RH (RH) Q1 2025 earnings summary

Executive summary

• Q1 2024 demand trends turned positive, but net revenues declined 1.7% year-over-year to $727 million due to macroeconomic headwinds and a challenging housing market.

• Net loss was $3.6 million, compared to net income of $41.9 million in the prior year, driven by lower gross profit and higher interest expense.

• Major product transformation and platform expansion are underway, positioning for significant market share gains in North America and global expansion.

• Gross margin decreased 350 basis points to 43.5% due to lower product margins, higher discounts, and increased occupancy costs.

• The company continues to invest in new product collections, global expansion, and digital initiatives despite challenging market conditions.

Financial highlights

• Q1 revenue was $727 million, in line with expectations but down from $739.16 million year-over-year.

• Net loss: $3.63 million, or $(0.20) per diluted share, versus net income of $41.89 million prior year.

• Gross profit: $316.04 million, gross margin 43.5%.

• Adjusted EBITDA was $89 million, down from $147 million year-over-year.

• Adjusted operating margin was 6.5%; adjusted EBITDA margin was 12.3%.

Outlook and guidance

• Persistent macro headwinds from high interest rates and a slow housing market are expected through late 2024 or into 2025.

• Forecasting FY24 demand growth of 12%-14% and revenue growth of 8%-10%.

• Adjusted operating margin expected at 13%-14%, adjusted EBITDA margin at 18%-19% for FY24.

• Adjusted capital expenditures for FY24 projected at $250–$300 million, focused on growth and expansion.

• Q2 guidance: demand growth 9%-10%, revenue growth 3%-4%, adjusted operating margin 11%-12%, adjusted EBITDA margin 17%-18%.