Pottery Barn owner Williams-Sonoma warns of 2025 margin impact from tariffs, shares fall
WSM
March 19 (Reuters) -
Pottery Barn parent Williams-Sonoma warned on Wednesday the Trump administration's tariffs on China, Canada and Mexico as well as on steel and aluminum would weigh on its fiscal 2025 margin, sending its shares down 5.7% in morning trade.
The San Francisco, California-based company forecast annual operating margin of 17.4% to 17.8%, down from 18.6% in 2024.
"Outlook includes 20% China tariffs, 25% tariffs on Mexico and Canada and a 25% tariff on steel and aluminum ... as we expect to see some erosion in gross margin simply from the headwinds we anticipate these tariffs," CEO Laura Alber said on a post-earnings call.
Williams-Sonoma imports 23% of its goods from China, though executives noted that the impact from Mexico and Canada is "non-material."
The company said it is attempting to mitigate the tariff impact by selectively raising prices, re-sourcing goods, and seeking cost concessions from vendors.
Williams-Sonoma's merchandise inventories increased about 7% year-over-year to $1.33 billion as of February 2, partly due to accelerating deliveries from China to mitigate higher tariff risks in 2025, according to company executives.
"(Inventory increase) represents a strategic defensive posture against potential tariff impacts rather than a concerning indicator of future performance challenges," CFRA analyst Ana Garcia said.
Major home improvement firms such as Home Depot and Lowe's have issued cautious sales forecasts in recent weeks, citing an uncertain macroeconomic environment amid escalating trade wars.
Annual same-store sales came in slightly above estimates, helped by steady demand and full-price selling of its home furnishing products from affluent shoppers.
The company forecasts comparable sales to be flat to up 3%, compared to analysts' average estimate of 1.4% growth.
It posted net revenue growth of 8% for the quarter ended February 2 to $2.46 billion from a year ago, beating estimates of $2.36 billion. (Reporting by Aamir Sohail in Bengaluru; Editing by Tasim Zahid)