RH Reports 79% Profit Increase in Q2 2025

RH (RH.US) reported robust financial results for the second quarter ended August 2, 2025. The company's adjusted net income reached $57.81 million, demonstrating a significant 72.7% increase compared to the prior year's $33.47 million. Revenue for the quarter was $899.15 million, up 8.4% from $829.66 million in the same period last year. Notably, RH's adjusted diluted EPS of $2.93 fell short of the analyst estimate of $3.20.

Key Business Drivers

RH continued to achieve industry-leading growth, with revenue increasing 8.4% and demand rising 13.7% in Q2 2025, despite tariff uncertainties and a challenging housing market. The company saw strong demand trends at RH England, with Gallery demand up 76% and online demand up 34% in the second quarter. The recent opening of RH Paris on the Champs Élysées is also off to a very strong start, with traffic exceeding RH New York and a significant design pipeline.

The company is strategically expanding its global presence and platform, with plans to open 4 additional Design Galleries in North America and further expansion in Europe. The European expansion, including key markets like Paris, London, and Milan, is expected to double RH's size over the next 5 to 7 years. These immersive physical experiences are designed to blur the lines between residential and retail, enhancing brand awareness and engagement.

Management Outlook

Management has revised its guidance for fiscal year 2025 due to tariff-related uncertainties, projecting revenue growth of 9% to 11% and an adjusted operating margin of 13.0% to 14.0%. The outlook includes an approximate 200 basis point impact on operating margin from investments in international expansion and a 90 basis point impact from tariffs. The introduction of the Fall Interiors Sourcebook was delayed, shifting approximately $40 million in revenues from Q3 to Q4 2025 and Q1 2026.

For the third quarter of fiscal 2025, RH expects revenue growth of 8% to 10% and an adjusted operating margin of 12.0% to 13.0%. These projections account for a negative 270 basis point impact on operating margin from international expansion investments and a 120 basis point impact from tariffs. Despite a higher risk business environment, RH remains confident in its ability to adapt and capitalize on market opportunities by investing in its platform and aggressively taking market share during the current downturn.