Sign in
R

RH (RH)·Q3 2025 Earnings Summary

Executive Summary

  • RH has not yet reported Q3 fiscal 2025 results as of Nov 20, 2025; management guided for Q3 revenue growth of 8%–10% with adjusted operating margin of 12%–13% and adjusted EBITDA margin of 18%–19% (guidance provided with Q2 results). Q3 earnings are expected around Dec 11, 2025 based on third‑party investor relations calendars .
  • Through Q2 FY25, revenue momentum and margin expansion were strong: Q2 revenue up 8.4% to $899.2M, adjusted operating margin 15.1% (+340 bps y/y), adjusted EBITDA margin 20.6% (+340 bps y/y), and free cash flow ~$80.7M .
  • Management flagged two key Q3 swing factors: ~$40M of revenue shifting out of Q3 into Q4/Q1 2026 due to a delayed fall Sourcebook, and ~$30M of incremental H2 tariff cost net of mitigation—both embedded in the outlook .
  • Europe is a major growth vector: RH Paris opened Sept 5 with traffic exceeding RH New York “day by day”; RH England is tracking ~$46M of demand in its second full year; London and Milan slated for spring 2026, with near‑term international startup cost drag (approx. -270 bps to Q3 op margin) .
  • Stock catalysts into Q3 print: execution vs guidance given the $40M revenue shift, tariff pass‑through/pricing cadence, and early read‑through from RH Paris on international scaling and four‑wall economics -.

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and cash generation: Q2 adjusted operating margin 15.1% and adjusted EBITDA margin 20.6% (both +340 bps y/y); free cash flow ~$80.7M .
  • Early European momentum: RH Paris launched to strong traffic and design pipeline; RH England demand growth robust (gallery +76% in Q2; projected ~$37–$39M gallery demand plus ~$8M online in FY25) .
  • Strategic narrative intact: Management reiterated platform elevation and multi‑year global expansion plans (7–9 new galleries per year plus 2–3 studios/concepts), with Europe and the Middle East seen as enabling a potential doubling of RH over 5–7 years .

What Went Wrong

  • Tariff headwinds intensifying: H2 outlook includes ~$30M incremental tariff costs net of mitigation; management warned further tariff actions could drive industry‑wide inflation and consolidation .
  • Q3 revenue timing shift: ~8‑week delay to Fall Interiors Sourcebook (pricing finalization amid tariff uncertainty) pushes ~$40M of revenue from Q3 to Q4/Q1 2026, creating near‑term top‑line drag .
  • International startup drag: Q3 guide embeds ~-270 bps op margin impact from international expansion and RH Paris opening; execution complexity across supply chain, compliance and localized assortments remains in focus -.

Financial Results

Note: Q3 FY25 has not been reported as of Nov 20, 2025; results below reflect prior quarters and Q3 guidance.

MetricQ3 2024Q1 2025Q2 2025Q3 2025 (Status/Guide)
Revenue ($USD Millions)$812 $813.9 $899.2 Pending; guide +8%–10% y/y
GAAP Diluted EPS ($)n/a in PR $0.13 (reported) $2.62 Pending
Adjusted Diluted EPS ($)n/a in PR n/a disclosed in letter excerpt $2.93 Pending
Adjusted Operating Margin %15.0% 7.0% 15.1% Guide 12%–13%
Adjusted EBITDA Margin %20.8% 13.1% 20.6% Guide 18%–19%

KPIs and Operating Drivers

KPIQ3 2024Q1 2025Q2 2025
Demand growth (y/y)+13% total; RH Brand +14% not disclosed in excerpt +13.7%
Free Cash Flow ($M)n/a~$34 ~$80.7
RH Paris/Europen/an/aRH Paris opened Sept 5; strong traffic and design pipeline; RH England FY25 gallery ~$37–$39M + ~$8M online

Other Q3‑period press releases of note

  • RH Manhasset gallery opening (Americana, October 6, 2025) .
  • CEO letter announcing RH Paris opening (Sept 5, 2025) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2025+10% to +13% (Q1 letter) +9% to +11% (Q2 letter) Lowered
Adjusted Operating Margin %FY 202514% to 15% 13% to 14% Lowered
Adjusted EBITDA Margin %FY 202520% to 21% 19% to 20% Lowered
Free Cash Flow ($M)FY 2025$250–$350 $250–$300 Narrowed/lowered midpoint
Revenue GrowthQ3 2025n/a in Q1+8% to +10% (Q2 letter) New
Adjusted Operating Margin %Q3 2025n/a in Q112% to 13% (incl. ~-270 bps intl. startup) New
Adjusted EBITDA Margin %Q3 2025n/a in Q118% to 19% New
Tariff/Revenue TimingH2/Q3n/a in Q1~$30M H2 incremental tariffs; ~$40M revenue shift out of Q3 to Q4/Q1’26 New headwind

Earnings Call Themes & Trends

Note: Latest available call is Q2 FY25 (Sept 11, 2025). Q3 FY25 call not yet held as of Nov 20, 2025.

TopicPrevious Mentions (Q1 FY25)Previous Mentions (Q2 FY25)Current Period (Q3 FY25)Trend
Tariffs & inflationHeightened uncertainty; delayed new concept to spring 2026 ~$30M H2 net tariff costs; potential further furniture tariffs; shifting sourcing from China to 2% by Q4; India rug tariffs addressed Q3 guide embeds ~120 bps tariff impact, ~-270 bps intl. startup Worsening headwind near term
Europe scaling (Paris/England)Strong RH England demand in Q1 RH Paris opened Sept 5; traffic > RH New York, strong pipeline; RH England tracking ~$46M total FY25 demand Q3 includes Paris startup drag; London/Milan spring 2026 Positive long‑term
Sourcebook & pricingNA8‑week fall Sourcebook delay to finalize tariff‑affected pricing ~$40M Q3 revenue shift to Q4/Q1’26 Timing shift
Promotions/pricing powerNAIndustry‑wide promotions at luxury end; judicious price actions vs tariff pass‑through -Monitor price/inflation into Q3/Q4 Mixed
Cash/FCF & leverageNAQ2 FCF ~$81M; FY25 FCF $250–$300M; net debt/TTM adj. EBITDA ~4.2x Watch Q3 cash cadence vs H2 capex/intl. spend Improving FCF

Management Commentary

  • “Adjusted operating margin of 15.1% and adjusted EBITDA of 20.6% both increased 340 basis points versus last year… Net income increased 79%, and we generated $81 million of free cash flow in the quarter.”
  • “RH Paris is off to a very strong start. Traffic in the Gallery has exceeded RH New York… the design pipeline in the first six days is greater than… our first five European Galleries combined.”
  • “Our updated outlook reflects a $30 million cost of incremental tariffs net of mitigation in the second half… We now expect approximately $40 million in revenues to shift out of Q3 and into Q4 and Q1 2026.”
  • “Looking forward, we plan to accelerate our expansion strategy to include the opening of 7 to 9 new Galleries per year plus 2 to 3 Design Studios, Outdoor Galleries, or New Concept Galleries per year.”

Q&A Highlights

  • Real estate monetization: Management characterized potential asset monetization as opportunistic—not a need—highlighting ~$500M estimated real estate equity value and learnings from Aspen assets - .
  • Pricing and tariffs: Expect “big furniture inflation” in H2 across industry; RH pursuing balanced price actions and vendor mitigation while protecting revenue and partners .
  • International four‑wall economics: Early data encouraging; startup costs heavy near‑term, but longer‑term four‑wall margins expected to converge with U.S. economics as scale builds -.
  • Inventory and turns: Inventory reduction of $200–$300M targeted over 12–18 months; working back toward mid‑twos to low‑threes turns as product transformation matures .

Estimates Context

  • S&P Global consensus for Q3 FY25 could not be retrieved due to a daily limit error; values unavailable at this time. We will update comparisons vs Wall Street consensus once S&P Global data access is restored.
  • As a scheduling reference, third‑party IR aggregators indicate Q3 FY25 earnings around Dec 11, 2025 .

Key Takeaways for Investors

  • Expect optics headwind in Q3: ~$40M revenue timing shift and ~$30M H2 tariff costs (net) are embedded in Q3/H2, with Q3 margins guided lower sequentially; focus on cadence of pricing actions and tariff mitigation .
  • Structural margin story intact: Q2 demonstrated the operating algorithm—mix, promotions normalization, and cost discipline—delivering 15.1% adj. op margin and 20.6% adj. EBITDA margin despite macro and tariff headwinds .
  • Europe is the medium‑term engine: RH Paris early traction and RH England growth support the thesis that London/Milan openings can inflect brand awareness, four‑wall economics, and multi‑year revenue scale—albeit with near‑term startup drag .
  • Watch execution against sourcing shifts: Management targets China receipts down to ~2% by Q4 and is diversifying India exposure for rugs; sustained execution is key to protecting gross margin vs rising tariffs .
  • Liquidity/FCF trajectory improving: FY25 FCF guided at $250–$300M with TTM adj. EBITDA ~$599M and net leverage ~4.2x; monitor Q3 cash conversion into H2 capex and international ramp .
  • Trading setup: Into the Q3 print, the narrative will revolve around whether guidance sufficiently captures tariff/timing headwinds and if early‑read international KPIs (Paris run‑rate, pipeline) offset near‑term margin compression .

Notes and Sources:

  • Q2 FY25 8‑K, press release and shareholder letter (financials, guidance, non‑GAAP reconciliations) -.
  • Q2 FY25 earnings call transcript (qualitative themes, Q&A) -.
  • Q1 FY25 shareholder letter and press materials (trend analysis, FY guide) .
  • Q3 FY24 shareholder letter (prior‑year comps) .
  • RH Manhasset opening PR (Q3 period) ; CEO letter on RH Paris opening (Sept 5, 2025) .
  • S&P Global estimates unavailable at time of analysis due to daily request limit; will update when accessible.