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• Our updated guidance includes (i) the new Section 232 tariffs on furniture, (ii) the revised additional tariffs on China of 20%, (iii) the tariffs on India of 50%, (iv) the tariffs on Vietnam of 20%, (v) average tariffs on the rest of the world of 18%, (vi) the steel and aluminum tariff of 50% and (vii) the copper tariff of 50%.
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• We are reiterating our guidance even with absorbing incremental costs from the existing tariff environment. These costs include the additional tariffs on China of 30% and the global reciprocal tariff of 10%, along with the tariffs we spoke about in March, including the tariff on Mexico and Canada of 25% and the tariff on steel and aluminum of 25%. It does not assume any other tariffs. If there are material changes in future tariffs, we will revisit our guidance.
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• Our guidance includes (i) no refund of International Emergency Economic Powers Act tariffs paid, (ii) all tariff rates currently in place remain for fiscal 2026, including the Section 232 tariffs, the current Section 301 tariffs and the Section 122 tariffs, and (iii) the impact of tariffs will be front-loaded in the first half of fiscal 2026 as the tariffs flow through our weighted average cost of goods sold. Although the Section 122 tariffs expire in July 2026, our guidance assumes that these will be replaced with tariffs at a similar rate.
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• Our guidance assumes (i) oil prices will remain elevated for fiscal 2026, (ii) no refund of tariffs paid, (iii) the impact of tariffs will be front-loaded in the first half of fiscal 2026 as the tariffs flow through our weighted average cost of goods sold, and (iv) all tariff rates currently in place remain for fiscal 2026, including the Section 232 tariffs, the current Section 301 tariffs and the Section 122 tariffs.
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• Our guidance assumes (i) all tariffs currently in place will remain for fiscal 2026, including the Section 232 tariffs, the existing Section 301 tariffs, the new Section 301 tariffs announced on July 23rd, and the latest tariffs between Canada and the United States, (ii) oil prices will remain elevated for the remainder of the year, and (iii) no benefit from tariff refunds or related interest.
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• We expect that the incremental flow through from our higher net revenues will be pressured by incremental tariff costs. These costs include the additional tariffs on China of 30%, India of 50%, Vietnam of 20%, an average tariff on the rest of the world of 18%, as well as the steel and aluminum tariff of 50% and the copper tariff of 50%.
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The evolving tariff landscape during fiscal 2025 had an impact on our business. While our tariff mitigation efforts reduced the overall effect, tariffs impacted our Consolidated Statement of Earnings in fiscal 2025, due to the flow-through of higher tariffs into cost of goods sold.
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Beginning in fiscal 2025, the tariff landscape has evolved and impacted our business. While our tariff mitigation efforts reduced the overall effect, tariffs had a greater impact on our Condensed Consolidated Statement of Earnings in the first quarter of fiscal 2026 than in the first quarter of fiscal 2025 due to increased flow‑through of higher tariffs into cost of goods sold.
Read in the filing ↗ Also in 10-Q of Aug 28, 2026
Recent U.S. administrations have enacted tariffs on imports from various countries. The current U.S. administration has suggested, or is in the process of, increasing current tariffs, imposing additional tariffs and expanding tariffs to capture goods from countries not previously captured. While we have been and continue to execute against an aggressive tariff mitigation plan which includes cost reductions from vendors, moving production to lower cost markets and cost savings in other areas of the business, as well as targeted price increases, we may not be able to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, pass price increases on to our customers or secure adequate alternative sources of products or materials. The current tariffs, along with any additional tariffs, changes in duty regimes or retaliatory trade restrictions implemented by the U.S. or by other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, could adversely affect customer sales, including potential delays in products received from our vendors and our cost of goods sold, which could materially impact our business and financial results.
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• Gross margin of 51.6% on a GAAP basis, +450bps to LY driven by (i) IEEPA tariff refunds, net of tariff-related vendor concessions, of +610bps, (ii) occupancy leverage of +40bps, and (iii) supply chain efficiencies of +30bps, partially offset by (iv) lower merchandise margins of -230bps primarily driven by tariff costs. Occupancy costs of $208 million, +3.3% to LY.
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The global tariff landscape has evolved over the last few years and we expect it to continue to do so for the foreseeable future. While we continue to execute against an aggressive tariff mitigation plan which includes cost reductions from vendors, moving production to lower cost markets and cost savings in other areas of the business, as well as targeted price increases, we may not be able to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, pass price increases on to our customers or secure adequate alternative sources of products or materials. Current global tariffs, along with any additional tariffs and the related uncertainties around tariffs, changes in duty regimes or retaliatory trade restrictions implemented by the U.S. or by other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, have resulted and could continue to result in potential delays in products received from our vendors and adversely affect customer sales and our cost of goods sold, which could materially impact our business and financial results.
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For the second quarter of fiscal 2026, diluted earnings per share was $2.84, compared to $2.00 in the second quarter of fiscal 2025. The second quarter of fiscal 2026 diluted earnings per share of $2.84 included (i) tariff refund income of $1.06 recognized as a reduction to cost of goods sold and (ii) interest income on tariff refunds of $0.04, partially offset by (iii) reimbursements of $0.30 to certain merchandise vendors that previously provided tariff-related concessions and (iv) a one-time tariff-related employee recognition cost of $0.06.
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During the second quarter of fiscal 2026, we recognized income from the refund of previously paid International Emergency Economic Powers Act (“IEEPA”) tariffs. During the quarter, we recorded (i) a reduction of cost of goods sold of $167.8 million related to refunds received for tariffs that have been previously expensed and (ii) related interest income of $6.3 million. This income was partially offset by (i) a provision of $47.5 million to reimburse certain merchandise vendors that previously provided tariff-related concessions and (ii) a one-time tariff-related employee recognition cost of $10.0 million, in the form of a discretionary 401(k) contribution to all eligible employees. As of August 2, 2026, we deferred $29.3 million of the tariff refund income as a reduction of merchandise inventories, which we anticipate recognizing as a reduction to cost of goods sold in the third quarter of fiscal 2026. Substantially all of our initial refund claim of $197.8 million has been collected as of August 2, 2026, with a remaining tariff refund receivable of $3.2 million. We have adjusted all of these tariff-related items as non-GAAP adjustments. See Exhibit 1 for our GAAP to non-GAAP reconciliation.
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On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the tariffs imposed under IEEPA was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming the prior decision of the CIT in V.O.S. Selections, Inc. v. United States. As a result, on February 20, 2026, the U.S. President issued an executive order stating that the related tariffs were no longer in effect and ending the collection of these tariffs. However, the U.S. President then issued an additional executive order imposing tariffs pursuant to Section 122 of the Trade Act of 1974 for 150 days, effective on February 24, 2026. The Supreme Court's ruling did not address whether importers who paid IEEPA tariffs are entitled to refunds, and that issue remains subject to further litigation before the CIT. We cannot predict whether or when any refunds will be available, or whether the administration will contest refund claims. We are currently assessing the impact of these actions on our operations and Consolidated Financial Statements, including our ability to recover certain tariffs paid.
Read in the filing ↗ Also in 10-K of Mar 26, 2026
During the second quarter of fiscal 2026, we recorded (i) a reduction of cost of goods sold of $ 167.8 million related to refunds received for tariffs that have been previously expensed and (ii) related interest income of $ 6.3 million. This income was partially offset by (i) a provision of $ 47.5 million to reimburse certain merchandise vendors that previously provided tariff-related concessions to the Company and (ii) a one-time tariff-related employee recognition cost of $ 10.0 million, in the form of a discretionary 401(k) contribution to all eligible employees.
Read in the filing ↗ Also in 10-Q of Aug 28, 2026
• Merchandise inventories +9.0% to the first quarter LY to $1.46 billion, including incremental tariff costs of approximately $60 million.
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However, the current uncertain macroeconomic environment, including the evolving tariff and trade policy landscape, a weak housing market, elevated interest rates, layoffs, inflationary pressure, economic uncertainty and global geopolitical instability could continue to impact our business. The tariff environment has materially changed over the last year, and we expect that uncertainty to continue into fiscal 2026. For information on risks, please see “Risk Factors” in Part I, Item 1A.
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• Merchandise inventories +9.8% to the fourth quarter LY to $1.5 billion, driven by incremental tariff costs of approximately $80 million. 1
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Gross profit increased $147.3 million, or 17.0%, compared to the second quarter of fiscal 2025. Gross margin increased to 51.6% from 47.1% in the second quarter of fiscal 2025. This increase in gross margin of 450 basis points was driven by (i) IEEPA tariff refunds, net of reimbursements to certain merchandise vendors that previously provided tariff-related concessions, of 610 basis points, (ii) the leverage of occupancy costs of 40 basis points resulting from higher sales, and (iii) supply chain efficiencies of 30 basis points, including a lower shrink accrual, partially offset by (iv) lower merchandise margins of 230 basis points primarily due to the flow-through of tariffs into cost of goods sold.
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Gross profit increased $174.9 million, or 10.7%, compared to the first half of fiscal 2025. Gross margin increased to 47.9% from 45.7% in the first half of fiscal 2025. This increase in gross margin of 220 basis points was driven by (i) IEEPA tariff refunds, net of reimbursements to certain merchandise vendors that previously provided tariff-related concessions, of 310 basis points, (ii) supply chain efficiencies of 40 basis points, including a lower shrink accrual, and (iii) the leverage of occupancy costs of 30 basis points resulting from higher sales, partially offset by (iv) lower merchandise margins of 160 basis points primarily due to the flow-through of tariffs into cost of goods sold.
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• Merchandise inventories +9.6% to the third quarter LY to $1.5 billion, including incremental tariff costs and a strategic pull forward of receipts.
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… Since the end of the first quarter of fiscal 2025, the tariff environment has materially evolved. Specifically, our incremental tariff rate has more than doubled from 14% in May 2025 to 29% as of this Quarterly Report on Form 10-Q. These tariffs, as well as any future tariffs, are expected to result in increased cost for imported materials and …
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… Since the end of the first quarter of fiscal 2025, the tariff environment has materially evolved. Specifically, our incremental tariff rate has doubled from 14% to 28% since we filed our previous Quarterly Report on Form 10-Q for the thirteen weeks ended May 4, 2025. These tariffs, as well as any future tariffs, are expected to result in increased …
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• Changes to tariffs could result in increased prices and/or costs of goods or delays in products received from our vendors and could adversely affect our results of operations.
Read in the filing ↗ Also in 10-K of Mar 27, 2025, 10-K of Mar 26, 2026, 10-K of Mar 26, 2026
• Merchandise inventories +1.0% to the second quarter LY to $1.45 billion, net of $29.3 million of deferred tariff refund income recorded as a reduction of inventory.
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Gross profit increased $50.2 million, or 6.1%, compared to the third quarter of fiscal 2024. Gross margin increased to 46.1% from 45.4% in the third quarter of fiscal 2024. This increase in gross margin of 70 basis points was primarily driven by higher merchandise margins of 60 basis points due to (i) the flow-through of tariffs into cost of goods sold being slower than anticipated due to delayed tariff effective dates, (ii) results from our tariff mitigation plan, including select price increases, and (iii) lower inbound transportation costs. Additionally, supply chain efficiencies contributed 30 basis points, including reductions in outbound shipping expense, damages, replacements and accommodations. These improvements were partially offset by higher occupancy costs of 20 basis points due to our retail outperformance and the higher occupancy costs in that channel.
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In fiscal 2025, diluted earnings per share was $8.84 versus $8.79 in fiscal 2024 (which included the benefit of an out-of-period freight adjustment in the first quarter of fiscal 2024 of $0.29). Despite a challenging macroeconomic environment, including continued unpredictability around geopolitics and tariffs, we delivered record diluted earnings per share. Our performance was driven by the execution of our three key priorities for 2025: returning to growth, elevating our world-class customer service and driving earnings. These results also demonstrate the effectiveness of our tariff mitigation efforts, our ability to quickly adjust as the tariff landscape evolved, and the strength and durability of our operating model in driving profitable market share gains. Our profitability in fiscal 2025 reflected disciplined execution across the company, as we maintained our focus on cost control.
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• Merchandise inventories +10.3% to the first quarter LY to $1.3 billion, including a strategic pull forward of receipts to reduce the potential impact of higher tariffs in FY25.
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• Merchandise inventories +17.7% to the second quarter LY to $1.4 billion, including a strategic pull forward of receipts to reduce the impact of higher tariffs in fiscal 2025.
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However, the current uncertain macroeconomic environment, including higher oil prices, the evolving tariff and trade policy landscape, a weak housing market, elevated interest rates, layoffs, inflationary pressure, economic uncertainty and global geopolitical instability could continue to impact our business. The tariff environment has materially changed over the last year, and we expect that uncertainty to continue in fiscal 2026. For information on risks, please see “ Risk Factors ” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026.
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However, the current uncertain macroeconomic environment, including war, higher oil prices, the evolving tariff and trade policy landscape, a stagnant housing market, elevated interest rates, layoffs, inflationary pressure, economic uncertainty and global geopolitical instability could continue to impact our business. The tariff environment has materially changed over the last year, and we expect that uncertainty to continue throughout fiscal 2026. For information on risks, please see “ Risk Factors ” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 1, 2026.
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• general economic conditions, changes in diplomatic and trade relationships, including the imposition of new or increased tariffs, political and social instability, war and acts of terrorism, outbreaks of diseases and natural disasters in each country or region;
Read in the filing ↗ Also in 10-K of Mar 26, 2026
As of August 2, 2026, we deferred $29.3 million of the tariff refund income as a reduction of merchandise inventories in our Condensed Consolidated Balance Sheet, which we anticipate recognizing as a reduction to cost of goods sold in the third quarter of fiscal 2026. In the second quarter of fiscal 2026, we collected cash refunds of $200.2 million, which includes related interest, and substantially all of our initial refund claim of $197.8 million has been collected as of August 2, 2026, with a remaining tariff refund receivable of $3.2 million in our Condensed Consolidated Balance Sheet.
Read in the filing ↗ Also in 10-Q of Aug 28, 2026
… Currently, many of the countries where we source raw materials and products from are subject to tariffs imposed by the U.S. Any event causing a disruption or delay of imports from foreign suppliers, including changes in the U.S. tariffs, could increase the cost, reduce the supply of merchandise available to us or result in excess inventory if merchandise …
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For the first half of fiscal 2026, net cash provided by operating activities was $695.9 million compared to $401.7 million for the first half of fiscal 2025, and was primarily attributable to net earnings of $569.5 million (inclusive of the impact of tariff refunds and related interest of $174.1 million) adjusted for non-cash items, and an increase in accounts payable of $49.3 million (as a result of the provision of $47.5 million to reimburse certain merchandise vendors that previously provided tariff-related concessions), partially offset by a decrease in accrued expenses and other liabilities of $89.2 million.
Read in the filing ↗ Also in 10-Q of Aug 29, 2025
On April 20, 2026, we filed for refunds of previously paid tariffs assessed under the International Emergency Economic Powers Act (“IEEPA”) in an aggregate amount of $ 197.8 million. As of May 3, 2026, due to the uncertainty with respect to the receipt of these refunds, we did not record a receivable for these refunds and a corresponding reduction to cost of goods sold or to merchandise inventories in our Condensed Consolidated Financial Statements for the first quarter of fiscal 2026. We expect to recognize the benefit for the refunds, related to tariffs that have been expensed in cost of goods sold, when we determine that the collection of the refund is probable.
Read in the filing ↗ Also in 10-Q of May 22, 2026
• Maintained strong liquidity position of $1.0 billion in cash and $696 million in operating cash flow, inclusive of the collection of $200.2 million of tariff refunds and the related interest, enabling the company to deliver returns to stockholders of $90 million through dividends. 1
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• We are reiterating our guidance on operating margin for fiscal 2025. In fiscal 2025, we expect an operating margin between 17.4% to 17.8% (with the 53rd week contributing 20bps in fiscal 2024). If there are material changes in future tariffs, we will revisit our guidance.
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A critical component of managing inventory levels is predictability of transit times from our global suppliers to our distribution centers. Factors such as labor disputes, union organizing activity, geopolitical instability, changing tariff and trade regulations, acts of terrorism, war, outbreaks of disease, adverse weather, natural disasters, and climate
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• Gross margin of 45.5% on a non-GAAP basis, -160bps to LY driven by (i) lower merchandise margins of -230bps primarily driven by tariff costs, partially offset by (ii) supply chain efficiencies of +30bps, and (iii) occupancy leverage of +40bps. Occupancy costs of $208 million, +3.3% to LY.
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Looking ahead to 2026, we will focus on our three key priorities of (i) accelerating growth, (ii) delivering world-class customer service and (iii) driving earnings. Despite continued macroeconomic and geopolitical uncertainty, including ongoing unpredictability related to tariffs, we are focused on executing against these priorities to drive performance in 2026 and beyond.
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Cost of goods sold includes (i) cost of merchandise, tariffs, inbound freight costs, freight-to-store costs and other inventory-related costs such as replacements, damages, obsolescence and shrinkage, (ii) occupancy costs, which consists of rent, other costs (including property taxes, common area maintenance and utilities) and depreciation, and (iii) shipping costs, which consists of third-party delivery services and shipping materials.
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In April 2026, we filed for a refund of the tariffs we paid in fiscal 2025 and fiscal 2026 assessed under International Emergency Economic Powers Act (“IEEPA”) in an aggregate amount of $ 197.8 million. During the second quarter of fiscal 2026, we applied the loss recovery model and determined that the receipt of the IEEPA refund was probable and estimable and we recorded a refund receivable.
Read in the filing ↗ Also in 10-Q of Aug 28, 2026
For fiscal 2025, net cash provided by operating activities was $1.3 billion compared to $1.4 billion in fiscal 2024, and was primarily attributable to net earnings of $1.1 billion adjusted for non-cash items, partially offset by higher spending on merchandise inventories, inclusive of tariffs, of $125.9 million. Additionally, cash paid during the year for income taxes, net of refunds, was $330.3 million.
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• SG&A rate of 28.7% on a GAAP basis, -50bps to LY driven by (i) employment expense leverage, net of a one-time tariff-related employee recognition cost in the form of a discretionary 401(k) contribution, of -70bps, partially offset by (ii) higher general expenses of +10bps, and (iii) higher advertising expenses of +10bps. SG&A of $563 million, +5.0% to LY on a GAAP basis.
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Gross profit is equal to our net revenues less costs of goods sold. Cost of goods sold includes (i) cost of merchandise, tariffs, inbound freight costs, freight-to-store costs and other inventory related costs such as replacements, damages, obsolescence and shrinkage, (ii) occupancy costs, which consists of rent, other costs (including property taxes, common area maintenance and utilities) and depreciation, and (iii) shipping costs, which consists of third-party delivery services and shipping materials.
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Gross profit is equal to our net revenues less cost of goods sold. Cost of goods sold includes (i) cost of merchandise, tariffs, inbound freight costs, freight-to-store costs and other inventory-related costs such as replacements, damages, obsolescence and shrinkage, (ii) occupancy costs, which consists of rent, other costs (including property taxes, common area maintenance and utilities) and depreciation, and (iii) shipping costs, which consists of third-party delivery services and shipping materials.
Read in the filing ↗ Also in 10-Q of Aug 28, 2026
Net cash provided by operating activities for the first half of fiscal 2026 compared to the first half of fiscal 2025 increased $294.2 million primarily due to an increase in net earnings adjusted for non-cash items, lower spending on merchandise inventories of $113.6 million and an increase in accounts payable of $98.3 million. This increase was primarily due to the collection of IEEPA tariff refunds of $200.2 million, which includes related interest.
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uncertainties include tariffs, import duties and quotas, compliance with anti-dumping regulations, work stoppages, economic uncertainties and adverse economic conditions (including inflation and recession), government regulations, trade restrictions, regulations to address climate change, employment and labor matters, wars and fears of war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease and other unexpected events. We cannot predict whether any of the countries from which our raw materials or products are sourced, or in which our products are currently manufactured or may be manufactured in the future, will be subject to trade restrictions imposed by the U.S. or foreign governments, such as the tariffs levied by the U.S., or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from foreign suppliers could increase the cost, reduce the supply of merchandise available to us or result in excess inventory if merchandise is received after the planned or appropriate selling season, all of which could adversely affect our business, financial condition and operating results.
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Gross profit is equal to our net revenues less cost of goods sold. Cost of goods sold includes (i) cost of goods, which consists of cost of merchandise, inbound freight expenses, freight-to-store expenses, tariff expenses and other inventory related costs such as replacements, damages, obsolescence and shrinkage, (ii) occupancy expenses, which consists of rent, other occupancy costs (including property taxes, common area maintenance and utilities) and depreciation, and (iii) shipping costs, which consists of third-party delivery services and shipping materials.
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“We are proud of our strong finish to 2025. In Q4, our comp came in at +3.2%, and we delivered an operating margin of 20.3% with earnings per share of $3.04. Normalizing for the 53rd week last year and the tariff impact this year, we delivered substantial operating margin improvement versus last year. As we look forward to 2026 and beyond, we are confident in our competitive advantages that have allowed us to take market share, and our focus is on widening that advantage,” said Laura Alber, President and Chief Executive Officer.
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For the first thirty-nine weeks of fiscal 2025, net cash provided by operating activities was $718.0 million compared to $726.7 million for the first thirty-nine weeks of fiscal 2024, and was primarily attributable to net earnings adjusted for non-cash items, partially offset by higher spending on merchandise inventories (as a result of increased tariff costs and timing of receipts). Net cash provided by operating activities compared to the first thirty-nine weeks of fiscal 2024 decreased primarily due to higher spending on merchandise inventories, partially offset by an increase in income taxes payable.
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Gross profit increased $27.6 million, or 3.6%, compared to the first quarter of fiscal 2025. Gross margin decreased to 44.0% from 44.3% in the first quarter of fiscal 2025. This decrease in gross margin of 30 basis points was primarily driven by (i) lower merchandise margins of 100 basis points as a result of the flow-through of tariffs into cost of goods sold, partially offset by (ii) supply chain efficiencies of 50 basis points, including a lower shrink accrual, and (iii) the leverage of occupancy costs of 20 basis points due to higher sales.
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SG&A increased $26.6 million, or 5.0%, compared to the second quarter of fiscal 2025. SG&A as a percentage of net revenues decreased to 28.7% from 29.2% in the second quarter of fiscal 2025. This decrease of 50 basis points was driven by (i) employment expense leverage due to our disciplined payroll management and incentive compensation, net of one-time tariff-related employee recognition costs in the form of a discretionary 401(k) contribution, of 70 basis points, partially offset by (ii) an increase in general expenses of 10 basis points and (iii) an increase in advertising expenses of 10 basis points.
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As we look forward to the year ahead, we believe these key priorities will set us apart from our competition and allow us to drive long-term growth and profitability. We have a powerful portfolio of brands, serving a range of categories, aesthetics, and life stages, and we have built a strong omni-channel platform and infrastructure, which positions us well for the next stage of growth. However, the current uncertain macroeconomic environment with the weak housing market, elevated interest rates, layoffs, inflationary pressure, political uncertainty, global geopolitical instability and new tariffs could negatively impact our business. For information on risks, please see “Risk Factors” in Part I, Item 1A.
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“We are proud to deliver strong results in the second quarter of 2025, driving a comp of +3.7% with all brands again running positive comps. Additionally, we exceeded profitability estimates with an operating margin of 17.9% and earnings per share of $2.00 with earnings growth of nearly +20%. This growing outperformance was driven by positive comps in both furniture and non-furniture, and strong performance in our retail and ecommerce channels; and has allowed us to raise our guidance on the top-line and reiterate our guidance on the bottom- line, despite continued macroeconomic uncertainty and the tariff environment,” said Laura Alber, President and Chief Executive Officer.
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As of August 2, 2026, we had $1.0 billion in cash and cash equivalents and generated operating cash flow of $695.9 million, inclusive of the collection of tariff refunds and the related interest of $200.2 million, in the first half of fiscal 2026. In addition to our cash balance, we also ended the second quarter of fiscal 2026 with no outstanding borrowings under our revolving line of credit. This strong liquidity position allowed us to fund the operations of the business, invest $116.4 million in capital expenditures and return $463.2 million through stock repurchases and dividends to stockholders in the first half of fiscal 2026.
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SG&A increased $53.2 million, or 5.3%, compared to the first half of fiscal 2025. SG&A as a percentage of net revenues decreased to 28.3% from 28.4% in the first half of fiscal 2025. This decrease of 10 basis points was driven by (i) employment expense leverage due to our disciplined payroll management, net of one-time tariff-related employee recognition costs in the form of a discretionary 401(k) contribution, of 20 basis points, partially offset by (ii) an increase in general expenses of 10 basis points. Advertising expenses, as a percentage of net revenues, were flat compared to the first half of fiscal 2025.
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The current macroeconomic environment is uncertain, and we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as tariffs, foreign currency exchange rate fluctuations, increasing labor costs and union organizing activity. Despite these challenges, we believe our key differentiators, growth initiatives and the strength of our operating model to control costs and manage inventory levels leave us well-positioned to mitigate these costs in both the short- and long-term. Refer to Item 1A. Risk Factors and to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on the effect the global supply chain disruption has had and may have on our results of operations.
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Gross profit increased $20.8 million, or 0.6%, compared to fiscal 2024. Gross margin decreased to 46.2% from 46.5% in fiscal 2024. This decrease in gross margin of 30 basis points was driven by (i) the out-of-period freight adjustment in the first quarter of fiscal 2024 of 70 basis points, (ii) lower merchandise margins of 40 basis points as a result of the flow-through of tariffs into cost of goods sold, and (iii) the deleverage of occupancy costs of 20 basis points, partially offset by (iv) supply chain efficiencies of 50 basis points, including lower shipping costs, reductions in damages and returns, reduced replacements, as well as fewer customer accommodations, and (v) favorable physical inventory results of 50 basis points.
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Furthermore, our foreign suppliers’ operations may be adversely affected by political and financial instability resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds, increased tariffs or quotas, war (including the recent conflict with Iran), political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease or other trade disruptions. In addition, an economic downturn, or failure of foreign markets, may result in financial instabilities for our foreign suppliers, which may cause our foreign suppliers to decrease production, discontinue selling to us or cease operations altogether. Our global operations in Asia, Australia, Canada, Europe and Mexico could also be affected by changing economic and global political conditions, which could have a negative effect on our business, financial condition and operating results.
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Furthermore, some or all of our foreign suppliers’ operations may be adversely affected by political and financial instability resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds and/or increased tariffs or quotas, war, political unrest, acts of terrorism, natural disasters, adverse weather, climate change, outbreaks of disease or other trade disruptions. In addition, an economic downturn, or failure of foreign markets, may result in financial instabilities for our foreign suppliers, which may cause our foreign suppliers to decrease production, discontinue selling to us or cease operations altogether. Our global operations in Asia, Australia, Canada, Europe and Mexico could also be affected by changing economic and political conditions in foreign countries, which could have a negative effect on our business, financial condition and operating results.
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We manufacture merchandise, primarily upholstered furniture and lighting, at our facilities located in North Carolina, Oregon and Mississippi. The current macroeconomic environment is uncertain, and we are subject to risks that may disrupt our supply chain operations or regionalization efforts, such as tariffs, foreign currency exchange rate fluctuations, increasing labor costs and union organizing activity. Despite these challenges, we believe our key differentiators, growth strategies and the efficiencies of our operating model to reduce costs and manage inventory levels leave us well-positioned to mitigate these costs in both the short- and long-term. Refer to Item 1A. Risk Factors and to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on the effect the global supply chain disruption has had on our results of operations.
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if any, may not be of a suitable quality and/or may be more expensive than those we currently purchase. In addition, we are subject to certain risks that could limit our suppliers’ ability to provide us with quality merchandise on a timely basis and at prices that are commercially acceptable to us, including risks related to the availability of raw materials, labor disputes, work disruptions or stoppages, union organizing activities, supplier financial liquidity, changes in tariff regimes, adverse weather, natural disasters, climate change, political unrest, war, acts of terrorism, outbreaks of disease, general economic and political conditions and regulations to address climate change. If any of our suppliers experience work disruptions or stoppages, or transportation or other restrictions, it could negatively impact our ability to acquire merchandise, which would have an adverse effect on our results of operations.
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could change the terms upon which it sells to us, discontinue selling to us or go out of business at any time. We may not be able to acquire desired raw materials and merchandise in sufficient quantities on terms acceptable to us, especially in light of the current tariff landscape. Additionally, we may not be able to modify our existing purchase orders with our suppliers in response to fluctuating sales demand from our customers. Better than expected sales demand may lead to customer backorders and lower in-stock positions of our merchandise, which could negatively affect our business and operating results. Conversely, if we experience lower than expected sales demand, we may not be able to reduce our purchase orders with our suppliers, which may lead to high inventory levels, and could require us to sell excess inventory at a discount. In addition, our suppliers may have difficulty adjusting to our changing demands and business needs.
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We currently are, and plan to continue, growing our business and increasing our global presence, including by operating e-commerce websites to service international customers, opening new stores outside of the U.S., expanding our franchise and shop-in-shop operations and offering global shipping. We have relatively limited experience with global sales, understanding foreign consumer preferences, anticipating buying trends in different countries, marketing to non-U.S. customers and managing international shipping logistics. Moreover, global awareness of our brands and our products may not be high. Consequently, we may not be able to successfully compete with established brands in these markets and our global sales may not result in the revenues we anticipate. Additionally, global economic or political instability (such as tariffs), work disruptions or stoppages, war or fear of war (such as the recent conflict with Iran) or outbreaks of diseases and resulting government actions (such as lockdowns or quarantines), may delay or harm our efforts to expand globally. Also, our products may not be
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Any inability to acquire the appropriate amount of suitable raw materials or merchandise on acceptable terms or the loss of one or more of our foreign suppliers or third-party agents could have a negative effect on our business and operating results. We may not be able to develop relationships with new suppliers or third-party agents, and products from alternative sources, if any, may not be of a suitable quality or available at competitive prices. Our suppliers face risks related to the availability of raw materials, labor disputes, work disruptions or stoppages, union organizing activities, supplier financial liquidity, changes in tariff regimes, adverse weather, natural disasters, climate change, political unrest, war (including the recent conflict with Iran), acts of terrorism, outbreaks of disease, general economic and political conditions and regulations to address climate change that could limit our suppliers’ ability to provide us with quality merchandise on a timely basis and at prices that are commercially acceptable to us. If any of our suppliers experience work disruptions or stoppages, or transportation or other restrictions, it could negatively impact our ability to acquire raw materials and merchandise, which would have an adverse effect on our results of operations.
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… labor disputes, union organizing activity, fluctuations in fuel costs (including recent fluctuations due to the conflict with Iran), increases in regulatory burden, changing tariff and trade regulations, adverse weather, natural disasters, climate change, the potential for railway and port worker strikes, possible acts of terrorism, war, outbreaks of disease or other factors affecting such carriers’ ability to provide delivery services …
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… our ability to provide products that are designed and built for durability and longevity at competitive prices; changes in and the related impact of U.S. (federal, state and local) and international tax laws and trade policies and regulations; our ability to mitigate current and future tariffs and realize tariff refunds; factors, including but not limited to general economic conditions …
Read in the filing ↗ Also in 8-K of Mar 13, 2024, 8-K of Nov 20, 2024, 8-K of Mar 13, 2024, 8-K of Nov 16, 2023, 8-K of May 22, 2024, 8-K of Aug 22, 2024, 8-K of May 22, 2025, 8-K of Aug 27, 2025, 8-K of Nov 19, 2025, 8-K of Aug 26, 2026, 8-K of Mar 18, 2026, 8-K of Mar 18, 2026, 8-K of Mar 19, 2025, 8-K of Mar 19, 2025
… our ability to provide products that are designed and built for durability and longevity at competitive prices; changes in and the related impact of U.S. (federal, state and local) and international tax laws and trade policies and regulations; our ability to mitigate current and potential future tariffs and realize tariff refunds; the complementary nature of our e-commerce and …
Read in the filing ↗ Also in 10-Q of Aug 28, 2026
… our ability to provide products that are designed and built for durability and longevity at competitive prices; changes in and the related impact of U.S. (federal, state and local) and international tax laws and trade policies and regulations; our ability to mitigate current and potential future tariffs; the complementary nature of our e-commerce and retail channels; the plans …
Read in the filing ↗ Also in 10-K of Mar 27, 2025
… changes in U.S. (federal, state and local) and international tax laws and trade policies and regulations; the impact of current and potential future tariffs and our ability to mitigate such impacts; the complementary nature of our e-commerce and retail channels; the plans, strategies, initiatives and objectives of management for future operations; our ability to execute strategic priorities and …
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