We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
RH Stock Down on Q2 Earnings and Revenue Miss, Guidance Lowered
Read MoreHide Full Article
Key Takeaways
RH posted Q2 EPS of $2.93, missing estimates but rising from $1.69 a year earlier.
Q2 revenue grew 8.3% to $899M, with RH and Waterworks segments driving gains.
Paris expansion boosted brand presence, while U.S. housing market weakness weighed.
RH (RH - Free Report) reported lower-than-expected second-quarter fiscal 2025 (ended Aug. 2, 2025) results, with both adjusted earnings and net revenues missing the Zacks Consensus Estimate. Meanwhile, on a year-over-year basis, both the top and bottom lines increased.
Shares of RH have dipped 6.2% in the after-hours trading session yesterday.
Despite reported lower-than-expected results, RH demonstrated resilience in the quarter, achieving solid revenue and demand growth amid a weak housing market and tariff disruptions. Performance was supported by the success of its immersive Gallery model, momentum in international expansion, operational efficiencies, and proactive supply chain adjustments, all of which reinforced its brand differentiation and market share gains.
However, the company continues to grapple with significant challenges, including escalating tariff uncertainty, delayed product launches, margin pressure from costly global expansion, and persistent weakness in the U.S. housing market. Broader risks tied to inflation, geopolitical instability, and a leveraged balance sheet further add to near-term pressures, even as management positions RH for long-term growth.
RH’s Q2 Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $2.93, which missed the Zacks Consensus Estimate of $3.19 by 8.2%. The reported figure compares favorably with the EPS of $1.69 reported in the same period last year.
Net revenues of $899.2 million marginally lagged the consensus mark of $906 million by 0.7% but improved 8.3% year over year. Net revenues from the RH segment increased 8.4% year over year to $846.7 million, while those for Waterworks rose 7.6% to $52.4 million.
Notably, demand rose 13.7%, despite what management described as “the worst housing market in almost 50 years.” On a two-year basis, revenues were up 12% and demand increased 21%, underscoring market share gains even against a weak housing backdrop.
RH’s Margin Highlights
The adjusted gross margin expanded 80 basis points (bps) to 46% in the reported quarter.
Adjusted Selling, general & administrative expenses (as a percentage of total net revenues) declined 260 bps to 30.9% year over year.
Adjusted operating margin expanded 340 bps year over year to 15.1%. Moreover, adjusted EBITDA increased 30% year over year to $185 million for the quarter and adjusted EBITDA margin expanded 340 bps to 20.6%.
RH’s Balance Sheet & Cash Flow
As of Aug. 2, 2025, RH’s cash and cash equivalents were $34.6 million, up from $30.4 million at the end of fiscal 2024. The company ended the second quarter of fiscal 2025 with merchandise inventories worth $957 million compared with $1.02 billion at the end of fiscal 2024.
RH ended the quarter with a net debt of $2.5 billion and a net debt-to-adjusted EBITDA ratio of 4.2x.
Net cash provided by operating activities was $224.3 million as of the first six months of fiscal 2025 compared with $67.3 million in the year-ago period. Free cash flow was $80.7 million against a negative $37.9 million reported in the year-ago period.
Capital expenditures, as of Aug. 2, 2025, were $109.6 million during the first half of fiscal 2025, down from $115.3 million in the year-ago period.
RH Unveils Q3 View
The company expects the quarterly net revenues to grow between 8% and 10% year over year.
Adjusted operating margin is expected to be in the range of 12-13%, down from 15% reported in the prior-year quarter.
Adjusted EBITDA margin is forecasted to be between 18% and 19%, down from 20.8% reported in the prior-year quarter.
RH Revised Fiscal 2025 Guidance
For the fiscal year, RH lowered the expectations for revenue growth between 9% and 11% (prior expectation was 10% and 13%).
Adjusted operating margin is now expected to be between 13% and 14% (prior expectation was 14% and 15%), up from 11.3% reported in fiscal 2024.
Adjusted EBITDA margin is expected to be between 19% and 20% (prior expectation was 20% and 21%), up from 16.9% reported last year.
RH lowered the outer range of free cash flow; now it is expected to be between $250 million and $300 million.
RH’s Zacks Rank & Key Picks
RH currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Zacks Consumer Staples sector.
It has a trailing four-quarter negative earnings surprise of 42.1%, on average. The company’s shares have lost 23.8% year to date. The Zacks Consensus Estimate for ARKO’s 2025 sales implies a decrease of 11.4% while EPS implies an increase of 30.8% from the prior-year levels.
Village Farms International (VFF - Free Report) currently flaunts a Zacks Rank #1. It delivered a trailing four-quarter earnings surprise of 122.2%, on average. The stock has soared 229.5% year to date.
The consensus estimate for Village Farms International’s 2025 sales indicates a decrease of 30.2% and EPS imply an increase of 137.5% from the prior-year levels.
Grocery Outlet Holding Corp. (GO - Free Report) currently carries a Zacks Rank #2 (Buy). It delivered a trailing four-quarter earnings surprise of 28.2%, on average. The stock has risen 12.9% year to date.
The consensus estimate for Grocery Outlet’s 2025 sales indicates an increase of 8.3% while EPS reflects a 1.3% decline from a year ago.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
RH Stock Down on Q2 Earnings and Revenue Miss, Guidance Lowered
Key Takeaways
RH (RH - Free Report) reported lower-than-expected second-quarter fiscal 2025 (ended Aug. 2, 2025) results, with both adjusted earnings and net revenues missing the Zacks Consensus Estimate. Meanwhile, on a year-over-year basis, both the top and bottom lines increased.
Shares of RH have dipped 6.2% in the after-hours trading session yesterday.
Despite reported lower-than-expected results, RH demonstrated resilience in the quarter, achieving solid revenue and demand growth amid a weak housing market and tariff disruptions. Performance was supported by the success of its immersive Gallery model, momentum in international expansion, operational efficiencies, and proactive supply chain adjustments, all of which reinforced its brand differentiation and market share gains.
However, the company continues to grapple with significant challenges, including escalating tariff uncertainty, delayed product launches, margin pressure from costly global expansion, and persistent weakness in the U.S. housing market. Broader risks tied to inflation, geopolitical instability, and a leveraged balance sheet further add to near-term pressures, even as management positions RH for long-term growth.
RH’s Q2 Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $2.93, which missed the Zacks Consensus Estimate of $3.19 by 8.2%. The reported figure compares favorably with the EPS of $1.69 reported in the same period last year.
Net revenues of $899.2 million marginally lagged the consensus mark of $906 million by 0.7% but improved 8.3% year over year. Net revenues from the RH segment increased 8.4% year over year to $846.7 million, while those for Waterworks rose 7.6% to $52.4 million.
Notably, demand rose 13.7%, despite what management described as “the worst housing market in almost 50 years.” On a two-year basis, revenues were up 12% and demand increased 21%, underscoring market share gains even against a weak housing backdrop.
RH’s Margin Highlights
The adjusted gross margin expanded 80 basis points (bps) to 46% in the reported quarter.
Adjusted Selling, general & administrative expenses (as a percentage of total net revenues) declined 260 bps to 30.9% year over year.
Adjusted operating margin expanded 340 bps year over year to 15.1%. Moreover, adjusted EBITDA increased 30% year over year to $185 million for the quarter and adjusted EBITDA margin expanded 340 bps to 20.6%.
RH’s Balance Sheet & Cash Flow
As of Aug. 2, 2025, RH’s cash and cash equivalents were $34.6 million, up from $30.4 million at the end of fiscal 2024. The company ended the second quarter of fiscal 2025 with merchandise inventories worth $957 million compared with $1.02 billion at the end of fiscal 2024.
RH ended the quarter with a net debt of $2.5 billion and a net debt-to-adjusted EBITDA ratio of 4.2x.
Net cash provided by operating activities was $224.3 million as of the first six months of fiscal 2025 compared with $67.3 million in the year-ago period. Free cash flow was $80.7 million against a negative $37.9 million reported in the year-ago period.
Capital expenditures, as of Aug. 2, 2025, were $109.6 million during the first half of fiscal 2025, down from $115.3 million in the year-ago period.
RH Unveils Q3 View
The company expects the quarterly net revenues to grow between 8% and 10% year over year.
Adjusted operating margin is expected to be in the range of 12-13%, down from 15% reported in the prior-year quarter.
Adjusted EBITDA margin is forecasted to be between 18% and 19%, down from 20.8% reported in the prior-year quarter.
RH Revised Fiscal 2025 Guidance
For the fiscal year, RH lowered the expectations for revenue growth between 9% and 11% (prior expectation was 10% and 13%).
Adjusted operating margin is now expected to be between 13% and 14% (prior expectation was 14% and 15%), up from 11.3% reported in fiscal 2024.
Adjusted EBITDA margin is expected to be between 19% and 20% (prior expectation was 20% and 21%), up from 16.9% reported last year.
RH lowered the outer range of free cash flow; now it is expected to be between $250 million and $300 million.
RH’s Zacks Rank & Key Picks
RH currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Zacks Consumer Staples sector.
ARKO (ARKO - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
It has a trailing four-quarter negative earnings surprise of 42.1%, on average. The company’s shares have lost 23.8% year to date. The Zacks Consensus Estimate for ARKO’s 2025 sales implies a decrease of 11.4% while EPS implies an increase of 30.8% from the prior-year levels.
Village Farms International (VFF - Free Report) currently flaunts a Zacks Rank #1. It delivered a trailing four-quarter earnings surprise of 122.2%, on average. The stock has soared 229.5% year to date.
The consensus estimate for Village Farms International’s 2025 sales indicates a decrease of 30.2% and EPS imply an increase of 137.5% from the prior-year levels.
Grocery Outlet Holding Corp. (GO - Free Report) currently carries a Zacks Rank #2 (Buy). It delivered a trailing four-quarter earnings surprise of 28.2%, on average. The stock has risen 12.9% year to date.
The consensus estimate for Grocery Outlet’s 2025 sales indicates an increase of 8.3% while EPS reflects a 1.3% decline from a year ago.