RH (RH) Q2 2023 Earnings
Non-GAAP adjustments include $8.0 million in legal settlements related to class action litigation, $2.0 million in non-cash compensation charges, and the add-back of $3.4 million share of equity method investments loss
Did RH Beat Earnings? Q2 2023 Results
Yes. RH reported Q2 2023 earnings of $3.93 a share on Sep 7, 2023, beating the $2.56 consensus estimate by 53.5%. Revenue was $800.5M against a $784.9M estimate.
RH delivered a sharp earnings beat in its fiscal second quarter of 2023, posting adjusted diluted EPS of $3.93 against a consensus estimate of $2.56, a 53.52% beat, even as revenue slipped 19.3% year-over-year to $800.48 million amid a luxury housing market weighed down by 20-year-high mortgage rates. The top line still edged past the $784.90 million consensus by 1.98%, aided in part by a $25 million revenue pull-forward from faster-than-expected deliveries, though roughly $40 million in advertising costs were pushed into Q3 due to the later mailing of the RH Interiors Sourcebook, a timing shift that clouds near-term margins. Adjusted operating margin contracted to 20.2% from 24.7% a year ago, reflecting the pressures facing high-end home furnishings. Looking ahead, RH raised the floor of its full-year revenue guidance to $3.04 billion to $3.10 billion and expects business trends to inflect in the second half of 2023 and build through the first half of 2024 as new collections and gallery openings ramp across both domestic and international markets.
- $25 million revenue benefit from faster-than-expected deliveries
- Approximately $40 million of advertising costs shifted from Q2 to Q3
- Aggressive share repurchases reducing share count by approximately 17% during the quarter
- Strong free cash flow generation of $114 million in Q2
“Revenues of $800 million and adjusted operating margin of 20.2% exceeded our guidance for the second quarter due to a $25 million revenue benefit from faster than expected deliveries and a shift of approximately $40 million of advertising costs from Q2 to Q3 reflecting the later mailing of our RH Interiors Sourcebook.”
RH CEO, on the earnings call
What Was RH's Outlook in Q2 2023?
RH raised the low end of fiscal 2023 revenue guidance to $3.04 billion to $3.1 billion (from $3.0 billion to $3.1 billion previously), maintaining adjusted operating margin guidance of 14.5% to 15.5%. The 53rd week is estimated to contribute approximately $60 million in revenues. For Q3 FY2023, revenues are forecast at $740 million to $760 million with adjusted operating margin of 8.0% to 10.0%, reflecting approximately $50 million in incremental advertising costs versus Q2. For Q4 FY2023, revenues are forecast at $760 million to $800 million with adjusted operating margin of 14.4% to 16.6%. The company expects the luxury housing market and broader economy to remain challenging throughout fiscal 2023 and into next year, with mortgage rates at 20-year highs expected to remain unchanged until Q2 2024. Business trends are expected to inflect in H2 2023 and peak in H1 2024 as new collections fully ramp.
RH YoY Financials
| Metric | Q2 2023 | Q2 2022 | Year over year |
|---|---|---|---|
| Revenue | $800.5M | $991.7M | −19.3% |
| Gross Profit | $380.1M | $523.2M | −27.4% |
| Operating Income | $151.3M | $235.5M | −35.8% |
| Net Income | $76.5M | $122.3M | −37.5% |
Figures from SEC filings and company reports. Not investment advice.