Williams-Sonoma stock dropped on Wednesday even though the home specialty retailer delivered a beat-and-raise quarter in tough times for housing. It still wasn't enough given this year's rally.

Shares slipped 0.8% to $232.87. The stock is up 25% this year, but down 11% from its all-time closing high of $251.78 on Aug. 7, according to Dow Jones Market Data.

Williams-Sonoma adjusted earnings of $2.10 a share in its fiscal second quarter, up from $2 a year ago and above Wall Street's expectations of $2.08. Revenue increased to $1.96 billion, up from $1.84 billion a year ago and narrowly beating analysts' estimates of $1.93 billion.

The company also raised its guidance for the fiscal year ending Jan. 31, 2027, targeting a 4.7% to 7.2% increase in revenue. The new range is up from 2.7% to 6.7% .

While other retailers are logging tariff refunds, Williams-Sonoma is feeling a sting.

The company attributed a tighter operating margin of 17.3% to tariffs this quarter, which hit results harder than Wall Street had expected.

TD Cowen analyst Max Rakhlenko noted that tariffs were a "greater than expected drag," as margins declined 230 basis points (or 2.3%).

The retailer's management, however, said the pressure from tariffs should ease in the current quarter.

For the fiscal year's second half, investors might need a bit more proof of how profit margins and costs play out before they are willing to bid the stock price up even further, Rakhlenko said. He shares a Buy and has a $280 price target.

Overall, however, the shares might be a victim of their own success. Williams-Sonoma's rally, however, might hurt sthe stock, which is now ahead of the S&P 500, the SPDR S&P Retail exchange-traded fund, and peers like Wayfair.

Last week's results from home improvement retailers Home Depot and Lowe's were both upbeat, but showed the ongoing impact of a sluggish housing market.

Williams-Sonoma managed to navigate the difficult backdrop, but much of that optimism was already baked in.