Core Insights - RH reported mixed results for Q3 fiscal 2025, with adjusted earnings missing estimates while net revenues exceeded expectations and increased year-over-year [1][4][8] Revenue Performance - Adjusted EPS was $1.71, missing the Zacks Consensus Estimate of $2.13 by 19.7%, down from $2.48 in the same quarter last year [4] - Net revenues reached $883.8 million, surpassing the consensus mark of $882.9 million by 0.1% and reflecting an 8.9% year-over-year increase [4] - Revenue from the RH segment grew 8.8% year-over-year to $835.8 million, while Waterworks revenues rose 9.9% to $48 million [4] Market Context - RH demonstrated resilience with solid revenue growth despite one of the weakest housing markets in decades and ongoing tariff-related disruptions [2] - The company achieved an 18% revenue increase over a two-year period, highlighting its strong market position amid challenging conditions [5] Margin Analysis - Adjusted gross margin contracted by 40 basis points to 44.1% [6] - Adjusted operating margin decreased by 340 basis points year-over-year to 11.6% [6] - Adjusted EBITDA fell 7.6% year-over-year to $155.8 million, with an adjusted EBITDA margin contracting 320 basis points to 17.6% [6] Financial Position - As of Nov. 1, 2025, cash and cash equivalents were $43.1 million, up from $30.4 million at the end of fiscal 2024 [7] - Merchandise inventories were valued at $875 million, down from $1.02 billion at the end of fiscal 2024 [7] - The company ended the quarter with a net debt of $2.4 billion and a net debt-to-adjusted EBITDA ratio of 4.1x [7] Future Guidance - For Q4 fiscal 2025, RH expects net revenues to grow between 7% and 8% year-over-year [10] - Adjusted operating margin is projected to be between 12.5% and 13.5%, up from 11.3% in the prior-year quarter [10] - Adjusted EBITDA margin is forecasted to be between 18.7% and 19.6%, an increase from 17.1% reported in the previous year [10] Revised Fiscal Guidance - RH has lowered its fiscal 2025 revenue growth guidance to a range of 9% to 9.2%, down from the previous expectation of 9% to 11% [11] - Adjusted operating margin is now expected to be between 11.6% and 11.9%, down from the prior range of 13% to 14% [11] - Adjusted EBITDA margin is forecasted to be between 17.6% and 18%, reduced from the previous expectation of 19% to 20% [11] - The company still anticipates free cash flow to be between $250 million and $300 million [12]
RH Q3 Earnings Miss Estimates, Revenues Beat, FY25 Guidance Lowered