RH (NYSE:RH) shares surged almost 20% premarket after the luxury furniture store’s first quarter earnings impressed investors and it reaffirmed its full-year outlook despite challenges in the housing market and tariff uncertainty.
The company posted earnings per share of $0.13 for the quarter, an improvement from a loss per share of $0.40 and significantly beating estimates of a loss per share of $0.07.
Revenue grew 12% from the year-ago quarter to $814 million, however, it missed estimates of $818 million.
For the full year, the company continues to expect revenue growth of 10% to 13%, an adjusted operating margin of 14% to 15%, and an adjusted EBITDA margin of 20% to 21%. Free cash flow is expected to be between $250 million and $350 million.
In a letter to shareholders, RH CEO Gary Friedman noted that the company expects tariffs to negatively impact revenue by six points in the second quarter, which will be recovered in the second half.
“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,” Friedman said.
'Lack of catalysts'
Analyst at Jefferies repeated their ‘Hold’ rating on RH following the report, citing a lack of catalysts to spur luxury housing, a lean into higher promotions which drive sub-par results, and a drag from international that may persist longer than envisioned.
“In the past, management had labeled discounting activity as a surefire way to impair brand equity in the industry,” the analysts noted.
“Management defended their increased membership discount from 25% to 30% as a strategy to capture increased market share and drive additional membership ahead of a recovery in housing turnover.”
They noted that RH saw significant growth in international, but cautioned that this was from a small base. Demand in Munish and Dusseldorf was up 60%, while performance in Madrid and Brussels “seems solid.”
“While a doubling of the international business in a few years sounds impressive, we remind investors that even that sales volume is well below what was planned years ago for a single gallery,” Jefferies wrote. “Going forward, we believe better in-stocks, assortment refinement, and ongoing brand-building efforts will support the ramp.”
The analysts also expect some operating expenses to shift from 2025 to 2026 as RH delays its yet-to-be-disclosed new concept.
The analysts expressed surprise that RH has maintained its 2027 capital expenditure guidance of $150 million to $200 million despite plans for a larger number of galleries per year and a doubling in construction costs post-COVID.
“Management has been identifying efficiencies in capital spending for gallery design and construction, which should serve them well in the years ahead,” they wrote.
The analysts have a price target of $208 on RH. Shares of RH are set to open 19.9% higher at $212 on Friday.