Williams-Sonoma is one of the top-performing retail stocks of the year, despite weakness in the housing market that has dampened sales of home goods.
The company's share price had climbed about 23% year to date as of Friday, outperforming the S&P 1500 Home Furnishings index as well as competitors such as Wayfair, Arhaus, Ethan Allen and RH, formerly known as Restoration Hardware.
"We've been working on the product, we've been working on the service and the quality, but also the storytelling," said Williams-Sonoma CEO Laura Alber in a late August interview on CNBC's "Mad Money." "And that is also what's attracting ... many new customers to our brands, and then bringing people back to our brands."
The traditional investing thesis around home furnishings often revolves around home sales: As people buy new homes, they also purchase new furniture. In the U.S., which accounts for 96% of Williams-Sonoma's sales, consumers face a sluggish housing market driven by high interest rates, along with rising energy and food costs.
Yet over a three-year period, Williams-Sonoma shares have climbed more than 200%.
Fixing the underlying business fundamentals has been key to the success of the company, which includes its namesake brand along with retailers such as Pottery Barn and West Elm. In 2019, the company's operating margin, which is a key measure of profitability, was 7.9%. By 2021, it reached 17.6%.
After a Covid-fueled housing boom, the market slumped. Williams-Sonoma's sales fell accordingly, but it proved to investors that it could sustain profitability.
"They made a number of savvy moves, including reducing the amount of promotions and also optimizing their supply chain with home deliveries and, all in, they drove over 10% expansion in their EBIT [earnings before interest and taxes] margin during those tough years," said Peter Keith, head of consumer research at Piper Sandler.
Those moves continue to pay off for Williams-Sonoma. Revenue was $7.81 billion in 2025, down from $8.25 billion in 2021, but its operating income was nearly the same.
Finding growth
Williams-Sonoma is now focused on capturing more of the existing home furnishings market, while maintaining strong profit margins.
One of the ways it's been able to do that is selling its products at full price at a time when some rivals have run more promotions.
"When you're not running sales, it tends to spread your overall sales volume out quite evenly ... it's really also had some positive carryout effects to their supply chain and driven margin expansion there," Keith said.
On top of that, e-commerce — which is generally more profitable than brick-and-mortar — makes up more than two-thirds of Williams-Sonoma's sales. The company is also using AI to further grow that part of the business.
On an earnings call in November, the company said it launched an AI sales assistant nicknamed "Olive." In August, it said customers who engage with it make purchases at three times the rate of customers who don't.
Williams-Sonoma has also used AI to reduce costs in its supply chain and deliveries, Chief Technology and Digital Officer Sameer Hassan said on the company's first-quarter earnings call in May.
Business-to-business, or B2B, sales have also been a bright spot for the company. Its most recent quarter ended in August saw nearly 15% growth in the category as it expands selling in areas such as cruise ships, senior living and student housing.
Williams-Sonoma has said it believes its B2B business, which currently accounts for around $1 billion in annual sales, could double over the next several years.
Pottery Barn turnaround
Keith said the company's success with products such as candles, pillows and kitchen items has helped make the company less dependent on the underlying housing fundamentals.
Still, furniture is the bread and butter of many of its brands, and it has had to take steps to improve that piece of the business.
From fiscal 2022 to 2025, Pottery Barn, which is Williams-Sonoma's biggest brand, saw revenue fall more than 15%. In its fourth-quarter fiscal 2025 earnings call in March, the company said it leaned too heavily into decor to offset furniture declines during the post-Covid housing slump.
Pottery Barn's same-store sales were up 5.1% in its most recent quarter ended in August.
"This is really one of the more exciting parts of Williams-Sonoma today ... this renewed growth in Pottery Barn," Keith said.
Handling tariffs
Despite its relative strength in its sector, Williams-Sonoma faces challenges. Tariffs pose a risk for the company, as over 80% of its merchandise purchases in 2025 came from foreign manufacturers.
"I really am looking forward to the tariff stabilizing. If they just stay in one place, it's going to be a lot easier for everybody, including our investors," Alber said in the August "Mad Money" interview.
Williams-Sonoma received a tariff refund of $200 million after the Supreme Court ruled in February that President Donald Trump, who imposed tariffs under the International Emergency Economic Powers Act, did not have the authority to do so.
Alber said the company paid back vendors and that it spent $10 million to contribute $1,000 to each employee's 401(k). The total reimbursed to vendors was $47.5 million, according to the second-quarter earnings report.
Unlike many other retailers, Williams-Sonoma decided to keep that tariff refund separate from its reported earnings figures, which Keith said highlights the company's strong underlying fundamentals.
"They've built a model here with multiple brands that all have growth opportunities," Keith said. "They're smaller emerging brands that have significant growth opportunities all with this omnichannel approach with stores and e-commerce, which we think is a strong competitive advantage for Williams-Sonoma in a highly, highly fragmented furniture industry."