Williams-Sonoma CEO says next quarter will see a bigger tariff impact

Williams-Sonoma CEO Laura Alber gave CNBC’s Jim Cramer an update on how the tariffs are affecting businesses, explaining why her company will see more impact next quarter.

Household goods and furniture industry exceeded forecasts reported on Wednesday. But management noted that the tariffs took longer than expected to reach gross margins, in part because the effective dates of the new taxes were delayed. Shares closed up 3.39%.

“I think we’ll have stability and more predictability at the end of the year in terms of where the tariffs are going to go, and I don’t imagine they’re going to increase. That’s my best guess,” Alber told Cramer. “But these will impact us more in Q4 than in Q3 because a larger percentage of our inventory is now subject to tariff as the cost moves up the balance sheet.”

Alber said there is “no immunity” from tariffs but described how Williams-Sonoma is working to reduce losses, including renegotiating deals with vendors and reducing its reliance on certain countries such as China. Alper said that the company, which also owns retail brands such as West Elm and Pottery Barn, is also trying to increase domestic production. He added that most of Williams-Sonoma’s upholstered furniture is already produced in Mississippi and North Carolina.

Alper stated that Williams-Sonoma also “increased prices carefully” and explained that the company was reviewing areas where it was “low priced”. He added that his company has significantly reduced promotions and plans to continue doing so in order to “improve regular-priced sales and reduce the percentage of promotions.”

“When the tariffs get to the floor, which is very soon, we will be done with this,” he said. “And you keep going and build from there. So it’s more of a short-term situation than a long-term situation.”