Williams-Sonoma 4Q25 Immediate Call Postmortem
Hugely positive LT narrative change today: “A key shift in the plan is a near doubling of capital investment in retail, reflecting the meaningful opportunity we see to accelerate growth of retail stores”. This company has done nothing but net close stores for pretty much this entire decade. Current consensus estimates in out years expect that to only continue. After 2026 management now expects net store growth of 1-3% per year. Of course, Grom would catch how important that is with the first question in Q&A. Laura responded with now they see store growth. Had most gross openings this year in “over a decade”. Growth in West Elm, Pottery Barn, Rejuvenation, will see Greenrow.
Full price selling increased in 2025 and yet gained market share. Not competing on price. Competing and winning on affordability, aspiration, quality, design, and service. Can just imagine Laura wanting to really say: take your new higher 70% discount level and shove it Gary Friedman at Restoration Hardware.
B2B had another record-breaking quarter up 13.7% (10% for year). That business is getting quite sizable and given the tough environment. that level of growth should be considered outstanding. They even signed the New York Yankees as a client, lol. We talked a lot about the unique value proposition they bring in our note published 10/6/25.
Laura talking up the AI impact on e-commerce. We did a deep review of this in our last note (12/7/25) and found it highly lacking. But they did just sign a partnership with Open AI so guess we should see a lot more here soon. Surprised Laura didn’t mention that.
Seeing better comp performance at Pottery Barn QTD. For 2026 they are focusing on its heritage aesthetic. No idea what that means but just sounds like that could be a move more towards Arhaus positioning.
Laura super excited about West Elm’s outstanding performance but hate to ruin the party by illustrating that is more value oriented than Pottery Barn. You must wonder if that’s the real reason behind the Pottery Barn performance. Would take some of the wind out of all that full price bragging earlier in the call.
Suppose now must visit the new Greenrow store that just opened March 6th in Soho, NYC. Expect a channel check note on that to come.
Tariff landscape uncertain and unpredictable in 2025 and expect it to remain that way in 2026. Continue to execute same strategy and stay flexible. Guidance assumes all tariffs currently in place remain in place for all of 2026. Even the section 122 tariffs that are currently set to expire in July.
McShane with a good question! Asked about occupancy cost impact associated with the return to growth. Long winded answer but don’t think it will have a major impact on the EBIT margin overall.
The only thing that mattered today was the return to LT store growth. And yet most sell-side analysts decide to beat them up on gross margin and tariffs instead. Disappointed - so many questions y'all could have asked instead that would actually help investors. Keep the model questions to your callback.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Williams-Sonoma and other retail/consumer research) at our website here: M Squared Capital
Originally posted on X and Substack.