Rh ((RH)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call from RH paints a picture of a company navigating both growth and challenges. The sentiment expressed during the call was one of optimism tempered by caution. While RH is experiencing strong growth and successful international expansions, it faces significant challenges due to ongoing and potential new tariffs. The positive growth metrics and achievements in Europe are encouraging, but the uncertainties and financial impacts of tariffs present clear challenges for the company.
Revenue and Demand Growth
RH reported a revenue increase of 8.4% and a demand increase of 13.7% year-over-year. This growth comes despite facing challenges such as tariff uncertainty and a weak housing market. The company’s ability to maintain strong demand highlights its resilience and strategic positioning in the market.
Net Income and Cash Flow
The company saw a significant increase in net income, which rose by 79%. Additionally, RH generated $81 million in free cash flow during the quarter. These financial metrics underscore the company’s robust financial health and operational efficiency.
European Expansion Success
RH’s European expansion efforts are yielding positive results. RH England experienced a 76% increase in gallery demand and a 34% rise in online demand. The recent launch of RH Paris has been successful, with strong initial traffic and a design pipeline that exceeded expectations.
Adjusted Operating Margin and EBITDA
The company’s adjusted operating margin increased to 15.1%, and adjusted EBITDA rose to 20.6%, both up by 340 basis points from the previous year. These improvements reflect RH’s effective cost management and operational strategies.
Tariff Challenges
The announcement of new furniture tariff investigations introduces uncertainty for RH. The company is facing a $30 million cost due to incremental tariffs expected in the second half of the year, which could impact its financial performance.
Delay in Product Launches
Due to tariff uncertainties, RH has delayed the launch of a new brand extension to Spring 2026, and the Fall Interiors Sourcebook has been delayed by eight weeks. These delays highlight the operational challenges posed by the tariff situation.
Reduced Guidance Due to Tariffs
RH has revised its fiscal 2025 guidance downward due to tariff-related dislocations, which are causing expected revenue shifts between quarters. This adjustment reflects the company’s cautious approach in navigating the uncertain tariff landscape.
Forward-Looking Guidance
Despite the challenges, RH remains optimistic about its growth prospects. The company projects revenue growth of 9% to 11% for fiscal 2025, with an adjusted operating margin of 13% to 14% and free cash flow between $250 million and $300 million. These projections indicate RH’s confidence in its strategic initiatives and global expansion plans, even amid tariff uncertainties.
In summary, RH’s earnings call highlights a company that is growing and expanding internationally but is also facing significant challenges due to tariffs. The overall sentiment is one of cautious optimism, with strong financial performance and strategic expansions balanced against the uncertainties of the tariff environment. Investors and market watchers will be keen to see how RH navigates these challenges in the coming quarters.