RH Reports First Quarter 2025 Fiscal Results & Shareholder Letter from CEO

June 15, 2025  by Karen Parrish in Business Strategy, Industry   

RH FIRST QUARTER 2025 HIGHLIGHTS

GAAP Net Revenues Increased 12% to $814M
GAAP Operating Margin of 6.9%, Adjusted Operating Margin of 7.0%
GAAP Operating Income of $56M, Adjusted Operating Income of $57M
EBITDA Margin of 12.7%, Adjusted EBITDA Margin of 13.1%

In the letter from Chairman and CEO Gary Friedman, he shared with the Shareholders:

"Our industry leading growth continued into fiscal 2025 as revenue increased 12% in the first quarter despite the polarizing impact of tariff uncertainty and the worst housing market in almost 50 years. Both adjusted operating margin of 7.0% and adjusted EBITDA margin of 13.1% were at the high end of our expectations, and we achieved positive free cash flow of $34 million in the quarter."

"The substantial investments to elevate and expand our product and platform have resulted in significant share gains and strategic separation, positioning the RH brand for continued growth over the next decade."

"We continue to be pleased with the second year demand trends at RH England, with the Gallery up 47% in the first quarter, and online demand up 44%. Current demand trends indicate the Gallery will now reach approximately $37 to $39 million of demand in 2025, its second full fiscal year, with the online demand reaching approximately $8 million."

"To put those results in perspective, if an RH Gallery in the English Countryside, with an estimated population of 100,000 in a 10 mile radius 2 hours outside of London can generate $46 million of total demand in its second full fiscal year, what can an RH Gallery in the center of Mayfair, the most exclusive shopping district in London with a population of 9.7 million do in its second full fiscal year? We believe exponentially more."

Friedman continued with thoughts on the opening of the gallery in the English countryside, the other Galleries throughout Europe, and the soon to be open Gallery in Paris. He continued the letter with the excitement in welcoming Lisa Chi as President and Co-Chief Merchandising & Creative Officer back to RH.

The financial commentary continues, "While we expect a higher risk business environment this year due to the uncertainty caused by tariffs, market volatility, inflation risk, and an increasing level of global discord, we believe it’s important to separate the signal from the noise. The fact is, we’ve been operating in the worst housing market in almost 50 years. For context, in 1978 there were 4.09 million existing homes sold when the U.S. had a population of 223 million. Contrast that to 2024 where 4.06 million existing homes sold with a population of 341 million, and it illuminates just how depressed the housing market has been this past year."

"Despite that fact, we are performing at a level most would expect in a robust housing market. We believe it’s a result of investing with a very narrow focus and a long-term view, or what we like to call, “An inch wide and a mile deep.” Elevating and expanding our platform by creating the most desired products presented in the most inspiring spaces in the world, with bespoke interior design services and beautiful restaurants that generate energy, engagement and tremendous awareness of the RH brand, while also serving as a profitable customer acquisition vehicle. Our intentions and attention to detail are reflected in everything we do, and in every house we turn into a home."

"While our business has been strong, it has been so due to action versus inaction, innovating versus duplicating, investing versus divesting, and aggressively taking market share during this downturn so we are positioned to create long term strategic separation on the other side of it. We are investing in the most iconic global locations in retail that will likely never be replicated in our lifetimes."

RECIPROCAL TARIFFS
"We have continued to shift sourcing out of China and expect receipts to decrease from 16% in Q1 to 2% in Q4, with a meaningful portion of the tariff absorbed by our vendor partners."

"We have also resourced a significant portion of our upholstered furniture to our own North Carolina factory. We are now projecting that 52% of our upholstered furniture will be produced in the United States and 21% will be produced in Italy by the end of fiscal 2025."

"While there remains uncertainty until the reciprocal tariff negotiations are complete, we have proven we are well positioned to compete favorably in any market conditions."

OUTLOOK
"Despite the speculative and uncertain outcome related to tariffs and the macroeconomic environment, we are maintaining our current guidance for fiscal 2025, assuming the existing tariffs remain unchanged."

"To mitigate risk, we are delaying the launch of the new concept that was planned for the second half of 2025 to the Spring of 2026 when there is more certainty regarding tariffs."

"Additionally, due to the significant and unexpected Liberation Day Tariffs announced on April 2nd, shipments and resourcing efforts were disrupted globally. We believe the disruption will negatively impact revenues by approximately 6 points in the second quarter and will be recovered in the second half, which is reflected in our outlook below."

The full shareholders letter can be read at the RH Investor Relation's site.