• Revenue Growth: Fourth quarter revenue increased by 18% on a comparable 13-week basis.
• Adjusted Operating Income: Increased by 57% in the fourth quarter.
• RH Brand Demand: Fourth quarter demand increased by 21%, stabilizing at 19% in January.
• Debt: Ended the year with $2.2 billion in debt, primarily due to stock repurchases.
• Real Estate Equity Value: Estimated at approximately $500 million.
• Excess Inventory: $200 million to $300 million planned to be converted to cash.
• Fiscal Year 2025 Revenue Growth Forecast: 10% to 13%.
• Fiscal Year 2025 Adjusted Operating Margin Forecast: 14% to 15%.
• Fiscal Year 2025 Adjusted EBITDA Margin Forecast: 20% to 21%.
• First Quarter Revenue Growth Forecast: 12.5% to 13.5%.
• First Quarter Adjusted Operating Margin Forecast: 6.5% to 7%.
• First Quarter Adjusted EBITDA Margin Forecast: 12.5% to 13%.
• New Galleries and Expansions: Plans to open seven design galleries, two outdoor galleries, and two new concept galleries in 2025.

• Warning! GuruFocus has detected 8 Warning Signs with RH.

Release Date: April 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RH (NYSE:RH) reported a strong fourth quarter with revenue up 18% and adjusted operating income increasing 57% on a comparable 13-week basis.
• The RH brand saw a 21% increase in demand during the fourth quarter, highlighting the success of its product transformation.
• The company is forecasting revenue growth of 10% to 13% for fiscal year 2025, with an adjusted operating margin of 14% to 15%.
• RH (NYSE:RH) plans to open seven new design galleries, two outdoor galleries, and two new concept galleries in 2025, expanding its physical presence.
• The company has a strategic plan to monetize real estate assets valued at approximately $500 million and excess inventory worth $200 million to $300 million, which could enhance cash flow.

Negative Points

• The housing market remains challenging, with RH (NYSE:RH) operating in what it describes as the worst housing market in almost 50 years.
• The company faces a higher risk business environment due to tariffs, market volatility, and inflation risks.
• RH (NYSE:RH) ended the year with significant debt, primarily due to stock repurchases totaling $2.2 billion.
• The introduction of new product collections has been delayed due to the rapidly changing economic outlook.
• The company anticipates a negative impact on operating margins from investments and start-up costs related to international expansion.

Q & A Highlights

Q: How do you see the outlook for the consumer given the slowdown in consumer sentiment and the housing market? Also, how are legacy galleries performing compared to design galleries? A: Gary Friedman, CEO: We don't have direct insights into individual consumers, but we focus on how we react to the consumer environment. Despite the challenging housing market, we have a history of performing well in times of crisis. Both legacy and design galleries are performing well, and we are confident in our strategy and offerings.

Q: Can you expand on your comment that "inventory is your friend," especially in light of the recent tariff announcements? A: Gary Friedman, CEO: We anticipated needing extra inventory due to our product transformation. We have a strong inventory position at good prices, which allows us to navigate the current tariff situation effectively. We believe the tariffs may not stick long-term, and we are well-positioned to adapt and thrive.

Q: Have you started to adjust prices in response to the tariffs, and how do you plan to manage this situation? A: Gary Friedman, CEO: We are not making immediate price adjustments. We have a good inventory position, and this is a time to think strategically rather than react hastily. We expect tariffs to fluctuate, and we will adapt as necessary while maintaining our focus on innovation and customer experience.

Q: Can you provide more details on your guidance and any potential impact from tariffs on your financial outlook? A: Jack Preston, CFO: Our guidance considers known tariffs from China, Mexico, and Canada. We believe our guidance is conservative, and we are prepared to rearchitect our supply chain if necessary. We anticipate potential concessions in global negotiations, which could mitigate the impact of tariffs.

Q: How do you view the impact of tariffs on your competitive position, especially against premium competitors? A: Gary Friedman, CEO: We don't believe any competitor has a cost advantage over us. We have the largest platform and buying power in our segment, allowing us to negotiate effectively and maintain our market position. The playing field is level, and we are confident in our ability to compete.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.