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Yahoo
16-06-2025
- Business
- Yahoo
What a Difference a Quarter Makes: RH Stock Climbs on Q1 Results After Seeing a 40% Post-Earnings Slide in April
RH turned in solid fiscal Q1 results and maintained its full-year guidance. The company is operating in a difficult home furnishings market, and tariffs have only added another headwind. However, the company is quickly moving some of its production, and its European expansion is seeing early signs of success. 10 stocks we like better than RH › RH (NYSE: RH) saw its shares surge after the luxury furniture company reported a surprise profit for the fiscal 2025 first quarter and indicated it was making progress moving more production out of China to mitigate tariff impacts. While some of the initial enthusiasm faded, the 7% gain RH posted on June 13 was still a much better day for the stock compared to the last time it reported quarterly results. In early April, the company saw its shares plunge 40% following its fiscal 2024 year-end report, which coincided with President Donald Trump's "Liberation Day" tariff announcements. The company had already been dealing with a difficult home furnishings market, and new tariffs added another headwind. The home furnishings industry saw a lot of demand pulled forward during the pandemic as homeowners focused on remodeling and decorating. Since then, higher interest rates have negatively impacted the remodeling market and led to less homebuying activity. Given that RH had been sourcing most of its furniture from Asia, a difficult environment just got tougher. At the same time, the company is pushing forward with an aggressive European expansion. Instead of testing the waters, it's going big with elaborate showrooms in high-end, high-rent locations. It already has galleries in Aynho Park (England), Munich and Düsseldorf (Germany), Madrid (Spain), and Brussels (Belgium), with plans to open in Paris later this year and in London and Milan next year. Despite the rally, the stock is still down more than 50% year to date. Let's dig into the company's recent results to see whether it's time to pick up shares while they're on sale. Given the environment, RH turned in a solid Q1. Its quarterly revenue rose 12% year over year to $814 million. Adjusted earnings per share (EPS) came in at $0.13, well above the analyst consensus calling for a $0.09 loss (as compiled by LSEG). Gross margin was solid, edging up 20 basis points to 43.7%, though SG&A (selling, general, and administrative) expenses rose 15% and represented 36.8% of sales, compared to 36.0% of sales a year ago. Merchandise inventories climbed 26% to $1.0 billion. When inventory growth far outpaces revenue growth, it can often be a sign of trouble, but the figure was down slightly from the end of fiscal 2024. The company plans to sell off the $200 million to $300 million in excess inventory it's carrying to raise cash. Meanwhile, RH said that demand in its European markets continues to grow. On-premise merchandise and hospitality sales at its RH England gallery soared 47%, while its RH Munich and RH Düsseldorf galleries surged 60%. Management expects these sales at its RH England gallery to reach $37 million to $39 million in fiscal 2025. Online orders going to U.K.-based customers should add an additional $8 million this year. Given the gallery's location is in the countryside, RH thinks demand will be much greater when it opens the London location next year. In addition, the company continues to shift its manufacturing out of China. It's now looking to manufacture 52% of its upholstered furniture in the U.S. and 21% in Italy by the end of fiscal 2025. It also expects a lot of tariff costs to be absorbed by its vendor partners. Looking ahead, the company maintained its forecast for full-year revenue growth of 10% to 13% and an adjusted EBITDA margin of 20% to 21%. Q2 revenue growth should land between 8% and 10%. There is no doubt the home furnishings market is extremely difficult right now, and tariffs only add to the pressure. However, RH's bold European expansion, which was a risk even in a good market for furniture, is showing solid signs of early success. That's very encouraging for when the market eventually turns. From a valuation perspective, RH trades at a forward price-to-earnings ratio of 19 times analysts' estimates for the current fiscal year. That number falls to 13 based on fiscal 2026 estimates. That's not expensive, but the company did take on a lot of debt when it decided to aggressively buy back shares in 2017 and 2023. All in all, RH is a high-risk, high-reward stock. The company has huge potential upside if it can weather the current market environment while executing on its European and U.S. expansion plans. However, investors need to weigh this potential upside against the risk of a macroeconomic downturn and the more than $2.5 billion of debt RH is carrying. Before you buy stock in RH, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and RH wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,702!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $870,207!* Now, it's worth noting Stock Advisor's total average return is 988% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy. What a Difference a Quarter Makes: RH Stock Climbs on Q1 Results After Seeing a 40% Post-Earnings Slide in April was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-06-2025
- Business
- Yahoo
RH Q1 Earnings Call: Tariff Disruptions and Global Expansion Define Outlook
Luxury furniture retailer RH (NYSE:RH) missed Wall Street's revenue expectations in Q1 CY2025, but sales rose 12% year on year to $814 million. Next quarter's revenue guidance of $904.3 million underwhelmed, coming in 0.7% below analysts' estimates. Its non-GAAP profit of $0.13 per share was significantly above analysts' consensus estimates. Is now the time to buy RH? Find out in our full research report (it's free). Revenue: $814 million vs analyst estimates of $819 million (12% year-on-year growth, 0.6% miss) Adjusted EPS: $0.13 vs analyst estimates of -$0.07 (significant beat) Adjusted EBITDA: $106.4 million vs analyst estimates of $104.4 million (13.1% margin, 2% beat) Revenue Guidance for Q2 CY2025 is $904.3 million at the midpoint, below analyst estimates of $910.9 million Operating Margin: 6.9%, in line with the same quarter last year Locations: 125 at quarter end, down from 126 in the same quarter last year Same-Store Sales rose 7.8% year on year (-3.7% in the same quarter last year) Market Capitalization: $3.31 billion RH's first quarter results reflected the impact of ongoing macroeconomic headwinds and management's continued focus on brand elevation and market share gains. CEO Gary Friedman highlighted that, despite operating in what he described as 'the worst housing market in almost fifty years,' RH delivered double-digit sales growth, driven by investments in new product collections, immersive gallery experiences, and the company's ability to capture demand in key global markets. Notably, management pointed to strong performance in its European galleries, particularly RH England, where demand trends surpassed internal benchmarks. Friedman acknowledged the strategic decision to pursue aggressive market share during a downturn, emphasizing, 'We are performing at a level most would expect in a robust housing market.' Looking ahead, RH's guidance reflects both optimism about international expansion and caution around near-term volatility tied to tariffs and macroeconomic uncertainty. Management expects the opening of flagship galleries in Paris, London, and Milan to serve as significant growth catalysts, with Friedman stating that these locations present 'a multibillion-dollar opportunity' for the brand. However, leadership noted that the recent introduction of new tariffs and associated supply chain disruptions have prompted a temporary delay in key product launches and are expected to impact revenue timing for the next quarter. CFO Jack Preston indicated that, while the company maintains its full-year margin targets, elevated investment in international markets and ongoing tariff negotiations may create further earnings variability through the remainder of the year. Management attributed quarterly performance to a mix of strong demand in Europe, ongoing product transformation, and tactical responses to trade disruptions, while emphasizing strategic flexibility amid external volatility. European momentum: RH's galleries in England, Munich, and Dusseldorf saw notable demand growth, with RH England's gallery and online channels up 47% and 44% respectively. Success in these markets encouraged confidence in the brand's disruptive potential across Europe as new flagship locations prepare to open. Product transformation: Management highlighted the rollout of 18 new collections—including a new Japandi design aesthetic blending Japanese and Scandinavian influences—and ongoing efforts to elevate the product assortment. These initiatives are designed to differentiate RH from competitors and support margin resilience. Membership discount strategy: In response to heightened industry promotions and a compressed outdoor selling season, RH increased its membership discount from 25% to 30%, and briefly to 35% for select outdoor products. Management described this as a strategic, long-term move to capture market share, rather than a temporary measure. Tariff mitigation efforts: The company accelerated its shift away from Chinese sourcing, aiming to reduce receipts from China to just 2% by year-end. RH also increased U.S. and Italian production for key upholstery lines, seeking to offset uncertainty from evolving trade policies. Capital allocation and real estate flexibility: RH continues to hold significant real estate assets, with plans to monetize properties opportunistically. Management cited a portfolio of owned and joint-venture galleries, particularly in Aspen and major U.S. markets, providing both liquidity options and strategic growth opportunities. RH's outlook is shaped by the pace of international expansion, margin management through product and sourcing shifts, and the evolving tariff landscape. International gallery expansion: Management expects the upcoming openings of flagship locations in Paris, London, and Milan to meaningfully expand RH's global reach. These galleries are positioned in high-visibility, luxury retail districts and are anticipated to drive substantial brand awareness and sales growth, although initial investments will weigh on operating margins in the near term. Margin resilience and discounting strategy: Despite increasing its membership discount, RH believes its elevated product mix and operational efficiencies will support full-year non-GAAP margin targets. Management noted that margin improvement is expected as product assortment optimizes and as European galleries scale, but acknowledged ongoing promotional intensity and macro volatility as risks. Tariff and supply chain adjustments: The company continues to shift sourcing out of China and work closely with vendor partners to absorb tariff costs. Management warned of near-term revenue timing disruptions and supply chain unpredictability, but expressed confidence that these challenges are being addressed through diversified sourcing and inventory management. Going forward, the StockStory team will focus on (1) the pace and performance of new flagship gallery openings in Europe, (2) how RH manages product margins and inventory in the face of elevated promotions and tariffs, and (3) whether the shift in membership discount strategy drives meaningful incremental demand without eroding brand positioning. Progress on monetizing real estate assets and supply chain diversification will also be important indicators. RH currently trades at a forward P/E ratio of 15.8×. Should you double down or take your chips? Find out in our full research report (it's free). Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
Yahoo
13-06-2025
- Business
- Yahoo
RH (RH) Q1 2025 Earnings Call Highlights: Strong Revenue Growth Amid Market Challenges
Revenue Growth: Increased by 12% in the first quarter of fiscal 2025. Adjusted Operating Margin: Achieved 7% in the first quarter. Adjusted EBITDA Margin: Reached 13.1% in the first quarter. Free Cash Flow: Positive free cash flow of $34 million in the first quarter. RH England Gallery Demand: Increased by 47% in the first quarter. Online Demand at RH England: Grew by 44% in the first quarter. European Demand Growth: 60% increase in demand across RH Munich and RH Dusseldorf in the first quarter. Fiscal 2025 Revenue Forecast: Projected growth of 10% to 13%. Fiscal 2025 Adjusted Operating Margin Forecast: Expected to be 14% to 15%. Fiscal 2025 Adjusted EBITDA Margin Forecast: Anticipated to be 20% to 21%. Fiscal 2025 Free Cash Flow Forecast: Estimated between $250 million to $350 million. Second Quarter 2025 Revenue Growth Guidance: 8% to 10% expected growth. Second Quarter 2025 Adjusted Operating Margin Guidance: 15% to 16% expected. Second Quarter 2025 Adjusted EBITDA Margin Guidance: 20.5% to 21.5% expected. Warning! GuruFocus has detected 8 Warning Signs with RH. Release Date: June 12, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. RH (NYSE:RH) reported a 12% increase in revenue for the first quarter of fiscal 2025, despite challenges in the housing market. The company achieved an adjusted operating margin of 7% and an adjusted EBITDA margin of 13.1%, both at the high end of expectations. RH (NYSE:RH) generated positive free cash flow of $34 million in the quarter. The company's international expansion is showing promising results, with RH England's Gallery demand up 47% and online demand up 44% in the first quarter. RH (NYSE:RH) is forecasting revenue growth of 10% to 13% for fiscal 2025, with an adjusted EBITDA margin of 20% to 21%. The company is facing challenges due to tariff uncertainties and the worst housing market in almost 50 years. RH (NYSE:RH) has delayed the launch of a new concept planned for the second half of 2025 to Spring 2026 due to tariff uncertainties. The company is dealing with significant debt, largely due to stock repurchases, and is paying high interest expenses. There was a disruption in shipments and resourcing efforts due to unexpected Liberation Day Tariffs, impacting revenues by approximately 6 points in the second quarter. The outdoor furniture business experienced a slowdown following reciprocal tariffs and a compressed peak selling season. Q: Gary, you started the letter focusing on Europe. Given the demand ramp at RH England, how have your demand planning forecasts for Paris, London, and Madrid evolved? A: Gary Friedman, CEO: The RH brand can be as disruptive and productive in Europe as in America. Despite choppy execution, early trends are promising. We believe fixing a few key issues could double our business in Europe, leading to profitability and cash contributions comparable to the US. Q: Can you break down the $500 million real estate value into non-operational and operational assets? A: Gary Friedman, CEO: We own several galleries that we plan to do sale-leasebacks on, though it's not the best time for it. We also have a significant portfolio in Aspen and an option on a second building in Madrid. We have flexibility with these assets, and while it's a challenging time for real estate, we see long-term value. Q: How has the increased membership discount impacted demand, and how do you plan to ease off it? A: Gary Friedman, CEO: The increase from 25% to 30% is a strategic move to capture market share in a promotional world. It's not temporary, and we believe it will open up the market. The outdoor furniture discount was a tactical decision to capture market share during peak season. Q: What gives you confidence in the second half sales improvement? A: Gary Friedman, CEO: Our confidence comes from current performance, new galleries opening, and a built-up model of various factors. Despite the unpredictable market, we are generally more right than wrong in our forecasts. Q: How did product margin perform in the quarter, and what's your view for the full year? A: Jack Preston, CFO: Core business product margins were up year-over-year, and we expect them to continue improving throughout the year. We don't comment on quarter-over-quarter trends but focus on year-over-year improvements. Q: How are you offsetting the increased membership discount while maintaining profitability? A: Gary Friedman, CEO: We generally adjust prices at the beginning of the year and react to tariffs appropriately. Our distinctive offer and brand value allow us flexibility in pricing, and we've been building this model for 25 years. Q: Can you discuss the tariff mitigation efforts and where products are moving outside of China? A: Gary Friedman, CEO: We have strong partnerships and operate collaboratively to mitigate tariffs. While the situation is chaotic, we believe things will resolve in the coming months, leading to a more predictable operating environment. Q: Are you working towards any target debt metrics or coverage metrics for the balance sheet? A: Gary Friedman, CEO: We don't have specific targets or covenants requiring us to. While we don't like the current debt ratio, we are profitable and can drive free cash flow despite it. We are naturally deleveraging from growth. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
