RH (RH) Q1 2025 earnings summary

Executive summary

• Q1 2024 revenue was $727 million, with demand trends turning positive despite a challenging housing market and macroeconomic headwinds.

• Net loss was $3.6 million compared to net income of $41.9 million in the prior year quarter, driven by lower gross profit and higher interest expense.

• Major product transformation and platform expansion underway, positioning for significant market share gains in North America and global expansion.

• Gross margin decreased 350 basis points to 43.5% due to lower product margins, higher discounts, and increased occupancy costs.

• Aggressive investment during downturns is expected to yield long-term opportunities as competitors exit the market.

Financial highlights

• Q1 2024 revenue: $727 million, down 1.7% year-over-year.

• Net loss: $3.63 million, or $(0.20) per diluted share.

• Adjusted operating margin: 6.5%; adjusted EBITDA margin: 12.3%.

• Gross margin: 43.5% (down from 47.0% year-over-year).

• Adjusted EBITDA was $89 million, down from $147 million year-over-year.

Outlook and guidance

• Business conditions expected to remain challenging until interest rates ease and the housing market rebounds.

• Revenue to lag demand by 4-8 points in 2024 due to assortment transformation and back orders.

• Year-end backlog forecasted at $110-$130 million, impacting operating and EBITDA margins by ~140 basis points.

• International expansion start-up costs to drag margins by ~200 basis points in 2024.

• Adjusted capital expenditures for fiscal 2024 projected at $250–$300 million, focused on growth and expansion.