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In the last reported quarter, RH’s earnings and revenues missed the Zacks Consensus Estimate by 17.3% and 1.8%, respectively. Nonetheless, the top and bottom lines increased 10% and 119.4% on a year-over-year basis, respectively. The adjusted operating margin of 11.3% rose 220 basis points (bps), showing the company’s ability to expand profitability even amid challenging market conditions.
RH’s Earnings Surprise History
This leading luxury home furnishings retailer has surpassed earnings estimates once in the trailing four quarters and missed on the other three occasions, with an average negative surprise of 103.5%, as shown in the chart below.
Image Source: Zacks Investment Research
How are Estimates Placed for RH Stock?
For the quarter to be reported, the Zacks Consensus Estimate for loss per share has widened to 9 cents from 6 cents in the past 30 days. In the prior-year quarter, RH incurred a loss of 40 cents per share. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
The consensus estimate for revenues is pegged at $818.9 million, indicating a 12.6% rise from the year-ago quarter's reported figure.
What the Zacks Model Unveils for RH
Our proven model predicts an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: RH has an Earnings ESP of +9.80%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Although the company has been grappling with sluggish demand in the luxury home furnishings sector, which is closely tied to consumer sentiment and housing market trends, RH remains confident in its ability to sustain revenue growth, aided by ongoing strategic initiatives.
The company's product transformation plans for 2025, including the RH Outdoor and Interiors Sourcebooks, along with international expansion efforts, are likely to have contributed to fiscal first-quarter results. For the quarter, the company expects revenue to grow 12.5-13.5%.
From the margin perspective, RH anticipates the gross margin in the fiscal fourth quarter to be impacted by ongoing economic pressures, including higher costs associated with logistics, raw materials and promotional activities.
The company expects the adjusted operating margin between 6.5% and 7%, and the adjusted EBITDA margin between 12.5% and 13% in the to-be-reported quarter. In the year-ago quarter, the company recorded an adjusted operating margin of 6.5% and an adjusted EBITDA margin of 12.3%. Although the expected figures indicate a slight margin improvement, the outlook includes negative impacts of 160-200 bps on the operating margin due to start-up costs for international expansion.
RH Stock’s Price Performance
Shares of the company have lost 18.2% over the past month. RH’s prospects are hurting from a weak sales environment in home furnishings, softness in the U.S. housing market, mortgage rate fluctuations and uncertainties related to newly imposed tariffs.
Image Source: Zacks Investment Research
The broader industry weakness is evident as Hoya Capital Housing ETF (HOMZ - Free Report) has declined just 2.3% in the same period, which has 20% exposure in the home improvement and furnishings segment. Meanwhile, other industry players like The Lovesac Company (LOVE - Free Report) , Williams-Sonoma, Inc. (WSM - Free Report) and Haverty Furniture Companies, Inc. (HVT - Free Report) have recorded declines during the same period. In the said time frame, Lovesac, Williams-Sonoma and Haverty Furniture have lost 3.1%, 9.8% and 3.3%, respectively.
RH Trades at a Discount
From a valuation standpoint, the company is currently trading at 15.02X forward 12-month price-to-earnings (P/E). RH is trading at a discount to industry peers like Lovesac and Williams-Sonoma, which are trading at 19.31X and 18.03X, respectively. Meanwhile, HavertyFurniture is trading lower at 11.26X.
Investment Thoughts on RH
While RH faces challenges from weak demand, housing market softness, and cost pressures, its ongoing product transformation, international expansion, and revenue growth outlook offer some support. It may be prudent for investors to monitor the stock for further updates. Those already holding shares can consider maintaining their position, given the company’s ongoing efforts to strengthen the business.
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RH Gears Up to Post Q1 Earnings: Buy or Hold Ahead of Results?
Key Takeaways
RH (RH - Free Report) is scheduled to report first-quarter fiscal 2025 results on June 12, after the closing bell.
In the last reported quarter, RH’s earnings and revenues missed the Zacks Consensus Estimate by 17.3% and 1.8%, respectively. Nonetheless, the top and bottom lines increased 10% and 119.4% on a year-over-year basis, respectively. The adjusted operating margin of 11.3% rose 220 basis points (bps), showing the company’s ability to expand profitability even amid challenging market conditions.
RH’s Earnings Surprise History
This leading luxury home furnishings retailer has surpassed earnings estimates once in the trailing four quarters and missed on the other three occasions, with an average negative surprise of 103.5%, as shown in the chart below.
Image Source: Zacks Investment Research
How are Estimates Placed for RH Stock?
For the quarter to be reported, the Zacks Consensus Estimate for loss per share has widened to 9 cents from 6 cents in the past 30 days. In the prior-year quarter, RH incurred a loss of 40 cents per share. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
RH Price and EPS Surprise
RH price-eps-surprise | RH Quote
The consensus estimate for revenues is pegged at $818.9 million, indicating a 12.6% rise from the year-ago quarter's reported figure.
What the Zacks Model Unveils for RH
Our proven model predicts an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: RH has an Earnings ESP of +9.80%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company has a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Note Ahead of RH’s Q1 Results
Although the company has been grappling with sluggish demand in the luxury home furnishings sector, which is closely tied to consumer sentiment and housing market trends, RH remains confident in its ability to sustain revenue growth, aided by ongoing strategic initiatives.
The company's product transformation plans for 2025, including the RH Outdoor and Interiors Sourcebooks, along with international expansion efforts, are likely to have contributed to fiscal first-quarter results. For the quarter, the company expects revenue to grow 12.5-13.5%.
From the margin perspective, RH anticipates the gross margin in the fiscal fourth quarter to be impacted by ongoing economic pressures, including higher costs associated with logistics, raw materials and promotional activities.
The company expects the adjusted operating margin between 6.5% and 7%, and the adjusted EBITDA margin between 12.5% and 13% in the to-be-reported quarter. In the year-ago quarter, the company recorded an adjusted operating margin of 6.5% and an adjusted EBITDA margin of 12.3%. Although the expected figures indicate a slight margin improvement, the outlook includes negative impacts of 160-200 bps on the operating margin due to start-up costs for international expansion.
RH Stock’s Price Performance
Shares of the company have lost 18.2% over the past month. RH’s prospects are hurting from a weak sales environment in home furnishings, softness in the U.S. housing market, mortgage rate fluctuations and uncertainties related to newly imposed tariffs.
Image Source: Zacks Investment Research
The broader industry weakness is evident as Hoya Capital Housing ETF (HOMZ - Free Report) has declined just 2.3% in the same period, which has 20% exposure in the home improvement and furnishings segment. Meanwhile, other industry players like The Lovesac Company (LOVE - Free Report) , Williams-Sonoma, Inc. (WSM - Free Report) and Haverty Furniture Companies, Inc. (HVT - Free Report) have recorded declines during the same period. In the said time frame, Lovesac, Williams-Sonoma and Haverty Furniture have lost 3.1%, 9.8% and 3.3%, respectively.
RH Trades at a Discount
From a valuation standpoint, the company is currently trading at 15.02X forward 12-month price-to-earnings (P/E). RH is trading at a discount to industry peers like Lovesac and Williams-Sonoma, which are trading at 19.31X and 18.03X, respectively. Meanwhile, Haverty Furniture is trading lower at 11.26X.
Investment Thoughts on RH
While RH faces challenges from weak demand, housing market softness, and cost pressures, its ongoing product transformation, international expansion, and revenue growth outlook offer some support. It may be prudent for investors to monitor the stock for further updates. Those already holding shares can consider maintaining their position, given the company’s ongoing efforts to strengthen the business.