Core Viewpoint - The luxury home goods retailer RH has faced significant revenue declines due to a sluggish housing market, resulting in a stock price drop of over 50% in the last five years, contrasting with the S&P 500's 87% increase [1][4]. Group 1: Company Performance - RH's revenue peaked at $1 billion in Q3 2021 but fell to $727 million by fiscal Q1 2024, although a modest recovery to $899 million was noted in the most recent quarter [4]. - The stock is down 58% year to date, influenced by uncertainties around tariffs and competition, leading to reduced profit visibility [5]. - The operating profit margin has decreased from over 20% before the downturn to just 12% on a trailing-12-month basis [5]. Group 2: Market Conditions and Opportunities - With the Federal Reserve expected to lower interest rates, it may be an opportune time to invest in stocks like RH that could benefit from a housing market recovery [2]. - RH is expanding internationally, particularly in Europe, where demand in England has surged by 76% in the recent quarter, indicating potential for future growth [7]. - The company is managing selling prices to counteract higher tariff costs, which is expected to stabilize margins, with analysts predicting a return to nearly 20% operating margin by fiscal 2030 [8]. Group 3: Investment Potential - The stock is currently trading at a forward price-to-earnings ratio of 12.8, suggesting potential for significant returns over the next five years, especially with projected 46% compound annual growth in adjusted earnings per share [8]. - Despite recent underperformance, RH's brand and long-term growth potential remain intact, presenting a buying opportunity for long-term investors [6].

Financial Data and Key Metrics Changes - The second quarter demonstrated resilience with GMV and revenue performing above the midpoint of guidance, while adjusted EBITDA exceeded the high end [5][19] - Operating expenses declined by 4% year over year, reflecting a commitment to cost management [5][28] - Net revenue was $22.1 million, flat year over year, with transaction revenue making up approximately 75% of total revenue [25][26] - Adjusted EBITDA loss was $1.8 million compared to a loss of $1.6 million last year, with an adjusted EBITDA margin loss of 8% [28][30] Business Line Data and Key Metrics Changes - GMV modestly declined, but market share was gained in the luxury home goods market [6][36] - Average order value was nearly $2,600, flat year over year, while median order values increased by 10% to approximately $13.50 [22] - Jewelry accounted for about 20% of total GMV, increasing in high single digits, while other verticals were flat or down [24] Market Data and Key Metrics Changes - Active buyers totaled approximately 64,400, up 5% [24] - The company ended the quarter with nearly 1.9 million listings, up 3%, but unique sellers decreased by 21% year over year [16][17] - The U.S. housing market has shown the slowest spring selling season in thirteen years, impacting the luxury home goods market [36] Company Strategy and Development Direction - The 2025 roadmap focuses on accelerating organic traffic growth, ensuring competitive pricing, and optimizing the multi-step conversion funnel [7][10] - The company is embedding AI throughout its platform to enhance efficiencies and capabilities [15] - A significant addition to the leadership team was made with the hiring of Bradford Shellhammer as chief marketing officer and chief product officer [19] Management's Comments on Operating Environment and Future Outlook - The macro environment for luxury home goods remains challenging, with no major changes observed since the beginning of the year [35][36] - Despite a soft market, the company believes it can continue to gain market share based on its product roadmap [37] - The guidance for the third quarter reflects a modest rebound in average order value growth and continued conversion growth [30] Other Important Information - The company has implemented machine learning-based pricing models across all verticals to enhance pricing transparency [10][11] - Seller churn has remained elevated due to subscription pricing optimizations, but the impact on GMV and overall listings has been minimal [18][25] Q&A Session Summary Question: Changes in the overall environment since the beginning of the year - Management noted that there have not been major changes in the macro environment, with both the U.S. housing market and luxury home goods market remaining soft [35][36] Question: Vulnerability of organic traffic to AI-driven search results - Management acknowledged the potential impact of AI and chatbots on traffic but stated that there has not been a material impact on organic search traffic to date [39][40]