RH(US:RH)2025-09-11 20:18Financial Performance - Q2 2025 revenues increased by 8.4% to $899.2 million, with net income rising 79% to $51.7 million[3] - Net revenues for Q2 2025 reached $899,151,000, a 8.4% increase from $829,655,000 in Q2 2024[55] - Net income for Q2 2025 was $51,708,000, up 78.6% from $28,952,000 in Q2 2024[55] - Operating income for the six months ended August 2, 2025, was $184,787,000, representing a 22.5% increase from $150,790,000 in the same period last year[55] - Adjusted net income for the three months ended August 2, 2025, was $57,812,000, up from $33,468,000 in the prior year, reflecting a growth of 72.5%[64] - EBITDA for the three months ended August 2, 2025, was $162,727 thousand, an increase from $124,188 thousand in the same quarter of 2024, marking a rise of 31.0%[84] - Adjusted EBITDA for the trailing twelve months ending August 2, 2025, was $598,920 thousand, compared to $231,737 thousand for the same period in 2024, showing a significant increase of 158.5%[88] Cash Flow and Margins - Free cash flow for Q2 2025 was $81 million, with an adjusted operating margin of 15.1% and adjusted EBITDA margin of 20.6%[6] - Free cash flow for the six months ended August 2, 2025, was $114,754,000, compared to a negative $48,034,000 in the same period last year[59] - The adjusted EBITDA margin is forecasted to be 20% in a robust housing market, indicating potential for increased margins and cash flow[40] - Adjusted operating margin for the three months ended August 2, 2025, was 15.1%, compared to 11.7% in the prior year, reflecting an improvement of 29.1%[84] Growth and Expansion - Demand increased by 13.7% in Q2 2025, with a two-year revenue growth of 12% and demand growth of 21%[4][5] - The company plans to open 4 additional Design Galleries in 2025 and anticipates significant growth in Europe following the openings in Paris, London, and Milan[35][36] - The company is focused on global expansion, with plans to open Galleries in Europe and the UK in 2025 and 2026, including locations in RH England, RH Madrid, RH Paris, RH London, and RH Milan[51] - The company aims to create a new market for luxury travel in the $200 billion North American hotel industry through its hospitality initiatives, including RH Guesthouses and luxury yacht offerings[51] Guidance and Projections - Fiscal Year 2025 revenue growth is projected at 9% to 11%, with adjusted operating margin guidance of 13.0% to 14.0%[32] - The company expects a revenue shift of approximately $40 million from Q3 2025 to Q4 2025 and Q1 2026 due to delays in the Fall Interiors Sourcebook[29] - The company forecasts generating $250 to $300 million of free cash flow in 2025, with adjusted capital expenditures expected to decrease to $200 to $250 million in 2026 and $150 to $200 million in 2027 and beyond[41] Risks and Challenges - The company acknowledges risks related to economic conditions, consumer demand, and supply chain uncertainties that could impact future performance[53] - The company is revising its guidance for fiscal 2025 to account for an estimated $30 million cost of incremental tariffs in the second half[27] Inventory and Assets - Total assets increased to $4,697,021,000 as of August 2, 2025, from $4,554,689,000 on February 1, 2025[57] - The company reported a decrease in merchandise inventories to $956,947,000 from $1,019,591,000[57] Shareholder Value - The company repurchased 60% of its outstanding shares post Warren Buffett's 2016 letter and 30% during the housing downturn in 2022-2023, reflecting a strong commitment to long-term shareholder value[42] Product and Market Transformation - The company believes its product transformation plans represent the most significant transformation in the industry, creating a multi-billion dollar opportunity[51] - The company is implementing a Sourcebook mailing strategy to elevate its brand and capitalize on demand trends[51]