分组1 - RH reported quarterly earnings of $2.93 per share, missing the Zacks Consensus Estimate of $3.19 per share, but showing an increase from $1.69 per share a year ago, resulting in an earnings surprise of -8.15% [1] - The company posted revenues of $899.15 million for the quarter ended July 2025, missing the Zacks Consensus Estimate by 0.7%, and an increase from $829.66 million year-over-year [2] - Over the last four quarters, RH has surpassed consensus EPS estimates only once and has topped consensus revenue estimates just once [2] 分组2 - RH shares have declined approximately 41.8% since the beginning of the year, contrasting with the S&P 500's gain of 11.1% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to those expectations [4] - The current consensus EPS estimate for the upcoming quarter is $4.33 on revenues of $910.79 million, and for the current fiscal year, it is $10.77 on revenues of $3.54 billion [7] 分组3 - The Zacks Industry Rank indicates that the Consumer Products - Staples sector is currently in the bottom 35% of over 250 Zacks industries, which may negatively impact stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that tracking these revisions can be beneficial for investors [5] - The estimate revisions trend for RH was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6]

Financial Data and Key Metrics Changes - Revenue increased by 8.4% and demand increased by 13.7% in Q2 2025, despite challenges from tariff uncertainties and a weak housing market [4] - On a two-year basis, revenues increased by 12% and demand increased by 21%, indicating significant market share gains [4] - Net income rose by 79%, with free cash flow generated amounting to $81 million in the quarter [5] Business Line Data and Key Metrics Changes - Gallery demand in RH England surged by 76% in Q2, while online demand increased by 34% [5] - The gallery in the English countryside is projected to reach approximately $37 million to $39 million in demand in 2025 [5] Market Data and Key Metrics Changes - The company is experiencing strong demand trends in Europe, particularly with the opening of RH Paris, which has exceeded traffic expectations compared to RH New York [13] - The company anticipates that the opening of additional galleries in London and Milan will further enhance brand awareness and revenue potential in Europe [21][76] Company Strategy and Development Direction - The company is focused on expanding its global presence, with plans to open four additional design galleries in 2025 [20] - The strategy includes creating immersive physical experiences that blend residential and retail spaces, enhancing customer engagement [19] - The company is also shifting sourcing out of China, with a significant portion of upholstered furniture expected to be produced in the U.S. by the end of fiscal 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential impact of tariffs and inflation on the industry, noting that strong brands may benefit from market dislocation while smaller companies may struggle [14][24] - The company revised its fiscal 2025 guidance, projecting revenue growth of 9% to 11% and adjusted operating margins of 13% to 14% [18] - Management emphasized the importance of maintaining a long-term view and separating signal from noise in a challenging economic environment [22][24] Other Important Information - The company is experiencing a significant transformation in its product offerings, which has led to inefficiencies in inventory management but is expected to improve over time [62] - The company is optimistic about the potential for future growth, particularly in the luxury furniture market, despite current economic challenges [24][59] Q&A Session Summary Question: Is real estate monetization still something the company would pursue? - Management indicated that they are opportunistic regarding real estate and do not see a current need to pursue monetization, but they recognize the value of their real estate holdings [29][30][40] Question: How much room is there for continued reduction in net inventory? - Management discussed the potential for inventory reduction, noting that they have historically achieved higher turnover rates and expect to improve efficiency as they move past product transformation challenges [62][63] Question: What are the revenue expectations for the new brand extension? - Management expressed confidence in the upcoming brand extension, stating that it is a significant opportunity and they plan to launch it alongside new galleries in key markets [66][67]

Financial Data and Key Metrics Changes - Revenue increased by 8.4% and demand increased by 13.7% in Q2 2025, despite challenges from tariff uncertainty and a weak housing market [4] - On a two-year basis, revenues increased by 12% and demand increased by 21%, leading to significant market share gains [4] - Net income rose by 79%, with free cash flow generated amounting to $81 million in the quarter [5] Business Line Data and Key Metrics Changes - Gallery demand in RH England surged by 76% in Q2, while online demand increased by 34% [5] - The gallery in the English countryside is projected to reach approximately $37 million-$39 million in demand for 2025 [6] Market Data and Key Metrics Changes - The company is experiencing strong demand trends in Europe, particularly with the opening of RH Paris, which has exceeded traffic expectations compared to RH New York [13] - The company anticipates that the opening of additional galleries in London and Milan will further enhance brand awareness and revenue potential in Europe [21][76] Company Strategy and Development Direction - The company is focused on expanding its global presence, with plans to open four additional design galleries in 2025 [20] - The strategy includes creating immersive physical experiences that blend residential and retail spaces, enhancing customer engagement [19] - The company is also shifting sourcing out of China, with a significant portion of upholstered furniture expected to be produced in the U.S. by the end of fiscal 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential impact of tariffs and inflation on the industry, noting that strong brands may benefit from market dislocation while smaller companies may struggle [14][24] - The company revised its fiscal 2025 guidance, projecting revenue growth of 9%-11% and adjusted operating margins of 13%-14% [18] - Management emphasized the importance of maintaining a long-term view and separating market signals from noise during challenging economic conditions [22][24] Other Important Information - The company is experiencing a significant transformation in its product offerings, which has led to inefficiencies in inventory turnover but is expected to improve as new concepts are launched [62] - The company is optimistic about the potential for cash flow generation in the coming years, forecasting $250 million-$300 million in cash flow for 2025 [25] Q&A Session Summary Question: Is real estate monetization still something the company would pursue given the expected cash flow? - Management indicated that real estate monetization is opportunistic and not a necessity, as the company focuses on being a real estate developer rather than a long-term owner [30][40] Question: How much visibility is there into the planned launch of the new brand extension in spring? - Management expressed confidence in the launch, stating that unless there are unexpected tariff issues, the extension is on track [56][58] Question: What are the expected revenues per market or gallery in Europe? - Management noted that brand awareness in Europe is growing, particularly in Paris, and they expect strong performance from upcoming galleries in London and Milan [76]

Financial Data and Key Metrics Changes - Revenue increased by 8.4% and demand increased by 13.7% in Q2 2025, despite challenges from tariff uncertainty and a weak housing market [4] - On a two-year basis, revenues increased by 12% and demand increased by 21%, indicating significant market share gains [4] - Adjusted operating margin improved to 15.1%, and adjusted EBITDA rose to 20.6%, both up by 340 basis points year-over-year [4] - Net income surged by 79%, with free cash flow generated amounting to $81 million in the quarter [5] Business Line Data and Key Metrics Changes - Gallery demand in RH England rose by 76% in Q2, while online demand increased by 34% [5] - The gallery in the English countryside generated $46 million in demand in its second full fiscal year, with expectations for the Mayfair gallery to perform even better [6] Market Data and Key Metrics Changes - The company is experiencing strong demand trends in Europe, particularly with the opening of RH Paris, which has exceeded traffic expectations compared to RH New York [13] - The company anticipates significant brand-building opportunities in key European markets, including London and Milan, set to open in 2026 [21] Company Strategy and Development Direction - The company is focused on expanding its global presence, with plans to open four additional design galleries in 2025 [20] - The strategy includes creating immersive physical experiences that blend residential and retail spaces, enhancing customer engagement [19] - The company is also shifting sourcing out of China, projecting a decrease from 16% in Q1 to 2% in Q4 2025 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential impact of new tariffs on the furniture industry, emphasizing the need for a balanced approach to avoid significant job losses [52] - The company is optimistic about its growth trajectory, projecting revenue growth of 9% to 11% for fiscal 2025, with adjusted operating margins between 13% and 14% [18] - Management highlighted the importance of maintaining focus on long-term investments despite current economic challenges [24] Other Important Information - The company plans to delay the launch of a new brand extension to spring 2026 due to tariff uncertainties [17] - The company is also working on reducing excess inventory, with a target of $200 million to $300 million in inventory reduction by year-end [61] Q&A Session Summary Question: Is real estate monetization still something the company would pursue given the improvement in free cash flow? - Management indicated that they are opportunistic regarding real estate and do not see a pressing need to pursue monetization at this time [30][41] Question: How much visibility is there into the planned launch of the new brand extension? - Management expressed confidence in the launch of the new brand extension, barring any unforeseen tariff issues [58] Question: What are the expected revenues per market or gallery in Europe? - Management noted that while it is early to provide specific figures, they are optimistic about the performance of galleries in England and Paris, with expectations for strong brand awareness in London [75]

Financial Data and Key Metrics Changes - Revenue increased by 8.4% and demand increased by 13.7% in Q2 2025, despite challenges in the housing market and tariff uncertainties [4] - Net income rose by 79%, with free cash flow of $81 million generated in the quarter [5] - Adjusted operating margin improved to 15.1%, and adjusted EBITDA margin reached 20.6%, both up by 340 basis points year-over-year [4] Business Line Data and Key Metrics Changes - Gallery demand in RH England surged by 76%, while online demand increased by 34% [5] - The gallery in the English countryside generated $46 million in demand in its second full fiscal year, indicating strong performance potential for future locations [5] Market Data and Key Metrics Changes - The company is experiencing significant share gains and strategic separation, with a two-year revenue increase of 12% and demand increase of 21% [4] - Current demand trends suggest that the gallery in England could reach approximately $37 million to $39 million in demand for 2025 [5] Company Strategy and Development Direction - The company is focused on expanding its global presence, with plans to open additional design galleries in key markets such as London and Milan [20][21] - The recent opening of RH Paris is seen as a pivotal moment, with expectations of it becoming a major brand-building experience [6][20] - The company aims to create immersive physical experiences that blend residential and retail spaces, enhancing customer engagement [19] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the impact of tariffs and inflation on the industry, noting that many smaller companies may struggle to survive [13][22] - The company is optimistic about its positioning to benefit from potential market dislocation caused by tariffs, while also acknowledging the challenges ahead [13][24] - Future guidance for fiscal 2025 includes revenue growth of 9% to 11% and free cash flow expectations of $250 million to $300 million [18] Other Important Information - The company is shifting sourcing out of China, with expectations that receipts will decrease significantly by Q4 2025 [15] - The company plans to delay the launch of a new brand extension to spring 2026 due to tariff uncertainties [17] Q&A Session Summary Question: Is real estate monetization still something the company would pursue given the improvement in free cash flow? - Management indicated that they do not see a need to pursue real estate monetization aggressively, as they are opportunistic and primarily real estate developers [30][42] Question: How much visibility is there into the planned launch of the new brand extension? - Management expressed confidence in the launch of the new brand extension, barring any unforeseen tariff issues, and highlighted the potential for significant market impact [58][60] Question: What are the expected revenues per market or gallery in Europe? - Management noted that while it is early to provide specific figures, the strong start in Paris and improvements in England suggest positive revenue potential [71][74]

Core Viewpoint - Inflation is expected to significantly increase this year and is projected to accelerate into 2026 and beyond, according to RH CEO Gary Friedman [1] Group 1 - The company anticipates a notable rise in inflation rates [1]

Retail Expansion - As of August 2, 2025, the company operated a total of 72 retail locations globally, including 67 in North America and 5 in Europe[135] - The company anticipates an annual revenue opportunity of $5 to $6 billion from opening new Design Galleries in major North American markets[144] - The company aims to build a projected $20 to $25 billion global brand in terms of annual revenues through international expansion[146] - The company opened RH Paris, The Gallery on the Champs Élysées, in September 2025, marking a significant step in its European expansion[146] - The company plans to incorporate hospitality into new Design Galleries, enhancing the retail experience and driving incremental sales[144] - The company is exploring new real estate strategies, including transitioning from leasing to development models for Design Galleries[227] Digital Transformation - The company is actively pursuing digital reimagination, enhancing its online portal "The World of RH" to elevate customer experience[147] Financial Performance - Net revenues for the three months ended August 2, 2025, were $899,151 thousand, representing a 8.4% increase from $829,655 thousand for the same period in 2024[149] - Gross profit for the six months ended August 2, 2025, was $764,592 thousand, up 10.6% from $690,795 thousand in the prior year[149] - Operating income increased to $128,876 thousand for the three months ended August 2, 2025, a 33.9% increase compared to $96,127 thousand in the same period of 2024[149] - Adjusted net income for the three months ended August 2, 2025, was $57,812 thousand, compared to $33,468 thousand for the same period in 2024, reflecting a 72.3% increase[157] - EBITDA for the six months ended August 2, 2025, was $265,732 thousand, an increase of 28.9% from $206,071 thousand in the same period of 2024[163] - Consolidated net revenues increased by $69 million, or 8.4%, to $899 million for the three months ended August 2, 2025, compared to $830 million for the same period in 2024[174] - RH Segment net revenues rose by $66 million, or 8.4%, to $847 million for the three months ended August 2, 2025, compared to $781 million for the same period in 2024[175] - Gross profit increased by $35 million, or 9.2%, to $409 million for the three months ended August 2, 2025, with a gross margin of 45.5%[178] - Consolidated net revenues increased by $156 million, or 10.1%, to $1,713 million for the six months ended August 2, 2025, compared to $1,557 million for the same period in 2024[195] - RH Segment net revenues rose by $154 million, or 10.5%, to $1,612 million for the six months ended August 2, 2025, driven by higher core business revenue and increased hospitality revenue from new Gallery openings[196][197] Cost Management - The company is adapting its supply chain to mitigate risks related to tariffs and trade policies, which may affect product costs[137] - Selling, general and administrative expenses increased by $1.8 million, or 0.6%, to $280 million for the three months ended August 2, 2025[182] - Selling, general and administrative expenses rose by $40 million, or 7.4%, to $580 million for the six months ended August 2, 2025[203] - RH Segment selling, general and administrative expenses as a percentage of net revenues decreased to 30.6% for the three months ended August 2, 2025, from 33.2% for the same period in 2024[183] Interest and Debt Management - The company reported interest expense—net of $57,358 thousand for the three months ended August 2, 2025, down from $59,262 thousand in the same period of 2024[149] - Interest expense—net decreased to $57.4 million for the three months ended August 2, 2025, from $59.3 million for the same period in 2024[187] - Interest expense—net decreased to $113.961 million for the six months ended August 2, 2025, down from $116.034 million in the prior year[208] - The ABL Credit Agreement was amended to provide an asset-based credit facility with initial availability of up to $600 million, expandable to $900 million under certain conditions[221] - The company entered into a $2,000 million Term Loan B with a maturity date of October 20, 2028, requiring quarterly principal payments of $5.0 million[222] - An incremental term debt financing (Term Loan B-2) of $500 million was secured in May 2022, also maturing on October 20, 2028, with quarterly principal payments of $1.3 million[223] Cash Flow and Capital Expenditures - Net cash provided by operating activities for the six months ended August 2, 2025, was $224 million, driven by net income of $60 million and an increase in non-cash items of $169 million[228][230] - Net cash used in investing activities was $134 million, including $110 million for retail stores and $32 million for a business acquisition[232] - Net cash used in financing activities totaled $87 million, primarily due to net repayments under the asset-based credit facility of $65 million[234] - Adjusted capital expenditures for the six months ended August 2, 2025, totaled $156,051 thousand, compared to $132,801 thousand for the same period in 2024, indicating an increase of 17.5%[165] - Adjusted capital expenditures for the six months ended August 2, 2025, were $156 million, with an anticipated range of $275 million to $325 million for fiscal 2025, primarily for growth and expansion[224] - As of August 2, 2025, $201 million remains available for future share repurchases under the authorized $2,450 million Share Repurchase Program[243] Economic Challenges - The company is facing challenges due to macroeconomic conditions, including high interest rates and inflation, which have negatively impacted its business[136] - The company expects variability in financial performance due to ongoing strategic initiatives and market conditions[141] - For every 100-basis point change in interest rates, the company's annual interest expense could change by approximately $25 million[250] - Anticipated adjusted capital expenditures may be adjusted in response to macroeconomic factors such as increased inflation and higher interest rates[224]

Market Performance - U.S. equities experienced a robust rally on September 11, 2025, with all three major indices closing at record highs, driven by optimism over a potential Federal Reserve interest rate cut [1][2] - The S&P 500 rose 0.9% to approximately 6586 points, marking a 17.69% increase year-over-year [2] - The Dow Jones Industrial Average surged 1.3%, closing above 46,000 for the first time, adding over 500 points [2] - The Nasdaq Composite climbed 0.7%, achieving a new record high, influenced by mixed performances among technology stocks [2] Economic Indicators - The Consumer Price Index (CPI) report for August indicated a headline annual inflation of 2.9% and core inflation steady at 3.1%, with a monthly rise of 0.4% in headline CPI [3] - Initial jobless claims reached a near four-year high, signaling a softening labor market, which reinforced expectations for a Federal Reserve rate cut [3] - Treasury yields eased in response to the economic reports, as traders anticipated the Fed's first rate cut of the year [3] Upcoming Events - The Federal Reserve's meeting on September 17, 2025, is highly anticipated, with expectations for the first interest rate cut of the year [4] - Key economic data releases are scheduled, including the Michigan Consumer Sentiment report and Retail Sales, Industrial Production, and Housing Starts [5] Corporate News - Oracle (ORCL) shares fell 3.6% after a previous surge of nearly 36% due to excitement over AI-related contracts [6] - Tesla (TSLA) gained 6%, while Apple (AAPL) rose over 1%, and Microsoft (MSFT) and Alphabet (GOOGL) saw slight increases [7] - Warner Bros. Discovery (WBD) shares soared 29% following news of a potential takeover bid from Paramount Skydance [8] - Synopsys Inc. (SNPS) plummeted 35.8% after missing earnings estimates, while GameStop Corp. (GME) rose 3.3% after beating expectations [10] Earnings Announcements - Adobe Inc. (ADBE) is expected to report earnings with a forecasted EPS of $4.21, a 10.50% increase year-over-year [11] - Other companies reporting include RH and RF Industries, with RF Industries expected to show a significant 200% increase in EPS year-over-year [11]

Core Insights - The company reported an adjusted earnings of $2.93, but revenue of $899 million fell short of the expected $95 million [1] - The company anticipates a $30 million impact from tariffs, which is a significant concern for its outlook [1] - Shares of the company have declined by approximately 15% due to detailed discussions about tariff impacts and uncertainties surrounding new tariffs [3] Industry Context - The company is facing additional scrutiny as President Trump has announced an investigation into furniture makers, steel, and aluminum industries [2] - The company is adapting by reducing reliance on China and shifting operations to North Carolina [3] - The overall outlook for the industry appears to be becoming more uncertain due to potential new tariffs and ongoing investigations [3]

Group 1 - RH's second-quarter results fell below expectations, leading to a decline in stock price by 13% after the announcement [3] - The company has revised its forecast for the year downward, indicating potential challenges ahead [3]