Williams-Sonoma said its margins are being squeezed by high fuel expenses, offsetting some of the sales growth across its brands.

The kitchenware and decor retailer said adjusted gross margins were lower in the second quarter and would face further headwinds in the second half of the year. Shares were down 6% in early morning trading, but leveled out to be roughly flat by midday.

Chief Financial Officer Jeff Howie told analysts that he expects fuel costs to affect overall gross margin as the year goes on. Williams-Sonoma absorbed the extra costs in the first two quarters, making margin expansion difficult.

Williams-Sonoma posted a profit of $338.1 million, or $2.84 a share, compared with $247.6 million, or $2 a share, a year earlier.

Stripping out certain one-time items, adjusted per-share earnings were $2.10, ahead of the $2.08 anticipated by analysts, according to FactSet.

Revenue rose 6.7% to $1.96 billion. Analysts surveyed by FactSet forecast revenue of $1.93 billion.

Same-store sales rose 6.2%, above the 4.5% growth analysts projected.

Same-store sales from Pottery Barn, the company's most lucrative business, rose 5% during the quarter, while West Elm was up 6.4% and the Williams Sonoma core brand was up 7.6%.

The retailer recorded a reduction of costs of goods sold of $167.8 million related to refunds received for tariffs, plus $6.3 million in interest income.

The refund income was partly offset by a $47.5 million provision to reimburse certain vendors that previously provided tariff-related concessions, as well as $10 million that Williams-Sonoma contributed to employees' 401ks as part of a worker recognition program.

Williams-Sonoma deferred $29.3 million of the tariff refund income as a reduction of merchandise inventories, which is expected to be a reduction to costs in the current third quarter.

The company raised its outlook for sales growth to 4.7% to 7.2%, up from a previous range of 2.7% to 6.7%.