RH Earnings: RH Stock Soars 18% on Strong Forward Guidance
Shares of RH (RH) are up 18% after the high-end furniture retailer reported a strong first-quarter profit and reaffirmed its full-year outlook.
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California-based RH, formerly known as Restoration Hardware, reported adjusted earnings per share (EPS) of $0.13, which was well ahead of the Wall Street consensus that called for a loss of -$0.07. Revenue in the first three months of the year totaled $814 million, which was slightly below estimates of $818 million.
In terms of guidance, RH maintained its Fiscal 2025 outlook that calls for revenue growth of 10% to 13%, and a margin of up to 21%. Management said they also anticipate $350 million in free cash flow this year. In the current second-quarter, revenue is forecast to grow between 8% and 10%, even as the company absorbs near-term pressure from import tariffs and international expansion costs.
RH's profitability. Source: Main Street Data
Difficult Housing Market
In the earnings release, management said they are operating in 'the worst housing market in almost 50 years.' Still, RH managed to increase its net revenues 12% year-over-year while maintaining 7% adjusted operating margins. CEO Gary Friedman said RH's expanding physical footprint, especially in Europe, continues to drive the company forward.
International performance remains a bright spot for the furniture maker. RH England reported a 47% demand increase in Q1, while RH Munich and Düsseldorf in Germany saw combined growth of 60%. Customer demand in Paris, London, and Milan is expected to grow following gallery openings in those cities over the next year.
While tariff risks remain, RH's management team said they are responding by shifting much of the company's sourcing out of China. RH stock has declined 55% this year.
Is RH Stock a Buy?
The stock of RH has a consensus Moderate Buy rating among 17 Wall Street analysts. That rating is based on 10 Buy, six Hold, and one Sell recommendations issued in the last three months. The average RH price target of $268.47 implies 51.79% upside from current levels. These ratings are likely to change after the company's financial results.
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