RH’s second quarter results prompted a negative market reaction, as adjusted profitability and next quarter revenue guidance both fell short of analyst expectations. Management attributed ongoing performance to steady demand growth, despite a sluggish housing market and persistent tariff-related challenges. CEO Gary Friedman stated, “We continued to generate industry-leading growth…despite the polarizing impact of tariff uncertainty and the worst housing market in almost 50 years.” The company also highlighted improvements in same-store sales and margin expansion, fueled by operational efficiency and selective cost management, while acknowledging external headwinds.
Is now the time to buy RH? Find out in our full research report (it’s free).
RH (RH) Q2 CY2025 Highlights:
- Revenue: $899.2 million vs analyst estimates of $903 million (8.4% year-on-year growth, in line)
- Adjusted EPS: $2.93 vs analyst expectations of $3.22 (8.9% miss)
- Adjusted EBITDA: $170.2 million vs analyst estimates of $191.5 million (18.9% margin, 11.1% miss)
- Revenue Guidance for Q3 CY2025 is $884.8 million at the midpoint, below analyst estimates of $902.6 million
- Operating Margin: 14.3%, up from 11.6% in the same quarter last year
- Locations: 129 at quarter end, up from 126 in the same quarter last year
- Same-Store Sales rose 5.1% year on year (-1% in the same quarter last year)
- Market Capitalization: $4.30 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From RH’s Q2 Earnings Call
- Simeon Gutman (Morgan Stanley) questioned whether improving free cash flow meant real estate monetization was still necessary. CEO Gary Friedman responded that while opportunistic, the company is not dependent on asset sales and will wait for favorable conditions.
- Steven Forbes (Guggenheim) asked about inventory reduction progress and the risk to launching the new brand extension amid tariff uncertainties. Friedman said the launch would proceed unless new tariffs are unexpectedly severe, and CFO Jack Preston detailed that inventory turns could improve further.
- Maksim Rakhlenko (TD Cowen) inquired about European gallery economics versus the U.S. and margin drag from international expansion. Friedman explained that while start-up costs remain high, early signs from Paris are encouraging, and long-term profitability should approach U.S. levels as execution improves.
- Michael Lasser (UBS) pressed management on the impact of discounting and promotional activity on sales and margins. Friedman clarified that discounting is standard in luxury furniture and necessary in a weak housing market, but the company aims to normalize as market conditions improve.
- Steven Zaccone (Citi) sought clarity on industry pricing in response to tariffs and the trajectory of international margin drag. Friedman indicated that widespread price increases are inevitable due to tariffs, and Preston noted that margin headwinds from international expansion will persist as new galleries ramp up.
Catalysts in Upcoming Quarters
Our analysts will closely monitor (1) the pace of revenue realization from delayed product launches and the brand extension, (2) progress in ramping European galleries, particularly Paris and upcoming launches in London and Milan, and (3) the trajectory of tariff-related cost pressures and sourcing shifts. Additionally, we will watch for signs of margin stabilization as these initiatives mature and macroeconomic conditions evolve.
RH currently trades at $231, in line with $228.83 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
