RH Shares Fall As Q2 Earnings Miss Estimates, Tariffs Cloud Outlook

Core Insights - RH's shares fell 5% after reporting second-quarter earnings that missed analyst expectations despite revenue growth [1] - Adjusted earnings were $2.93 per share, below the expected $3.18, while revenue increased by 8.4% to $899.2 million, falling short of the $906.58 million consensus [1] - Demand grew by 13.7% during the quarter [1] Financial Performance - Net income surged by 79%, and free cash flow reached $81 million [2] - Operating margin remained at 15.1%, while adjusted EBITDA margin improved to 20.6%, both up 340 basis points year-over-year [2] - The company revised its fiscal 2025 outlook, now expecting revenue growth of 9% to 11% and operating margins between 13% and 14% [2] - For the third quarter, revenue growth is anticipated in the range of 8% to 10% [2] Supply Chain and Tariff Impact - Management indicated that sourcing from China would decrease from 16% in the first quarter to 2% in the fourth quarter [3] - Recently imposed 50% tariffs on India are expected to impact 7% of the business [3]