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RH Q3 Earnings Miss Estimates, Revenues Beat, FY25 Guidance Lowered
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Key Takeaways
RH posted mixed Q3 results with earnings falling short of estimates, while revenues rose YoY.
Revenue growth was supported by strength in Galleries, hospitality gains and early international traction.
Tariffs, housing-market weakness and rising global expansion costs continued to pressure RH's margins.
RH (RH - Free Report) reported mixed third-quarter fiscal 2025 (ended Nov. 1, 2025) results, with adjusted earnings missing the Zacks Consensus Estimate and declining on a year-over-year basis. Meanwhile, net revenues beat the estimate and increased from the prior year's reported figure.
Shares of RH gained 3.1% in the after-hours trading session yesterday.
RH demonstrated resilience in the quarter, achieving solid revenue growth despite one of the weakest housing backdrops in decades and persistent tariff-related disruptions. Performance was supported by strong momentum across its immersive Gallery model, rapid growth in its hospitality business, early international traction and the successful launch of RH Paris. The expansion of its interior design services and ongoing investment in new product development also helped strengthen the brand’s long-term growth prospects.
However, tariffs continue to elevate costs, delay products and pressure margins, while rising global expansion expenses and persistent housing-market weakness compound near-term challenges. Even so, management emphasized that RH continues to capture meaningful market share and remains committed to investments that they believe will drive long-term strategic separation. Considering the recent trend, RH trimmed its fiscal 2025 guidance.
RH’s Q3 Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $1.71, which missed the Zacks Consensus Estimate of $2.13 by 19.7%. In the year-ago quarter, it had reported adjusted EPS of $2.48.
Net revenues of $883.8 million surpassed the consensus mark of $882.9 million by 0.1% and rose 8.9% year over year. Net revenues from the RH segment increased 8.8% year over year to $835.8 million, while those for Waterworks rose 9.9% to $48 million.
Notably, on a two-year basis, revenues were up 18%, despite what management described as “the worst housing market in almost 50 years, and the polarizing impact of tariffs.” This performance underscores the brand’s continued strength and disruptive positioning amid a challenging housing environment.
RH’s Margin Highlights
The adjusted gross margin contracted 40 basis points (bps) to 44.1% in the reported quarter.
Adjusted Selling, general & administrative expenses (as a percentage of total net revenues) increased 300 bps to 32.5% year over year.
Adjusted operating margin contracted 340 bps year over year to 11.6%. Moreover, adjusted EBITDA decreased 7.6% year over year to $155.8 million for the quarter and adjusted EBITDA margin contracted 320 bps to 17.6%.
RH’s Balance Sheet & Cash Flow
As of Nov. 1, 2025, RH’s cash and cash equivalents were $43.1 million, up from $30.4 million at the end of fiscal 2024. The company ended the third quarter of fiscal 2025 with merchandise inventories worth $875 million compared with $1.02 billion at the end of fiscal 2024.
RH ended the quarter with a net debt of $2.4 billion and a net debt-to-adjusted EBITDA ratio of 4.1x.
Net cash provided by operating activities was $356.2 million as of the first nine months of fiscal 2025 compared with $35.9 million in the year-ago period. Free cash flow was $83 million against a negative $96 million reported in the year-ago period.
Capital expenditures, as of Nov. 1, 2025, were $158.4 million during the first nine months of fiscal 2025, down from $179.9 million in the year-ago period.
RH Unveils Q4 View
For fourth-quarter fiscal 2025, the company expects the quarterly net revenues to grow between 7% and 8% year over year.
Adjusted operating margin is expected to be in the range of 12.5-13.5%, up from 11.3% reported in the prior-year quarter.
Adjusted EBITDA margin is forecasted to be between 18.7% and 19.6%, up from 17.1% reported in the prior-year quarter.
Trimmed FY25 Guidance by RH
For fiscal 2025, RH lowered the higher end of the earlier guided range for revenue growth and is now expecting between 9% and 9.2% (prior expectation was 9% and 11%).
Adjusted operating margin is now expected to be between 11.6% and 11.9% (prior expectation was 13% and 14%), up from 11.3% reported in fiscal 2024.
Adjusted EBITDA margin is expected to be between 17.6% and 18% (prior expectation was 19% and 20%), up from 16.9% reported last year.
RH is still expecting free cash flow to be between $250 million and $300 million.
Here are some companies from the Zacks Consumer Staples sector that have released their respective earnings in recent times:
Williams-Sonoma Inc. (WSM - Free Report) reported better-than-expected results for the third quarter of fiscal 2025 (ended Nov. 2), with earnings and net revenues beating the Zacks Consensus Estimate and increasing year over year.
Williams-Sonoma’s performance reflects benefits realized from an effective operating model, diversified brand portfolios and a robust e-commerce channel. For fiscal 2025, WSM holds onto its prior net revenue and comps outlook while increasing the operating margin view. Going forward, the company remains focused on product development and customer service while navigating ongoing macroeconomic and geopolitical uncertainties.
The Home Depot Inc. (HD - Free Report) reported third-quarter fiscal 2025 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line missed the same. However, sales and EPS improved year over year.
Home Depot reported lower-than-expected EPS, primarily reflecting the absence of storm-related activity in the fiscal third quarter, which reduced demand in several key categories. Persistent consumer uncertainty and ongoing housing market pressure continued to weigh on home improvement spending, limiting Home Depot’s ability to capture incremental demand in the quarter. For fiscal 2025, Home Depot expects sales to increase 3% year over year, with EPS to decline 6%.
Wayfair Inc. (W - Free Report) reported third-quarter 2025 non-GAAP EPS of 70 cents, which beat the Zacks Consensus Estimate by 52.17% and increased 218.2% year over year. Net revenues for the third quarter of 2025 rose 8.1% year over year to $3.1 billion. Excluding the impact of Wayfair’s exit from Germany, revenue growth stood at about 9% year over year. The figure beat the Zacks Consensus Estimate by 3.62%.
For the fourth quarter of 2025, Wayfair expects revenues to grow in the mid-single digits year over year, with gross margin to range between 30% and 31%. The company expects customer service and merchant fees to remain just below 4% of net revenues, while advertising expenses are projected to represent 11-12% of net revenues in the fourth quarter.
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RH Q3 Earnings Miss Estimates, Revenues Beat, FY25 Guidance Lowered
Key Takeaways
RH (RH - Free Report) reported mixed third-quarter fiscal 2025 (ended Nov. 1, 2025) results, with adjusted earnings missing the Zacks Consensus Estimate and declining on a year-over-year basis. Meanwhile, net revenues beat the estimate and increased from the prior year's reported figure.
Shares of RH gained 3.1% in the after-hours trading session yesterday.
RH demonstrated resilience in the quarter, achieving solid revenue growth despite one of the weakest housing backdrops in decades and persistent tariff-related disruptions. Performance was supported by strong momentum across its immersive Gallery model, rapid growth in its hospitality business, early international traction and the successful launch of RH Paris. The expansion of its interior design services and ongoing investment in new product development also helped strengthen the brand’s long-term growth prospects.
However, tariffs continue to elevate costs, delay products and pressure margins, while rising global expansion expenses and persistent housing-market weakness compound near-term challenges. Even so, management emphasized that RH continues to capture meaningful market share and remains committed to investments that they believe will drive long-term strategic separation. Considering the recent trend, RH trimmed its fiscal 2025 guidance.
RH’s Q3 Earnings & Revenue Discussion
The company reported adjusted earnings per share (EPS) of $1.71, which missed the Zacks Consensus Estimate of $2.13 by 19.7%. In the year-ago quarter, it had reported adjusted EPS of $2.48.
RH Price, Consensus and EPS Surprise
RH price-consensus-eps-surprise-chart | RH Quote
Net revenues of $883.8 million surpassed the consensus mark of $882.9 million by 0.1% and rose 8.9% year over year. Net revenues from the RH segment increased 8.8% year over year to $835.8 million, while those for Waterworks rose 9.9% to $48 million.
Notably, on a two-year basis, revenues were up 18%, despite what management described as “the worst housing market in almost 50 years, and the polarizing impact of tariffs.” This performance underscores the brand’s continued strength and disruptive positioning amid a challenging housing environment.
RH’s Margin Highlights
The adjusted gross margin contracted 40 basis points (bps) to 44.1% in the reported quarter.
Adjusted Selling, general & administrative expenses (as a percentage of total net revenues) increased 300 bps to 32.5% year over year.
Adjusted operating margin contracted 340 bps year over year to 11.6%. Moreover, adjusted EBITDA decreased 7.6% year over year to $155.8 million for the quarter and adjusted EBITDA margin contracted 320 bps to 17.6%.
RH’s Balance Sheet & Cash Flow
As of Nov. 1, 2025, RH’s cash and cash equivalents were $43.1 million, up from $30.4 million at the end of fiscal 2024. The company ended the third quarter of fiscal 2025 with merchandise inventories worth $875 million compared with $1.02 billion at the end of fiscal 2024.
RH ended the quarter with a net debt of $2.4 billion and a net debt-to-adjusted EBITDA ratio of 4.1x.
Net cash provided by operating activities was $356.2 million as of the first nine months of fiscal 2025 compared with $35.9 million in the year-ago period. Free cash flow was $83 million against a negative $96 million reported in the year-ago period.
Capital expenditures, as of Nov. 1, 2025, were $158.4 million during the first nine months of fiscal 2025, down from $179.9 million in the year-ago period.
RH Unveils Q4 View
For fourth-quarter fiscal 2025, the company expects the quarterly net revenues to grow between 7% and 8% year over year.
Adjusted operating margin is expected to be in the range of 12.5-13.5%, up from 11.3% reported in the prior-year quarter.
Adjusted EBITDA margin is forecasted to be between 18.7% and 19.6%, up from 17.1% reported in the prior-year quarter.
Trimmed FY25 Guidance by RH
For fiscal 2025, RH lowered the higher end of the earlier guided range for revenue growth and is now expecting between 9% and 9.2% (prior expectation was 9% and 11%).
Adjusted operating margin is now expected to be between 11.6% and 11.9% (prior expectation was 13% and 14%), up from 11.3% reported in fiscal 2024.
Adjusted EBITDA margin is expected to be between 17.6% and 18% (prior expectation was 19% and 20%), up from 16.9% reported last year.
RH is still expecting free cash flow to be between $250 million and $300 million.
RH’s Zacks Rank & Peer Releases
RH currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are some companies from the Zacks Consumer Staples sector that have released their respective earnings in recent times:
Williams-Sonoma Inc. (WSM - Free Report) reported better-than-expected results for the third quarter of fiscal 2025 (ended Nov. 2), with earnings and net revenues beating the Zacks Consensus Estimate and increasing year over year.
Williams-Sonoma’s performance reflects benefits realized from an effective operating model, diversified brand portfolios and a robust e-commerce channel. For fiscal 2025, WSM holds onto its prior net revenue and comps outlook while increasing the operating margin view. Going forward, the company remains focused on product development and customer service while navigating ongoing macroeconomic and geopolitical uncertainties.
The Home Depot Inc. (HD - Free Report) reported third-quarter fiscal 2025 results, wherein the top line beat the Zacks Consensus Estimate, while the bottom line missed the same. However, sales and EPS improved year over year.
Home Depot reported lower-than-expected EPS, primarily reflecting the absence of storm-related activity in the fiscal third quarter, which reduced demand in several key categories. Persistent consumer uncertainty and ongoing housing market pressure continued to weigh on home improvement spending, limiting Home Depot’s ability to capture incremental demand in the quarter. For fiscal 2025, Home Depot expects sales to increase 3% year over year, with EPS to decline 6%.
Wayfair Inc. (W - Free Report) reported third-quarter 2025 non-GAAP EPS of 70 cents, which beat the Zacks Consensus Estimate by 52.17% and increased 218.2% year over year. Net revenues for the third quarter of 2025 rose 8.1% year over year to $3.1 billion. Excluding the impact of Wayfair’s exit from Germany, revenue growth stood at about 9% year over year. The figure beat the Zacks Consensus Estimate by 3.62%.
For the fourth quarter of 2025, Wayfair expects revenues to grow in the mid-single digits year over year, with gross margin to range between 30% and 31%. The company expects customer service and merchant fees to remain just below 4% of net revenues, while advertising expenses are projected to represent 11-12% of net revenues in the fourth quarter.