Core Viewpoint - RH, formerly known as Restoration Hardware, has shown resilience with a projected revenue growth of 10% to 13% for FY 2025 despite macroeconomic challenges, but faced a mixed Q1 earnings report leading to volatility in stock performance [2][4]. Financial Performance - For Q1 2025, RH reported a net income of $8.04 million ($0.40 per share), reversing a loss of $3.63 million ($0.20 per share) from the previous year [4]. - Revenue increased by 12% year-over-year to $814 million, slightly below analyst expectations [4]. - Adjusted operating margin reached 7%, with EBITDA margin at 13.1% [4]. Supply Chain and Tariff Impact - RH is shifting production away from China, with imports expected to decrease from 16% in Q1 to 2% by Q4, aiming for 52% of upholstered goods to be produced domestically in the U.S. and 21% in Italy by year-end [5]. - Tariffs are projected to impact Q2 revenue by approximately six percentage points [5]. Expansion Plans - Despite tariff uncertainties, RH is advancing with global expansion, including a flagship store opening on Paris' Champs Élysées in September and plans to launch 7–9 new galleries annually in major cities like London and Milan [6]. Historical Performance and Valuation - Historically, RH's stock has shown significant volatility during downturns, falling 71% during the 2022 inflation shock and 68% during the 2020 pandemic crash [7][8]. - The current valuation stands at approximately 45× forward earnings, significantly higher than its five-year average of 38× and the S&P 500's 26× [9]. Market Context - Following a post-pandemic demand boom in FY 2020, RH has faced challenges from rising mortgage rates, inflation, and a declining housing market, although FY 2024 showed some recovery [10]. - Investor confidence remains fragile due to ongoing tariff impacts and a weak housing market [10].
Q1 Profit Can't Justify RH's $180 Price Tag