RH (RH): A Bull Case Theory

Core Thesis - The bullish thesis on RH highlights the company's strong brand positioning and strategic international expansion, despite facing near-term tariff challenges [1][7]. Financial Performance - RH reported a 2Q25 revenue growth of 8% year-over-year, a decrease from 12% in the previous quarter, attributed to tariff impacts [2]. - The company anticipates full-year revenue growth of 9–11%, with adjusted operating margins projected at 13–14% [6]. Market Position and Strategy - Demand for RH products remains strong, indicating potential revenue re-acceleration in the latter half of the year [2]. - The successful introduction of RH England is expected to generate $37–39 million in demand for 2025, meeting or slightly exceeding expectations [3]. - The opening of the Paris Gallery on the Champs Elysees is part of RH's strategy to enhance consumer experiences and brand perception, with plans for further European expansions in London and Milan by Spring 2026 [3]. Tariff Impact - Tariffs are currently a headwind, but exposure to China is expected to decrease from 16% to 2% by 4Q, with vendors absorbing much of the cost [4]. - New tariffs from India will impact about 7% of products, causing delays in brand extensions and pushing $40 million in revenue into Q4 and 1Q26 [4]. Margin and Debt Management - Gross margins have expanded to 45.5%, and operating margins have improved to 14.3%, supported by operational discipline [5]. - Interest expenses are significant at $57 million, with total debt at $3.75 billion, slightly lower than the previous quarter [5]. - An inventory reduction of $50 million has aided working capital management, despite inventory levels remaining elevated [5].