniture newness and holiday seasonal textiles and decorative accessories and tabletop.

We saw improvement in furniture as high performing new collections came back in stock. Also, lighting was a particular strength for West Elm in Q4. Now, let's review the Williams Sonoma brand. We are thrilled to report a substantial improvement in comp to positive 5.7%. On a five year basis, the brand ran a 35.5 comp.

The Williams Sonoma brand built on last year's success with another strong year, driven by retail execution, product innovation, dynamic marketing and collaborations. In Q4, the product assortment for Williams Sonoma was stacked with great gifts and a complete offering for holiday hosting and entertaining. We saw strength in the cookware, cutlery and electrics categories led by newness and the popularity of key core items. Our seasonal and decorative accessories also drove results for the bakeware, tabletop, housewares, food and garden businesses. We continued to welcome customers into our stores with exciting events like Celebrity Chef Book Sightings.

The one hundredth book signing event of 2024 for Williams Sonoma was held in Q4 at our Columbus Circle store and it was coincidentally a sold out launch party for Martha Stewart's one hundredth Cookbook. Our team was also on-site managing the book sales at sold out auditoriums across the country for Ina Gardens book tour. And we're excited for even more events with our amazing chef partners in 2025. In 2025, we'll continue to celebrate food from around the world. A great example is our Japanese inspired tabletop collection currently in store along with our new food collaboration with celebrity chef Morimoto.

Now I'd like to update you on B2B. Business to business had an exciting and record breaking year driving more than $1,000,000,000 in revenues with a 10% comp with both trade and contract growing in both Q4 and the full year. Q4 represented contract's largest quarter history to date driving a 12% comp for the quarter. Our multi channel program and our leading assortment of contract grade products have been key drivers in our accelerated large project growth. Key project wins include our first furniture order for a cruise ship, Royal Caribbean's Utopia of the Seas, hospitality work for the Ritz Carlton, Kimpton, W Hotels and Sheraton and continued momentum in the multifamily space with related companies and cormorant communities.

We're excited about the opportunity that B2B has to disrupt an underserved and highly fragmented market. Lastly, I'd like to update you on our emerging brands. As I mentioned earlier, Williams Sonoma has a long history of creating brands and building them into big businesses. Like we did with West Elm from a concept in 02/2002 to an almost $2,000,000,000 business today, We are pleased with the performance of our smaller emerging brands like Mark and Graham and Greenrow, which had strong positive comps in the quarter. But today, I want to focus on rejuvenation.

Our rejuvenation brand continues to exceed our expectations with another quarter of double digit growth. In fact, in the last five years, rejuvenation has driven positive comps in 17 of those 20 quarters and the business has almost doubled since 2020. In 2024, Rejuvenation's growth was driven by innovative domestically designed and made products. Core categories including cabinet hardware, bath hardware and lighting performed exceptionally well. And growth categories such as bath vanities, plumbing, window hardware and organization delivered double digit comps.

Looking ahead to 2025 and beyond, Rejuvenation is well positioned for continued momentum. We currently have 11 stores and are actively looking for new locations. We believe Rejuvenation will be our next $1,000,000,000 brand. We are also encouraged by the improvement of the Williams Sonoma home business. We continue to expand products across categories with introductions of exclusive in house designs in lighting, textiles and accessories, as well as collaborations.

We see an opportunity to disrupt the high end home furnishings market where no key players offer prints and patterns like we do. Last, I'd like to talk about our global business. We continue to see strength in our key growth markets including Canada, Mexico and India. The Canada business continues to grow, fueled by our commitment to enhancing the customer experience both online and in retail. In Mexico, the holiday season saw continued growth in sales and market share, driven by our inspiring product assortments and personalized service.

Our business in India continues to grow, driven by excellence in design services for both retail and e commerce. And our UK business continues to grow as we strengthen our partnerships with John Lewis for West Elm, Pottery Barn Kids and Fort William Mason for Williams Sonoma. In summary, we are proud of our strong execution and outperformance in 2024. Despite an uncertain backdrop, we have been and will continue to be focused on returning growth, enhancing our world class customer service and driving earnings. We are innovators and operators and we are set up for a great 2025.

Before I hand it over to Jeff, I also want to take a minute to say thank you again to our associates, but also to our vendors and to you, our shareholders. Your continued dedication and support is appreciated. And with that, I will turn 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 a strong finish to fiscal year twenty twenty four with both Q4 and full year twenty twenty four earnings exceeding expectations. Our results reflect the three key priorities we focused on in 2024. First, returning to growth as our top line improved to a positive 3.1% comp in Q4, driven by innovation and newness across our core brands, strong comps in our emerging brands and double digit growth in business to business. Second, elevating our world class customer service as our supply chain team once again produced efficiencies and most importantly improved customer service.

And third, our focus on driving earnings as we delivered record operating margin and double digit EPS growth in both Q4 and the full year. 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. Now, let's dive into the numbers. I'll start with our Q4 results followed by our full fiscal year 2024 results then provide guidance for 2025. As a reminder, 2024 is a fifty three week year for Williams Stoneman, Inc.

So, our fourth quarter consisted of fourteen weeks. We are reporting our comps on a fourteen week versus fourteen week comparable basis. All other year over year compares are fourteen weeks versus thirteen weeks. In Q4, the additional week contributed five ten basis points to revenue growth and 60 basis points to operating margin. Q4 net revenues finished at $2,500,000,000 with a positive 3.1% comp.

Our revenues came in above the high end of our expectations, driven primarily by strong holiday performance across our portfolio of brands and substantially improved trends in our furniture business. During the quarter, we gained market share even as we increased our penetration of full price selling. From a channel perspective, our retail stores delivered a positive 7% comp and e commerce a positive 1.3% comp. Moving down the income statement. Q4 gross margin came in at 47.3%, one hundred and thirty basis points higher than last year.

There were three main drivers behind this: merchandise margins, supply chain efficiencies and occupancy. First, merchandise margins improved 40 basis points year over year, reflecting lower input costs and our continued focus on full price selling. Second, supply chain efficiencies delivered another 10 basis points of savings in Q4. We continue to realize expense savings across the supply chain from our focus on the customer experience and efficiency in manufacturing, warehousing and delivery. Key metrics including returns, accommodations, replacements, out of market shipping and multiple deliveries per order continued to improve year over year.

And third, occupancy costs were down 2% from last year and leveraged 80 basis points. Our higher top line leveraged occupancy across both retail and e commerce. Overall, our higher gross margin this quarter exceeded our expectations. Turning now to SG and A. Our Q4 SG and A ran at 25.8% of revenues, 10 basis points lower than last year.

Q4 employment expense was 80 basis points higher year over year, primarily from higher performance based incentive compensation due to our strong EPS performance. In Q4, we continue to manage variable employment costs across our retail stores, distribution centers and care centers in line with revenues. Q4 advertising expense was 30 basis points higher year over year. Our multi brand portfolio allows us to test into incremental spending, while our data driven marketing team maximizes the effectiveness of our investment and keeps valuable insights in house. Our advertising model is a powerful competitive advantage.

Q4 general expenses drove the balance of the leverage in SG and A due to our resolution of an indirect tax matter and a favorable insurance settlement. On the bottom line, our Q4 operating margin came in at a record 21.5% or 140 basis points above last year. Q4 diluted earnings per share of $3.28 increased 20.6% above last year. Turning now to our full year results, which again exceeded expectations. Full year net revenues finished at $7,700,000,000 with a full year comp of negative 1.6%.

Importantly, our comp trends gained momentum across the year. That was driven by the ongoing strength in our non furniture categories coupled with the improved trend in our furniture business. From a channel perspective, our retail stores delivered a positive 0.2% comp and e commerce a negative 2.5% comp. E commerce on the full year continued to constitute nearly 66% of total revenues. Full year gross margin ended at 46.5%, a three eighty basis point improvement over last year.

As a reminder, in the first quarter of fiscal year twenty twenty four, we recorded a $49,000,000 out of period adjustment. Related to freighter tools, the benefited operating margin results by approximately 70 basis points on the full year. Without the Q1 out of period adjustment, full year gross margin ended at 45.8%. This three ten basis point improvement was driven by higher merchandise margins, supply chain efficiencies and occupancy leverage. Full year SG and A expense increased to 27.9%, up 160 basis points year over year.

Higher employment and advertising expense was partially offset by slightly lower general expenses on the full year. On the bottom line, we delivered earnings exceeding expectations. Including the out of period adjustment in Q1, full year operating margin finished at 18.6% with full year diluted earnings per share of $8.79 Without the out of grade adjustment in Q1, full year operating margin finished at a record 17.9 and full year diluted earnings per share increased to $8.5 up 14.4% year over year. On the balance sheet, we ended the year with a cash balance of $1,200,000,000 with no debt outstanding. Merchandise inventory stood at 1,300,000,000 up 6.9% to last year.

Included in our year end inventory levels is a strategic pull forward China receipts to reduce the potential impact of higher tariffs in fiscal year twenty twenty five. Now turning to capital allocation. In 2024, we generated free cash flow of $1,100,000,000 and returned nearly $1,100,000,000 to our shareholders through share repurchases and dividends. Share repurchases in 2024 totaled $8.00 $7,000,000 or 4.6% of our outstanding shares. And we paid $280,000,000 in dividends to our shareholders, a 20% increase year over year.

Capital expenditures in 2024 totaled $222,000,000 as we continue to invest in our long term growth. Speaking of returns, our fiscal year twenty twenty four return on invested capital of 54% is among the best in the retail industry. Summing up our 2024 results, we are proud to have delivered strong earnings for our shareholders. These results reflect the efforts of the entire team at William Stone Inc. And I'd like to thank our talented team for delivering these outstanding results.

Now, let's turn to our 2025 outlook. First, some housekeeping. As I've mentioned, 2024 was a fifty three week year for William Stone, Inc. In fiscal year '20 '20 '5, we'll report comps on a fifty two week versus fifty two week comparable basis. All other year over year compares will be fifty two week versus fifty three weeks.

The additional week contributed 150 basis points to revenue growth and 20 basis points to operating margin to full year 2024 results. Additionally, in the first quarter of fiscal year twenty twenty four, we recorded a $49,000,000 out of period adjustment related to freight accruals that benefited operating margin results by approximately two ninety basis points in Q1 and 70 basis points on the full year. Our guidance for fiscal year twenty twenty five will use our fiscal year twenty twenty four results without the adequate adjustment as a comparable basis. Looking ahead to fiscal twenty twenty five, the macroeconomic and policy environment is unpredictable. Our focus is on what we can control executing on our three key priorities, returning to growth, elevating our world class service and driving earnings.

We're confident in our growth strategies and we see opportunity to drive earnings from additional supply chain efficiencies and savings across SG and A. Our guidance assumes no meaningful changes in the macroeconomic environment or interest rates for housing turnover. We expect 2025 net revenue comps 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 fifty third week impact from 2024. We anticipate operating margins will be between 17.417.8% inclusive of the 20 basis points impact from the fifty third week. Regarding tariffs, our operating margin guidance includes the tariff increases implemented as of this call.

Specifically, our guidance includes the additional 20% China tariffs, the 25% Mexico and Canada tariffs and the 25% tariff on steel and aluminum. With these tariffs included, we expect operating margin for fiscal year twenty twenty five to be in the range of 17.4% to 17.8%. If tariff policy changes, we may need to revisit our guidance estimates. Now turning to capital allocation. Our capital allocation plans for 2025 prioritize funding our business operations and investing in long term growth.

We expect to spend between $275,000,000 and $300,000,000 in capital expenditures in fiscal year twenty twenty five. '80 '5 percent of this capital spend will be dedicated to driving our leadership in e commerce, our 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 repurchases. For dividends, today we announced our board of directors authorized a 16% increase in our quarterly dividend payout to $0.66 per share. Fiscal year twenty twenty five will be the sixteenth consecutive year of increased dividend payouts, which we are both proud of and remain committed to.

For share repurchases, we have $1,200,000,000 available under our share repurchase authorizations through which we will opportunistically repurchase our stock to deliver returns to our shareholders. 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 are proud to have delivered strong results for our shareholders that exceeded expectations and we are encouraged by the momentum in our business. William Stoma Inc. Remains focused on our three key priorities, returning to growth, elevating our world class customer service and driving earnings.

We're confident we'll continue to outperform our peers and deliver shareholder growth. For these five reasons, they remain consistent. Our ability to gain market share in the 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 resiliency of our Fortress balance sheet.

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

Thank you. We will now begin the question and answer session. You. Your first question comes from the line of Oliver Wintermantel from Evercore. Your line is open.

Yes. Thanks very much. I'm looking for within your comp guide of 1% to 3%. How do you see SG and A leverage on a flat comp versus a plus 3% comp? We've seen in 4Q now that you had a positive three comp.

It was occupancy was nicely levered and SG and A. We saw a 10 basis point leverage. So if you could walk through what the break points were with leverage between maybe a flat and a plus three comp? Thank you.

Good morning, Ali. Thank you for that question. As you know, we don't guide the specific lines or provide guidance by quarter. On the full year, we're guiding operating margin to be in the range of 17.4% to 17.8%. We do expect to see some leverage in SG and A from expense savings that will partially offset the headwinds in gross margin we anticipate from tariffs.

I think there's three key points when considering SG and A. First, most of our employment sits in our stores, distribution centers and call centers. So it's variable expense that we can flex with top line trends. So as we see, more sales, we would expect to be able to hold, our employment rate. Second, we see opportunity to leverage AI to drive additional savings, especially in our call centers and certain back office operations.

We're starting to deploy some AI here and we think there's a good opportunity for us to leverage that. Tough to quantify because it's the early innings, but we're very optimistic about what that can bring, in terms of savings. And third, a key competitive advantage of our advertising model is our ability to test across our portfolio of brands and scale or pull back based upon returns. We're constantly evaluating our advertising spend and how we look to spend the next incremental dollar. That's a lever as we see more sales, we can always flex.

But here's the key thing. We got top line revenues and bottom line operating margins because it gives us the flexibility to respond to any changes in the business. And as you've seen, especially in our Q4 results, we know the levers to pull to deliver results.

Okay. Thank you. And then just to follow-up on the sales growth. How do you see e com versus stores performing in 2025? Thank you very much.

Look, we were very pleased with the retail performance in Q4 at a plus 7%. Retail team did a phenomenal job and our brands had a great strategy. In terms of the mix between the channels, we don't provide specific guidance. But we do believe that e commerce will continue to be on the full year 66% of our total revenues. We're optimistic about where we see both channels in '25 and that's baked into our guidance.

Your next question comes from the line of Max Rylandko from TD Cowen. Your line is open.

Great. Thanks a lot. Just curious, so on gross margin for 2025, if we were to ignore tariffs, how much further room do you see across supply chain, product margins and occupancy as well?

Yes, Max, great question. I think that gets to the heart of what's in everybody's mind this morning. Look, our guidance today of 17.4% to 17.8% in operating margin includes the full impact of the tariffs that have been implemented as of this call. That includes the 20% China tariff, the 25% tariffs on Mexico and Canada and the 25% tariff on steel and aluminum. Our expectation, as we look at it is that we expect to see some erosion in gross margin simply from the headwinds we anticipate in these tariffs.

But there will also be offsets from supply chain efficiencies in gross margin and savings in SG and A. On supply chain efficiencies, we have a long way to go. We do big and bulky better than just about anyone in this industry. And we do it at scale. We make over 2,400,000 in home deliveries per year.

That's about 7,000 a day. And like I said, we do it better than anybody. But we still have a lot of opportunity to improve on things like returns, damages, replacements on time. There's a lot of opportunity in there and our supply chain team has done a phenomenal job so far and they see additional savings that they can harness, as they approach 25. And then as we think about SG and A, there's additional offsets in there as well.

I just spoke about some of them with all these questions. But we definitely see opportunity to leverage some employment, as we deploy some exciting AI initiatives. And then, we see opportunity with that cost as well. I think the key point here is, you think about the impact of the tariffs. We have covered the full impact within our guidance today of all the tariffs that are implemented as of this call.

If it weren't for the tariffs, would the margin be higher? Perhaps. But that's not the reality today and we're guiding based upon the facts and trends that are out there in the environment today.

Your next question comes from the line of Simeon Gutman from Morgan Stanley. Your line is open.

Hey, good morning, everyone. I'm going to ask two strategic questions. First, a little related to the prior one. So gross margin structurally is punching at a much higher level than pre COVID. You were obviously maybe undervalued before.

Can you talk about the structural opportunity for higher product margins? Your business now flipped to positive comp. There's been no real degradation in the structure of margin. So can you talk about it? I know you just touched on it a little bit, Jeff, but thinking about the mix between price and product margin.

Sure. I'll chime in here. I think Jeff has covered well what our guidance is and what it includes. And I'll repeat what he said in a slightly different way about other opportunities. So the tariffs are in a way an opportunity for us because of our scale and our capabilities with our supply chain and our exclusive product line.

I think you know we design most of what we sell and that gives us the competitive advantage of being ahead and not being stuck in price wars with people. We also have a long, long relationships with our vendors overseas and our own sourcing organization on the ground, which I don't think any of our competitors have. So we have been anticipating these tariffs for some time now, details of which we didn't know, of course, but we knew that China was going to be squarely in the sight lines. You know, we've been moving goods away from China. We've cut it substantially.

We intend to continue to cut it substantially. That's not just an intention that's in progress and move things to areas that are cheaper and untariffed, easier to do business in, including moving some things back to The United States, which is exciting for us. I think you remember that we have our Sutter Street manufacturing unit in the Southern Part Of The United States, Southeastern Part Of The United States and we make a lot of our upholstery there. We have an incredible workforce and that product got a lot more appealing now from a margin perspective given these tariffs and it makes it very hard to compete with us because we have great prices, we have the best quality. Please, if you haven't purchased from Sutter, you should.

And also the most competitive part of that is we can do made to order in the shortest time in the marketplace. That's a big advantage big, big advantage for us. But moving back to pricing. We have been testing, we've told you this before, pricing up, pricing down, where is the sweet spot? And in addition to getting some relief from our great vendor partners and moving things to areas that don't have tariffs or we expect to be less tariffed, we have taken some targeted price increases on items that are either underpriced or that we're overselling and we're seeing good results from that.

We need to be very careful because being competitive is very important to us, but being competitive is not just price to price. It's design and it's quality. And it's really important that all those things are considered when we price things either up or down. But I am pleased to tell you this morning that, we are seeing some opportunity in pricing a few things up to cover some of these very extreme costs that have come through as a result to these tariffs. Now on supply chain, the other components of margin, There's all sorts of different beliefs out there about whether ocean comes down from here and whether, if demand flows worldwide, that becomes a real tailwind for us.

Could be we haven't baked a lot of that stuff in yet. What we have, put in is a nod to what Jeff was talking about in terms of further improvement in returns, replacements, damages. We know there's opportunity there. It's a very large number. But we also don't want to get ahead of ourselves.

So could there be more on those operating lines? There could be. Could there be other surprises? There could be. So when you give guidance, you pick your best case your best guess with all the puts and takes.

And that's what we gave you today. Remember, last year included an extra week. This year, we obviously don't have that. So that's worth more than I think people expected. But I'm very confident about our ability to outperform this year, especially vis a vis our competition.

And the truth is whenever there is uncertainty, there is opportunity. And that's what we're excited about this year.

Your next question comes from the line of Stephen Zaccone from Citi.

to ask two and one here just for time. First, can you just clarify what is your tariff posture kind of embedded in the guide because obviously the situation is very dynamic. So just help us quantify what is the actual impact to gross margin? And then the second is, I wanted to focus just on the consumer because you've heard a lot about some weakness and big ticket discretionary spending as of late. Have you seen anything in your business?

And it sounds like your guidance doesn't kind of embed any change in the external backdrop. But how do you think through if the consumer kind of weakens the levers to protect operating margin?

Hey, Steve. Good morning. Why don't we take the consumer first and then I'll take that and then I'll take the tariff portion.

Okay. I thought you're going to do the opposite, but I'd be happy The consumer all I can tell you about the consumer is what we see related to our business. I can't speak to what others are seeing. I don't want you to take this and apply it to everything that you guys cover. But, what we're seeing is that they are responding to our strategies.

And our strategies are to drive our non furniture business, which is exciting with our newness across brands and our stepped up incremental collabs, our non furniture seasonal holiday decor across brands. We had a double digit comp on our seasonal holiday decor and we're off to the races with Easter, which by the way there's an Easter shift, which is interesting because it makes things even more confusing, but it is usually good when Easter is later, which it is this year than it was last year, substantially later. And then our emerging brands are clearly outperforming and represent a big opportunity for us. As I said in my prepared remarks, the other opportunities that we see that our consumers are responding to are B2B. We had our biggest quarter ever in Q4 and we don't see that abating.

Our design services continue to be a real area of competitive advantage because we know it's hard to decorate a home and particularly online. And we're giving our sales associates better tools, but also our customers better tools to make decisions to furnish their homes online if they can't go to a store. And then, our channel strategies, using our channels to unlock the power of inventory anywhere and get it to customers quickly. And so these are our strategies, but they're strategies that have been approved by our customers based on what we're seeing in terms of response to them. So I can tell you that the consumer is responding to our strategies and that gives us confidence and optimism in our guidance.

All right. And just other part of your question regarding tariffs and what's in and what's the impact to our operating margin guidance. So our operating guidance of 17.4% to 17.8% includes the full impact of the tariffs implemented as of this call. So just to be super specific because there's a lot of different things bouncing out there. It includes the 20% China tariff, the 25% Mexico and Canada tariffs and the 25% additional tariffs on metals and aluminums.

And here's the thing on tariffs. We've always been a leader in proactively responding to changes in the trade environment. It's not our first time at this. Laura and I were both here in 2018 as were most of our management team. Since 2018, we've significantly reduced our China source goods.

From back then in 2018 was about 50% to about 23% today. And Metro and Canada are not a material source production for us. But there is an impact from tariffs embedded in our guidance. To offset the tariff impact, we have an effective six point plan. And Laura touched on a number of these in the last question.

First one is obtaining cost concessions from our vendors. We're also resourcing goods to lower cost countries, including out of China. As Laura mentioned, we are passing on targeted price increases to our customers. And I've said earlier in the call, we're identifying further supply chain efficiencies and we're reducing SG and A expense as well. And finally, we're expanding our Made in The USA assortment.

The US is already a major manufacturing hub for us. Laura will walk you through that. I want to share that it's our second largest source of goods at 18%. So and we see opportunity to expand our Made in The USA assortment production and partnerships. So here's the thing, there's a lot of noise in the tariffs.

Our guidance includes the tariff increases implemented as of this call and we've really offset most of the impact from those higher tariffs.

Your next question comes from the line of Brian Nagel from Oppenheimer. Your line is open.

Hi, good morning. Nice quarter, nice year. Congratulations.

So the question I want to ask and I apologize, I think this is a bit of a follow-up to the prior question. But just there's a lot of chatter out there. Broadly speaking, clearly, Williams Sonoma has really elevated itself to one of the best performers within your sector. A lot of chatter weakening demand out there. So the question I have is could you be a little more specific on on coming off of what was a decidedly solid, decidedly strong fourth quarter Q4, what you're kind of seeing here in the early part of fiscal twenty twenty five in Q1?

Williams-Sonoma (WSM) Q4 2025 Earnings Call Transcript

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