RH Q1 Earnings Top Estimates, Revenues Miss, Margins Up Y/Y
RH RH reported mixed first-quarter fiscal 2025 (ended May 3, 2025) results, with adjusted earnings topping the Zacks Consensus Estimate while net revenues missed the same. On a year-over-year basis, both metrics grew notably.The quarterly performance reflects benefits realized from the investments made to elevate and expand its product offerings and platform. Globally, the company witnessed share gains, with business in Europe being robust. The trends reflected from the increased contributions of the RH segment business, partially offset by soft contributions from the Waterworks business.Leverage in occupancy and shipping costs aided the margins during the quarter amid the uncertain global macro environment. Moving forward, RH aims to continue enhancing its platform and diversifying its product offerings to ensure revenue visibility even during a dicey macro scenario.RH stock soared 20.3% during yesterday's after-hours trading session, after the earnings announcement. The investors' sentiments are likely to have been boosted by an upbeat second-quarter and fiscal 2025 outlook.
The company reported adjusted earnings per share of 13 cents, which topped the Zacks Consensus Estimate of a loss per share of nine cents by 244.4%. The reported figure compares favorably with the loss per share of 40 cents reported in the year-ago period. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)
RH price-consensus-eps-surprise-chart | RH Quote
Net revenues of $814 million marginally lagged the consensus mark of $818 million by 0.5% but improved 12% year over year. Net revenues from the RH segment increased year over year by 13% to $765 million, while the same for Waterworks tumbled 1.9% to $49 million.
The gross margin expanded 20 basis points (bps) to 43.7% in the reported quarter.Selling, general & administrative expenses (as a percentage of total net revenues) expanded 80 bps to 36.8% year over year.Adjusted operating margin expanded 50 bps year over year to 7%. Moreover, adjusted EBITDA increased 19.4% year over year to $106.4 million for the quarter, with adjusted EBITDA margin expanding 80 bps to 13.1%.
As of May 3, 2025, RH's cash and cash equivalents were $46.1 million, up from $30.4 million at the end of fiscal 2024. The company ended the first quarter of fiscal 2025 with merchandise inventories worth $1.01 billion compared with $1.02 billion at the end of fiscal 2024.RH ended the quarter with a net debt of $2.57 billion and a net debt-to-adjusted EBITDA ratio of 4.6x.Net cash provided by operating activities was $86.6 million as of the fiscal first quarter compared with $56.1 million in the year-ago period. Free cash flow was $34.1 million against negative $10.1 million reported in the year-ago period.Capital expenditures, as of May 3, 2025, were $52.6 million, down from $66.3 million in the year-ago period.
The company expects the quarterly net revenues to grow between 8% and 10% year over year.Adjusted operating margin is expected to be in the range of 15-16%, up from 11.7% reported in the prior-year quarter.Adjusted EBITDA margin is forecasted between 20.5% and 21.5%, up from 17.2% reported in the prior-year quarter.
For the fiscal year, RH still expects revenue growth between 10% and 13%.Adjusted operating margin is still expected to be between 14% and 15%, up from 11.3% reported in fiscal 2024.Adjusted EBITDA margin is still expected between 20% and 21%, up from 16.9% reported last year.RH unveils its expectations of free cash flow to be between $250 million and $350 million.
RH currently carries a Zacks Rank #3 (Hold).Here are some better-ranked stocks from the Zacks Consumer Staples sector.Philip Morris International Inc. PM presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.It has a trailing four-quarter earnings surprise of 3.6%, on average. The company's shares have soared 52.3% year to date. The Zacks Consensus Estimate for Philip Morris' 2025 sales and earnings per share (EPS) implies an increase of 8.1% and 13.7%, respectively, from the prior-year levels.Grocery Outlet Holding Corp. GO currently carries a Zacks Rank #2 (Buy). It delivered a trailing four-quarter earnings surprise of 25.7%, on average. The stock has tumbled 14.8% year to date.The consensus estimate for Grocery Outlet's 2025 sales indicates an increase of 7.9% while EPS reflects a 3.9% decline from a year ago.Warby Parker Inc. WRBY presently carries a Zacks Rank of 2. It delivered a trailing four-quarter negative earnings surprise of 11.7%, on average. The stock has declined 6.7% year to date.The Zacks Consensus Estimate for Warby Parker's 2025 sales and EPS indicates an increase of 14.1% and 79%, respectively, from a year ago.
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