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1. Company Snapshot

1.a. Company Description

RH, together with its subsidiaries, operates as a retailer in the home furnishings.It offers products in various categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, and child and teen furnishings.The company provides its products through its retail galleries; and Source Books, a series of catalogs, as well as online through rh.com, rhbabyandchild.com, rhteen.com, and rhmodern.com, as well as waterworks.com.


As of January 29, 2022, it operated a total of 67 RH Galleries and 38 RH outlet stores in 30 states in the District of Columbia and Canada, as well as 14 Waterworks showrooms throughout the United States and the United Kingdom.The company was formerly known as Restoration Hardware Holdings, Inc.and changed its name to RH in January 2017.


RH was incorporated in 2011 and is headquartered in Corte Madera, California.

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1.b. Last Insights on RH

RH's recent performance was driven by robust top-line growth, particularly in its international expansion, with the new RH Paris gallery outpacing its historic flagship in New York. The company's aggressive expansion plans, including a potential $2 billion revenue engine from a new brand extension, are gaining traction. Additionally, investors are focusing on long-term growth prospects rather than immediate headwinds, such as a weak housing market. The company's continued growth and market share gain, despite a challenging environment, are also contributing to its positive performance.

1.c. Company Highlights

2. RH's Q3 2025 Earnings: A Strong Performance Amidst Tariff Challenges

RH reported a 9% revenue increase in Q3 2025, with an 18% growth on a two-year basis. The company's adjusted operating margin was 11.6%, and adjusted EBITDA was 17.6%, generating $83 million in free cash flow. The actual EPS came out at $1.71, missing estimates of $2.13. Year-to-date free cash flow reached $198 million, on track to achieve the outlook range of $250 to $300 million for the year. Net debt at the end of the quarter was $2.427 billion, down $85 million from Q2.

Publication Date: Dec -20

📋 Highlights
  • Revenue & Growth Momentum:: Q3 2025 revenue rose 9% YoY, with two-year growth of 18%, and full-year 2025 guidance at 9-9.2%.
  • Margin Expansion & Cash Flow:: Adjusted operating margin reached 11.6%, and adjusted EBITDA hit 17.6%, generating $83M free cash flow in Q3 and $198M year-to-date.
  • Inventory Reduction & Debt Management:: Inventory fell 11% YoY ($82M reduction from Q2), while net debt declined $85M to $2.427B.
  • Paris Location Success:: RH Paris drove 62% core sales growth in its first 8 weeks, with 40% multilingual customers, and is set for replication in Milan.

Operational Highlights

The company is making progress in reducing inventory, which is down 11% versus last year and down $82 million versus Q2. RH's market share gains are coming from both smaller, independent retailers and larger national brands. The company is investing in its international expansion, with a new concept launch planned for spring 2025. RH Paris, the company's newest gallery, is generating significant interest, with a unique and immersive experience that includes a restaurant and interior design office.

Guidance and Outlook

Revenue growth for Q4 is expected to be 7-8%, with an adjusted operating margin of 12.5-13.5% and an adjusted EBITDA margin of 18.7-19.6%. For the full year 2025, the outlook is for revenue growth of 9-9.2%, an adjusted operating margin of 11.6-11.9%, an adjusted EBITDA margin of 17.6-18%, and free cash flow of $250-300 million. Analysts estimate next year's revenue growth at 8.6%.

Valuation and Metrics

With a P/E Ratio of 29.18 and an EV/EBITDA of 10.48, the market seems to be pricing in a certain level of growth and profitability. The company's Free Cash Flow Yield is 3.99%, indicating a decent return for investors. However, the ROE is -140.97%, which is a concern. The Net Debt / EBITDA ratio is 3.08, indicating a manageable debt level.

Management's Strategy and Insights

Gary Friedman, the CEO, believes that making pricing fair for everyone is essential. He also emphasized that their business model focuses on doing what they love with people they love, for people who love what they do. Friedman expressed excitement about a new collection to be launched next year, targeting high-end homes, and described it as a potential multi-billion-dollar opportunity.

Tariff Impact and Mitigation

The company has been navigating the tariff situation effectively through price increases, mitigation efforts, and resource optimization. Friedman notes that they've been proactive in managing the impact of tariffs on their business. In Q3, they experienced some surprises due to timing and delays in passing on price increases to customers.

3. NewsRoom

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RH UNVEILS 2026 OUTDOOR SOURCEBOOK

Feb -10

Source: businesswire.com

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RH (RH) Stock Sinks As Market Gains: Here's Why

Feb -09

Source:

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RH (NYSE:RH) Given Consensus Rating of “Hold” by Brokerages

Feb -02

Source: defenseworld.net

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Why 1 Fund Is Loading Up on RH Stock

Jan -27

Source: fool.com

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RH Stock Is Beaten Down Now, but It Could 10X

Jan -23

Source: fool.com

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Campbell & CO Investment Adviser LLC Sells 2,716 Shares of RH $RH

Jan -20

Source: defenseworld.net

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Insider Selling: RH (NYSE:RH) Director Sells $440,200.00 in Stock

Jan -18

Source: defenseworld.net

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RH (NYSE:RH) Director Sells $495,880.00 in Stock

Jan -18

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.06%)

6. Segments

RH

Expected Growth: 2.0%

RH's 2.0 growth driven by expanding product offerings, increasing online presence, and strategic pricing. Strong brand recognition, high-end interior design, and luxury furniture demand also contribute to growth. Additionally, the company's focus on Galleries, outlets, and international expansion further supports revenue increase.

Waterworks

Expected Growth: 3.0%

Waterworks from RH with 3.0 growth driven by increasing demand for luxury home furnishings, expanding product offerings, and strategic marketing efforts. Additionally, RH's focus on experiential retail and investments in digital capabilities are expected to contribute to growth.

7. Detailed Products

Furniture

RH offers a wide range of high-quality, stylish, and comfortable furniture for the living room, dining room, bedroom, and outdoor spaces.

Lighting

RH's lighting collection features a variety of stylish and functional lighting fixtures, including chandeliers, sconces, table lamps, and floor lamps.

Textiles

RH offers a wide range of luxurious textiles, including fabrics, rugs, and throws, in a variety of materials, patterns, and colors.

Decor

RH's decor collection features a curated selection of stylish and unique decorative pieces, including vases, sculptures, and wall art.

Baby & Child

RH's baby and child collection features a range of stylish and functional furniture and decor for nurseries and kids' bedrooms.

Outdoor

RH's outdoor collection features a range of stylish and durable outdoor furniture, decor, and accessories for patios, gardens, and outdoor living spaces.

Bath & Bed

RH's bath and bed collection features a range of luxurious bedding, towels, and bath accessories in a variety of materials and styles.

8. RH's Porter Forces

Forces Ranking

Threat Of Substitutes

RH's products are highly customizable, making it difficult for substitutes to emerge. However, the rise of online marketplaces and DIY furniture platforms poses a moderate threat.

Bargaining Power Of Customers

RH's high-end products and strong brand loyalty reduce the bargaining power of customers. Additionally, the company's focus on luxury and exclusivity limits price sensitivity.

Bargaining Power Of Suppliers

RH's suppliers have some bargaining power due to the company's reliance on high-quality materials and craftsmanship. However, RH's strong relationships with suppliers and its ability to negotiate prices mitigate this threat.

Threat Of New Entrants

The luxury furniture market has high barriers to entry, including significant capital requirements and the need for established relationships with suppliers and designers. This limits the threat of new entrants.

Intensity Of Rivalry

The luxury furniture market is highly competitive, with established players like Williams-Sonoma and Crate & Barrel. RH's focus on high-end products and exclusive designs helps to differentiate it, but the company still faces intense competition.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 113.07%
Debt Cost 7.71%
Equity Weight -13.07%
Equity Cost 16.58%
WACC 6.55%
Leverage -865.31%

11. Quality Control: RH passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Growth: 7.7

Quality: 6.3

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Momentum: 9.0

Volatility: 6.0

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Value: 9.4

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Wayfair

A-Score: 4.3/10

Value: 5.7

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Quality: 4.0

Yield: 0.0

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A-Score: 4.0/10

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Quality: 6.4

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RH

A-Score: 2.2/10

Value: 3.8

Growth: 2.9

Quality: 3.4

Yield: 0.0

Momentum: 1.0

Volatility: 2.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

210.4$

Current Price

210.4$

Potential

-0.00%

Expected Cash-Flows