RH’s third quarter results were shaped by ongoing investments in international expansion and persistent tariff-related headwinds. Management attributed the 9% revenue growth to continued market share gains, particularly from fragmented design showrooms and regional high-end furniture stores, despite what CEO Gary Friedman described as “the worst housing market in almost fifty years.” The company’s ability to reduce inventory and generate positive free cash flow was also highlighted as a key operational achievement, even as higher-than-expected tariff costs impacted margins. Friedman noted, “Adjusted operating margin... was below the 12.5% midpoint of our guidance due to higher than forecasted tariff expense on prior period special order and backorder sales delivered in the quarter.”
Is now the time to buy RH? Find out in our full research report (it’s free for active Edge members).
RH (RH) Q3 CY2025 Highlights:
- Revenue: $883.8 million vs analyst estimates of $883.5 million (8.9% year-on-year growth, in line)
- Adjusted EPS: $1.71 vs analyst expectations of $2.16 (20.9% miss)
- Adjusted EBITDA: $155.8 million vs analyst estimates of $165.5 million (17.6% margin, 5.9% miss)
- Revenue Guidance for Q4 CY2025 is $873.3 million at the midpoint, below analyst estimates of $896.2 million
- Operating Margin: 12%, in line with the same quarter last year
- Locations: 131 at quarter end, up from 123 in the same quarter last year
- Same-Store Sales rose 2.9% year on year, in line with the same quarter last year
- Market Capitalization: $3.2 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From RH’s Q3 Earnings Call
- Steven Forbes (Guggenheim Securities) asked about the early performance of RH Paris and its influence on expectations for Milan and London. CEO Gary Friedman highlighted that RH Paris exceeded traffic projections and is informing future gallery rollouts.
- Max Rakhlenko (TD Cowen) inquired about customer price sensitivity following recent price increases linked to tariffs. Friedman responded that customers have largely accepted higher price points but noted ongoing monitoring of competitive pricing and tariff fairness.
- Max Rakhlenko (TD Cowen) also questioned the timing and impact of the upcoming product collection. Friedman described the new collection as a “ten-year growth driver” and emphasized its relevance to the luxury market’s largest architectural segment.
- Michael Lasser (UBS) asked if RH should slow its pace of strategic initiatives to enhance predictability and profitability. Friedman argued that maintaining ambition and investing through uncertainty are critical for long-term brand building.
- Simeon Gutman (Morgan Stanley) sought clarity on the sustainability of positive free cash flow amid unpredictable market conditions. CFO Jack Preston explained that inventory reduction and capex control provide flexibility but acknowledged ongoing external risks.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be watching (1) the ramp of RH’s new product collection and its reception at the Milan design fair, (2) the operational and financial performance of new international galleries, particularly in Europe, and (3) the company’s ability to manage ongoing tariff and supply chain volatility. Execution on hospitality integration and design services will also be critical markers of progress.
RH currently trades at $170.53, up from $152.75 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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