RH(US:RH)2025-09-11 22:02Financial Data and Key Metrics Changes - Revenue increased by 8.4% and demand increased by 13.7% in Q2 2025, despite challenges from tariff uncertainty and a weak housing market [4] - On a two-year basis, revenues increased by 12% and demand increased by 21%, indicating significant market share gains [4] - Adjusted operating margin improved to 15.1%, and adjusted EBITDA rose to 20.6%, both up by 340 basis points year-over-year [4] - Net income surged by 79%, with free cash flow generated amounting to $81 million in the quarter [5] Business Line Data and Key Metrics Changes - Gallery demand in RH England rose by 76% in Q2, while online demand increased by 34% [5] - The gallery in the English countryside generated $46 million in demand in its second full fiscal year, with expectations for the Mayfair gallery to perform even better [6] Market Data and Key Metrics Changes - The company is experiencing strong demand trends in Europe, particularly with the opening of RH Paris, which has exceeded traffic expectations compared to RH New York [13] - The company anticipates significant brand-building opportunities in key European markets, including London and Milan, set to open in 2026 [21] Company Strategy and Development Direction - The company is focused on expanding its global presence, with plans to open four additional design galleries in 2025 [20] - The strategy includes creating immersive physical experiences that blend residential and retail spaces, enhancing customer engagement [19] - The company is also shifting sourcing out of China, projecting a decrease from 16% in Q1 to 2% in Q4 2025 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential impact of new tariffs on the furniture industry, emphasizing the need for a balanced approach to avoid significant job losses [52] - The company is optimistic about its growth trajectory, projecting revenue growth of 9% to 11% for fiscal 2025, with adjusted operating margins between 13% and 14% [18] - Management highlighted the importance of maintaining focus on long-term investments despite current economic challenges [24] Other Important Information - The company plans to delay the launch of a new brand extension to spring 2026 due to tariff uncertainties [17] - The company is also working on reducing excess inventory, with a target of $200 million to $300 million in inventory reduction by year-end [61] Q&A Session Summary Question: Is real estate monetization still something the company would pursue given the improvement in free cash flow? - Management indicated that they are opportunistic regarding real estate and do not see a pressing need to pursue monetization at this time [30][41] Question: How much visibility is there into the planned launch of the new brand extension? - Management expressed confidence in the launch of the new brand extension, barring any unforeseen tariff issues [58] Question: What are the expected revenues per market or gallery in Europe? - Management noted that while it is early to provide specific figures, they are optimistic about the performance of galleries in England and Paris, with expectations for strong brand awareness in London [75]