RH (RH) Q3 2025 earnings summary

Executive summary

• Third quarter demand increased 13% year-over-year, with November demand up 18% and RH brand demand up 24%, accelerating to 30% in December, despite a challenging housing market.

• Net revenues rose 8.1% year-over-year to $812 million for the quarter ended November 2, 2024, driven by new product collections and Gallery openings.

• Net income reached $33 million, reversing a $2 million loss in the prior-year quarter, with diluted EPS of $1.66.

• Market share gains of 15-25 points in Q3, expected to accelerate to 25-45 points in Q4, driven by disruptive product transformation and platform expansion.

• Product transformation includes 54 new collections in RH Modern Source Book and 89 new collections in RH Interiors Source Book, with increased advertising investment to support growth.

Financial highlights

• Q3 revenues increased 8.1% year-over-year; adjusted operating margin rose to 15% from 7.3% last year; adjusted EBITDA margin improved to 20.8% from 12.4%.

• Gross profit increased 6.1% to $361 million; gross margin fell 80 bps to 44.5% year-over-year.

• Operating income more than doubled to $101 million from $51 million in the prior-year quarter.

• Adjusted EBITDA for the quarter was $169 million, up from $94 million year-over-year.

• Q4 guidance: total demand growth of 20%-22%, revenue growth of 18%-20%, adjusted operating margin of 12.2%-13.2%, and adjusted EBITDA margin of 18%-19%.

Outlook and guidance

• Most significant investments are behind, with future cash flow expected to increase and business to be self-funded starting next year.

• Free cash flow positive expected next year, with no major capital investments beyond iconic galleries.

• Adjusted capital expenditures for fiscal 2024 are projected at $250–$300 million, focused on new Design Galleries and infrastructure.

• Peak inflection in growth now expected to extend several years out, with strongest growth likely one to two years ahead due to significant brand extension.

• Management expects continued variability in financial performance due to ongoing business initiatives and macroeconomic headwinds.