After a first quarter when earnings exceeded analyst estimates, Restoration Hardware stated that it is holding the line on annual guidance, even if it expects to take a bit of a revenue hit in Q2.
A Zacks Investment Research analyst consensus estimate called for a first-quarter loss of nine cents per share on revenues of $818.9 million.
Net revenues were $814 million versus $727 million in the year-previous quarter. Operating income was $55.9 million versus $54.7 million in the year-before period, while adjusted operating income was $56.8 million versus $47.2 million.
In a letter to stakeholders, Gary Friedman, RH chairman and CEO, stated that the company’s “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% 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.”
Friedman added, “When we assess the current business momentum across our existing Galleries, the upcoming openings of RH Paris, London and Milan, all in iconic locations over the next 12 months, I can honestly say we have never been more excited or confident about the desirability of the RH brand globally. Another topic we could not be more excited about is welcoming Lisa Chi back to Team RH as president, co-chief merchandising and creative officer. Lisa is a proven creative and merchandising force in our industry, as witnessed by the product transformation and brand elevation she led over the past four-plus years at Arhaus in her role as chief merchandising officer and prior as a consultant to the company. Lisa will co-lead all merchandising and creative efforts with Eri Chaya, president, co-chief merchandising and creative officer, and a member of the RH board of directors.”
As for tariffs, Friedman said RH is managing the current environment.
“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,” he said. “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.”
Even with the uncertain tariff and macroeconomic environment, Friedman noted, “we are maintaining our current guidance for fiscal 2025, assuming the existing tariffs remain unchanged.
“Additionally, due to the significant and unexpected Liberation Day Tariffs announced on April Second, shipments and resourcing efforts were disrupted globally. We believe the disruption will negatively impact revenues by approximately six points in the second quarter and will be recovered in the second half, which is reflected in our outlook.”
