Company Reports

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories, including modern, estates, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the store buildouts accelerate, category expansions launch, loyalty remains compelling, and pricing remains consistent. However, the diverse end-market expansions that RH is pursuing could make it tough to gain a competitive edge. Still, opportunities in product line expansions, international markets, and the $200 billion hotel industry should support 8% top-line growth longer term.

RH's second-quarter sales rose 2.6% to $922 million, above the firm's guidance for 0.5%-2.5% growth. Adjusted EBITDA margin fell 120 basis points to 19.4%, including a 600-basis-point tariff refund benefit. Excluding the refund, RH beat the high end of its EBITDA outlook by 40 basis points.

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories, including modern, estates, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the store buildouts accelerate, category expansions launch, loyalty remains compelling, and pricing remains consistent. However, the diverse end-market expansions that RH is pursuing could make it tough to gain a competitive edge. Still, opportunities in international markets, the $200 billion hotel industry, and the $1.7 trillion domestic housing market should support 9% top-line growth longer term.

RH's first-quarter sales fell 1.7% to $800 million, hurt by an increase of $75 million in backorder and special-order balances. An adjusted EBITDA margin of 7% (down 600 basis points) was primarily pressured by 450 basis points of preopening and startup costs for international expansion.

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories, including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the store buildouts accelerate, category expansions launch, loyalty remains compelling, and pricing remains consistent. However, the diverse end-market expansions that RH is pursuing could make it tough to gain a competitive edge. Still, opportunities in international markets, the $200 billion hotel industry, and the $1.7 trillion domestic housing market should support 8% top-line growth longer term.

RH's fourth-quarter sales growth of 3.7% and operating margin of 11.5% were behind its outlook of 7%-8% and 12.5%-13.5%, respectively. Further, its first-quarter forecast of a 2%-4% sales decline and a 5.5%-6.6% EBITDA margin indicates demand variability and high international costs will persist.

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories, including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the store buildouts accelerate, category expansions launch, loyalty remains compelling, and pricing remains consistent. However, the diverse end-market expansions that RH is pursuing could make it tough to gain a competitive edge. Still, opportunities in international markets, the $200 billion hotel industry, and the $1.7 trillion domestic housing market should support 8% top-line growth longer term.

RH's third-quarter sales grew 9%, to $884 million, but the adjusted operating margin contracted 340 basis points to 11.6%, hurt by higher-than-expected tariff costs and opening expenses.

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the store buildouts accelerate, category expansions launch, loyalty remains compelling, and pricing remains consistent. However, the diverse end-market expansions that RH is pursuing could make it tough to gain a competitive edge. Still, opportunities in international markets, the $200 billion hotel industry, and the $1.7 trillion domestic housing market should support 8% top-line growth longer term.

Second-quarter sales of $899 million and adjusted operating margin of 15.1% were in line with RH's guidance. The third-quarter forecast for a 12%-13% adjusted operating margin indicates a drop in profit performance before a return to operating margin expansion.

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the pace of store buildouts accelerates, category expansions launch, loyalty remains compelling, and pricing remains consistent, but the diverse end-market expansions that RH is pursuing could make it tough to gain a competitive edge. Still, opportunities in international markets, the $200 billion hotel industry, and the $1.7 trillion domestic housing market should support 8% top-line growth longer term.

RH increased sales by 12% to $814 million and posted an adjusted operating margin of 7% in the first quarter of fiscal 2025. The firm reaffirmed its full-year guidance for 10%-13% sales growth and a 14%-15% operating margin.

RH has gained share in the fragmented $136 billion (per US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. It has broadened its brand awareness by expanding into underserved categories including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the pace of store buildouts accelerates, category expansions launch, and pricing remains consistent, but the diverse end-market expansions RH is pursuing could make it tough to capture a brand or cost advantage. Entry into international markets, the $200 billion hotel industry, and $1.7 trillion domestic housing market should support 8% top-line growth longer term.

RH reported robust fourth-quarter sales growth of 18%, but lower-than-expected profitability, posting a 17% adjusted operating margin. The firm's inaugural 2025 outlook for 10%-13% sales growth and a 14%-15% operating margin indicate slowing top line, but improving profit metrics are set to ensue.

RH has gained share in the fragmented $134 billion (US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from global artisans. The firm has broadened its brand awareness by expanding into underserved categories including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should improve as the pace of store buildouts accelerates, category expansions launch, and pricing remains consistent, but the diverse end-market expansions RH is pursuing could make it tough to capture a brand or cost advantage. Entry into international markets, the $200 billion hotel industry, and $1.7 trillion domestic housing market should support 9% top-line growth longer term.

After market close on Dec. 12, RH's shares rallied 18% as sales began to catch consumer demand, benefiting from a robust slate of new offerings that resonate with consumers.

RH has gained share in the fragmented $134 billion (US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from specialized global artisans. The firm has broadened its brand awareness by expanding into underserved categories including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should remain stable given the pace of tailored store buildouts, category expansions, and pricing consistency, but the diverse end-market expansions RH is pursuing could make it tough to capture a brand or cost advantage. Entry into international markets, the $200 billion hotel industry, and $1.7 trillion domestic housing market should support 8% top-line growth longer term.

No-moat RH appears to have hit the trough of its earning cycle in its second quarter, with the back half of 2024 poised for sales and EPS growth. This progress sent shares up nearly 20% in Sept. 12 after-hours trading, to modestly above our $295 per share fair value estimate. On the top line, RH continues to buck consumer caution trends, with sales rising 4% during the quarter and demand trends accelerating through the period and into the third quarter. With August demand up 12%, RH pointed to expected sales growth of 7%-9% in the third quarter, in line with our preresults estimate (recall sales are expected to lag demand orders by 4%-8% this year). Moreover, despite the full-year sales growth outlook falling to 5%-7% (from 8%-10% prior), revenue acceleration should continue through year-end—the low end of guidance implies a low-double-digit rise in the fourth quarter. We think this is nothing short of impressive given that the housing market has gained little traction since the spring, with July’s existing home sales volumes still 34% lower than three years ago.

RH has gained share in the fragmented $134 billion (US Census) domestic furniture and home furnishing market in recent years, curating differentiated offerings from specialized global artisans. The firm has broadened its brand awareness by expanding into underserved categories including modern, teen, and hospitality, where few peers nationally compete, leading to incremental market share gains from boutique competitors. Brand equity should remain stable given the pace of tailored store buildouts, category expansions, and pricing consistency, but the diverse end-market expansions RH is pursuing could make it tough to capture a brand or cost advantage. Entry into international markets, the $200 billion hotel industry, and $1.7 trillion domestic housing market should support 8% top line growth longer term.

Shares of no-moat RH tumbled more than 10% in June 13 postmarket trading on weaker-than-anticipated first-quarter profits and a second-quarter outlook calling for operating margin pressure. While first-quarter sales of $727 million were in line with our forecast, the adjusted operating margin of 6.5% was about 50 basis points below our estimate and 840 basis points below last year. However, the second-quarter outlook was more disappointing, including sales growth of 3%-4%, well below our 10% projection, and an operating margin of 11%-12%. Like the first-quarter result, the latter is more than 800 basis points lower than in the same period in 2023. Unfortunately, with just one sourcebook mailed during the first quarter, the benefit of robust new collections across the remaining books to be sent is unlikely to have a material sales or profit benefit until the second half of 2024. Adding near-term pressure is a US housing market that continues to face friction as mortgage rates are currently below 7%. We believe investors remain concerned that a weak housing market could persist into next year, hindering progress on profit at RH.