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RH (RH)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 delivered double‑digit top-line growth with GAAP net revenues of $812.4M (+10% YoY) and an adjusted operating margin of 11.3%; on a comparable 13‑week basis, net revenue grew 18% and adjusted operating income rose 57% as the product transformation continued to drive share gains .
  • Against S&P Global consensus, RH missed on EPS and revenue: Primary EPS $1.58 vs $1.91* and revenue $812.4M vs $829.5M*, while adjusted EBITDA also tracked below consensus ($125.4M vs $153.9M*)—a function of higher expenses and a still-challenging housing backdrop (see “Estimates Context”) *.
  • FY25 guidance introduced: revenue growth +10% to +13%, adjusted operating margin 14%–15%, and adjusted EBITDA margin 20%–21%; Q1 FY25 guided to revenue +12.5%–13.5%, adjusted operating margin 6.5%–7.0%, and adjusted EBITDA margin 12.5%–13.0% .
  • Post‑print update (Apr 4): company reiterated tariff mitigation, disclosed QTD demand up 17% (RH Brand +20%), and introduced FY25 free cash flow outlook of $250–$350M—key potential stock catalysts as visibility improves .

What Went Well and What Went Wrong

What Went Well

  • Product transformation driving outperformance: comparable 13‑week Q4 net revenue +18% and adjusted operating income +57%, with RH Brand demand +21%—a strong validation of new assortments and platform elevation .
  • Margin quality on an adjusted basis: Q4 adjusted operating margin expanded to 11.3% (from 9.1% in the prior year), and adjusted EBITDA margin improved to 17.1% (from 15.3%) .
  • Management conviction and positioning: “Inventory is your friend” and a decade of building US upholstery capacity (projecting 48% of upholstered furniture produced in the U.S. and 21% in Italy by year‑end) support agility amidst tariff volatility .

What Went Wrong

  • Consensus misses: Q4 Primary EPS $1.58 vs $1.91* and revenue $812.4M vs $829.5M*; adjusted EBITDA trailed as well ($125.4M vs $153.9M*), indicating expense pressure and lingering housing weakness (details below) *.
  • GAAP profitability constraints: GAAP operating margin flat at 8.7% and GAAP EPS only $0.69 despite strong demand, reflecting higher SG&A and other below‑gross‑margin factors .
  • Macro and tariff uncertainty: management spent significant time on mitigation plans (pricing, vendor concessions, sourcing shifts) and cautioned against overreacting, underscoring an unusually fluid external environment .

Financial Results

MetricQ4 2024Q3 2025Q4 2025
Revenue ($USD Millions)$738.3 $811.7*$812.4
GAAP Diluted EPS ($)$0.57 $2.48*$0.69
Adjusted Diluted EPS ($)$0.72 —$1.58
Gross Margin %43.5% —44.7%
Operating Margin %8.7% —8.7%
Adjusted Operating Margin %9.1% —11.3%
Adjusted EBITDA Margin %15.3% —17.1%
  • Comparable basis (13 weeks): Q4 revenue +18% and adjusted operating income +57% .
  • Backlog/demand alignment: Q4 comparable revenue +18% vs total demand +17%, indicating backlog normalization into shipments .

KPIs and Demand Indicators

KPIQ4 2024Q4 2025
Total Demand Growth (comparable 13‑week)—+17%
RH Brand Demand Growth (comparable 13‑week)—+21%
RH Brand January Demand—+19%
QTD Demand post‑print (as of Apr 4)—Total +17%, RH Brand +20%

Q4 2025 vs S&P Global Consensus

MetricConsensusActualSurprise
Primary EPS ($)1.91*1.58*−0.33*
Revenue ($M)829.5*812.4*−17.1*
EBITDA ($M)153.9*125.4*−28.5*

Values with asterisks (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 2025—+10% to +13% New
Adjusted Operating MarginFY 2025—14% to 15% New
Adjusted EBITDA MarginFY 2025—20% to 21% New
Operating Margin Drag (Intl. startup)FY 2025—−160 to −200 bps included New detail
Revenue GrowthQ1 2025—+12.5% to +13.5% New
Adjusted Operating MarginQ1 2025—6.5% to 7.0% New
Adjusted EBITDA MarginQ1 2025—12.5% to 13.0% New
Free Cash Flow ($)FY 2025—$250M to $350M Introduced

Additional guidance context:

  • Management expects to mitigate tariff impacts; no negative effect anticipated from previously announced tariff increases on China/Canada/Mexico; reciprocal tariffs to be managed with partners and sourcing shifts .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2025)Previous Mentions (Q1 2025)Current Period (Q4 2025)Trend
Tariffs & Supply Chain“Do not expect negative impact to margins” from potential increases; exiting China by end Q2; repositioning Mexico Ongoing shift away from China; confident in mitigation Real‑time discussion post‑reciprocal tariffs; focus on vendor concessions, US/Italy capacity, and not overreacting Heightened focus; proactive mitigation
Inventory & ClearanceHeavy newness; clearance to transition assortments; optimization cycle underway Value/pricing recalibration; dimensionalizing bestsellers “Inventory is your friend”; $200–$300M excess at cost to turn into cash; clearance tied to macro Improved positioning; cash conversion focus
International ExpansionParis/London/Milan pipeline; England ramping Europe acceleration; strong early demand; scaling advertising after openings Paris 2025; London delayed to 2026; intl. startup costs −160–200 bps; Europe inflection expected Continued build; timing refined
Advertising/SourcebooksDoubling contacts; multiple books driving demand Multiple mailings; sourcebook cadence as lift factor Two books in Q1 driving higher ad costs; quarter variability tied to mailings Consistent lever; timing effects
Free Cash Flow & Balance SheetTurning FCF positive “next year”; stock repurchase rationale; leverage to decline Confidence in multi‑year FCF and lower capex beyond 2025 FY25 FCF outlook $250–$350M introduced; real estate monetization optionality Improving visibility

Management Commentary

  • Strategic separation: “The positive inflection of our business continued… with revenue up 18% and adjusted operating income increasing 57% [comparable 13‑week]” .
  • Operating stance on tariffs: “We will be working with our manufacturing partners to mitigate the impact to both our margins and costs to our customers” .
  • Capacity shifts: “We are currently projecting that 48% of our upholstered furniture will be produced in the U.S., 21% in Italy, and 14% of our total business will be produced in the U.S. by the end of this year” .
  • Inventory optionality: “Inventory is your friend… we have $200–$300 million of excess inventory at cost that we plan to turn into cash” .
  • Tone/confidence: “This is when we thrive… we can outthink, out‑create, out‑innovate others” .

Q&A Highlights

  • Tariffs and pricing: Management prefers not to take immediate price actions; will think/invent and use vendor concessions, sourcing shifts, and efficiency before passing through costs .
  • Guidance interpretation: Despite new policy headlines, management would not go below guidance at this time and sees multiple offsets; no need to raise capital; monetization of real estate remains a lever .
  • Demand/backlog: Q4 gap narrowed—revenue +18% (comparable) vs total demand +17%; post‑call, company disclosed QTD demand trends remained strong .
  • Advertising cadence: Higher Q1 ad costs due to two books; quarterly margin variability tied to mailing schedule .
  • International timing: London pushed to 2026 due to build complexity; Paris targeted 2025 .

Estimates Context

  • Q4 2025 vs S&P Global consensus: Primary EPS $1.58 vs $1.91*; revenue $812.4M vs $829.5M*; EBITDA $125.4M vs $153.9M*—misses across metrics. Prior quarters show mixed performance: Q3 EPS missed (2.48 vs 2.64*) while revenue was in line (≈$812M*); Q2 slightly beat both EPS (1.69 vs 1.61*) and revenue ($829.7M vs $824.5M*)*.
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • The demand engine is intact: comparable revenue +18% and adjusted operating income +57% on a 13‑week basis, with RH Brand demand +21%—supporting a multi‑quarter share‑gain narrative despite macro headwinds .
  • Near‑term results are still noisy versus Street expectations (misses on EPS/revenue/EBITDA*), but FY25 guidance and post‑print demand/FCF updates add visibility (QTD demand +17% and FY25 FCF $250–$350M) *.
  • Tariff risk appears manageable given vendor concessions, US/Italy capacity, and sourcing agility; management signaled a measured response rather than immediate pricing actions .
  • Europe remains a 2025–2026 catalyst (Paris 2025; London 2026), with intl. startup costs (−160–200 bps) embedded in FY25 guidance—improving margin trajectory as new flags scale .
  • Expect quarterly margin variability from sourcebook timing and investment cadence; watch ad spend vs. demand lift and the pace of inventory cash conversion ($200–$300M excess at cost) .
  • Stock catalysts: clarity on reciprocal tariff negotiations, sustained demand strength, execution on FCF and real estate monetization, and on‑time Paris opening.

Values with asterisks (*) retrieved from S&P Global.