Core Insights - The ambiguity of the new U.S. tariff regime is impacting global markets, including RH, a luxury home furnishing retailer, which is closely tied to housing market trends facing challenges in affordability [2][3] Business Strategy - RH is actively investing in diversified business plans to enhance revenue visibility and ensure long-term margin expansion [3] - The company plans to reduce its sourcing from China from 16% in Q1 FY25 to 2% by Q4 FY25, with projections of 52% of upholstered furniture produced in the U.S. and 21% in Italy by the end of 2025 [3][7] - To mitigate risks from the domestic market, RH is focusing on international markets, particularly Europe, with plans for new gallery openings in Paris, London, and Milan [4] Financial Performance - In Q1 FY25, RH's adjusted operating margin increased by 50 basis points to 7%, and adjusted EBITDA margin rose by 80 basis points to 13.1% [5] - The company maintains its fiscal 2025 adjusted operating margin guidance of 14% to 15% and adjusted EBITDA margin guidance of 20% to 21% [5][7] Stock Performance - RH's stock has gained 16.4% over the past three months, outperforming the Hoya Capital Housing ETF (HOMZ) [6] - The stock is currently trading at a forward price-to-sales (P/S) ratio of 0.95, which is lower than Ethan Allen's 1.19 and higher than Arhaus's 0.83, indicating a potentially attractive valuation for investors [10] Earnings Estimates - Earnings estimates for RH for fiscal 2025 and 2026 have been revised downward to $10.76 and $14.61 per share, respectively, but still reflect year-over-year growth of 99.6% and 35.8% [11][12]

Core Insights - RH is implementing diverse in-house strategies to ensure margin expansion amid high mortgage rates, tariff-related risks, and inflationary pressures [1] - The company is focusing on global expansion, a customer-friendly membership approach, and supply-chain optimization to increase revenue visibility [1] Group 1: Financial Performance - In Q1 2025, RH's adjusted EBITDA margin expanded by 80 basis points year-over-year to 13.1% [1][8] - The company expects its adjusted EBITDA margin for FY25 to be between 20% and 21%, up from 16.9% reported last year [4][8] - Earnings estimates for fiscal 2025 have trended upward to $10.87 per share, indicating robust 101.7% year-over-year growth [11] Group 2: Market Expansion - Demand in Europe has grown by 60% across RH Munich and RH Dusseldorf, with continued growth in RH Brussels and RH Madrid [2] - RH plans to open new locations in Paris in September 2025, and two more in London and Milan in 2026 [2] Group 3: Supply Chain Strategy - RH is shifting its sourcing out of China, expecting receipts to reduce from 16% in Q1 2025 to 2% by Q4 2025 [3][8] - By the end of 2025, RH projects that 52% of its upholstered furniture will be produced in the U.S. and 21% in Italy [3] Group 4: Competitive Positioning - RH shares have gained 13.9% in the past month, outperforming the Hoya Capital Housing ETF (HOMZ) [5] - In comparison, shares of competitors Williams-Sonoma and Arhaus have increased by 3.8% and 2.2%, respectively [6] Group 5: Valuation Metrics - RH stock is currently trading at a forward 12-month P/E ratio of 15.3X, which is lower than Williams-Sonoma's 18.83X and Arhaus's 19.66X [9] - The discounted valuation of RH stock compared to other market players presents a promising opportunity for investors [9]