Dan Caplinger, The Motley Fool
4 min read
-
RH's sales growth lagged behind what many investors were expecting to see.
-
The fact that RH made money during the quarter was an unexpected win for the retailer.
-
Other signs of success, including soaring free cash flow, pointed to successes for RH.
Here's our initial take on RH's (NYSE: RH) fiscal 2025 first-quarter financial report.
|
Metric |
Q1 2024 |
Q1 2025 |
Change |
vs. Expectations |
|---|---|---|---|---|
|
Total revenue |
$727 million |
$814 million |
+12% |
Missed |
|
Adjusted earnings per share |
($0.40) |
$0.13 |
n/m |
Beat |
|
Free cash flow |
($10.1 million) |
$34.1 million |
n/m |
n/a |
|
Gross margin |
43.5% |
43.7% |
+20 bps |
n/a |
It's been a tough environment for retailers across the industry in 2025, given all the pressures they've seen. Between macroeconomic weakness and industry-specific tariff issues, RH investors were simply hoping to see some signs of recovery from the luxury home furnishings retailer.
Instead, what they got was a blowout quarter. Sales growth of 12% was respectable, even though it fell slightly short of what most analysts following RH had expected to see. But the big news was RH's adjusted net income of $2.6 million, which worked out to $0.13 per share. Most investors believed that RH would lose money, so the success in keeping costs under control and maintaining pricing discipline was particularly significant.
RH CEO Gary Friedman said he was proud of his company's results. He noted that although the company is currently in what he called the "worst housing market in almost 50 years," RH is "performing at a level most would expect in a robust housing market." Friedman credited RH's strength to the active steps that the company and its employees are taking to build out a luxury brand that spans across industries and geographical areas across the globe.
RH shareholders reacted positively to the news that the company had made money during the quarter. Shares rocketed higher by 19% in the first half-hour of trading in the after-hours session following the market's regular 4 p.m. EDT close.
In addition, RH maintained its guidance for 2025, which also pleased investors. Management said it believes that it will be able to grow revenue at a 10% to 13% clip over the course of the full year, generating free cash flow of between $250 million and $350 million. That would represent continued upward momentum for the business during the remainder of the year, and that's something no investor is going to be upset about.
