RH's Q3 Earnings Lag Estimates, Revenues Top, Stock Up 18%

Core Insights - RH's shares increased by 17.7% in after-hours trading despite missing earnings expectations for Q3 fiscal 2024, driven by strong revenue growth and resilient demand in a challenging housing market [1][5] Financial Performance - Adjusted earnings per share for Q3 were $2.48, missing the consensus estimate of$ 2.67 by 7.1%, but improved from a loss of $1.33 per share in the previous year [5] - Net revenues reached$ 811.7 million, exceeding the consensus estimate of $810.9 million, and grew by 8.1% year-over-year [6] - Demand for RH's products increased by 14% in Q3, with a notable rise to 24% by the end of November [6] - Gross margin contracted by 80 basis points to 44.5%, while adjusted operating margin expanded by 770 basis points year-over-year to 15% [7] Demand and Market Share - Total demand growth for Q3 was 13%, with November showing an acceleration to 18% [3] - RH gained market share by 15-25 points in Q3, with expectations of a further increase of 25-45 points in Q4 [3] Guidance and Future Outlook - The company raised its full-year guidance for demand growth to between 9.9% and 10.4%, and revenue growth to between 6.8% and 7.2% [4][11] - For Q4, demand growth is expected to be between 20% and 22%, and revenue growth between 18% and 20% [14] Product and Platform Expansion - RH is enhancing its product offerings with significant updates to its Sourcebooks and collections, including the introduction of 54 new collections in November [15] - The company is expanding its physical retail presence with new galleries, including a 90,000-square-foot gallery in Newport Beach expected to generate over$ 100 million in revenue [17] Balance Sheet and Cash Flow - Cash and cash equivalents at the end of Q3 were $87 million, down from$ 123.7 million at the end of fiscal 2023 [8] - Net debt stood at $2.53 billion, with a net debt-to-adjusted EBITDA ratio of 4.9x [9]