Williams-Sonoma on Wednesday reported net revenue in the third quarter rose 7.5% to $1.37 billion from $1.28 billion in the year-ago period. Comparable sales grew 6.5%, primarily driven by strong performance in its West Elm and Pottery Barn banners, according to a company press release.
By brand, comps rose 4.2% at Pottery Barn and 3.7% at Pottery Barn Kids and Teen, but fell 1.1% at Williams Sonoma. Comps soared 17.5% at the company's West Elm brand.
Williams-Sonoma raised its fiscal year guidance and now expects net revenues to be between $5.74 billion and $5.9 billion (from between $5.67 billion and $5.84 billion). Comp growth is expected to be between 3% and 6%, and non-GAAP operating margin to be in-line with the prior fiscal year.
While West Elm continues to post the most impressive comp growth, the success from Williams-Sonoma's Pottery Barn banner indicates the company's initiatives are paying off.
"We've diversified our product offering with more aesthetics and scale, including the launch of our successful new businesses, Pottery Barn Apartment and Marketplace, both of which are driving new customer acquisitions and brand reconsideration," CEO Laura Alber said on a call with analysts, according to a Motley Fool transcript.
To further drive growth in its other banners, particularly Williams Sonoma, which was the only brand to post negative same-store sales in the quarter, the company continues to encourage shopping across all of its channels through its cross-brand loyalty program, The Key. Alber said Williams-Sonoma added 1 million members this quarter, bringing the total number of members to 6.4 million.
The company also indicated that it's moving full steam ahead with its plan to mitigate the impacts of tariffs. Alber said Williams-Sonoma plans to cut its production in China in half by next year. "We started executing on our tariff mitigation strategy earlier than most and as evidenced by our results this quarter, we were able to cover the financial impact of List 3 tariffs," she added.
CFO Julie Whalen said the company is also pushing to "pull forward as much inventory as possible this quarter, which appears to be a good idea in light of the most recent tariff announcement," which indicated a tariff increase of 15%, from the originally announced 10%, on the remaining $300 billion worth of Chinese imports. These tariffs are set to take effect in stages, Sept. 1 and Dec. 15.
As a result, Williams-Sonoma's merchandise inventories in the quarter increased 8% to $1.2 billion. In addition to moving some of its production out of China, Whalen indicated Williams-Sonoma is trying to mitigate tariff impacts through cost reductions with its vendors and selective price increases. Alber, however, noted that "we're doing everything else we can" to mitigate the impacts on the consumer.
While Alber said moving production out of China is "not pleasant," the company isn't "having any quality degradation. We're not seeing any disruption in shipments."