RH (RH) Q1 2024 Earnings
GAAP results include favorable legal settlements net of $9.375 million (pre-tax). Adjusted EPS excludes legal settlements, $1.947 million non-cash compensation, and $2.442 million share of equity method investments loss.
Did RH Beat Earnings? Q1 2024 Results
No. RH reported Q1 2024 earnings of $-0.40 a share on Jun 13, 2024, missing the $-0.12 consensus estimate by 233.3%. Revenue was $727.0M against a $724.7M estimate.
RH delivered a deeply disappointing first quarter of fiscal 2024, posting an adjusted diluted loss of $0.40 per share against a consensus estimate of negative $0.12, a miss of 233.33%, even as revenue of $726.96 million edged fractionally above the $724.70 million Wall Street expected. Net revenues slipped 1.6% year-over-year, pressured by a luxury home furnishings environment still reeling from elevated mortgage rates and a stalled housing market, while gross margin contracted sharply to 43.5% from 47.0% a year earlier and interest expense surged to $56.77 million on a $2.48 billion debt load, together compressing adjusted operating margin to just 6.5% from 14.9%. CEO Gary Friedman noted that demand grew 3% in the quarter but softened in April as mortgage rates topped 7%, and flagged that revenue will continue to lag demand by 4 to 8 percentage points throughout fiscal 2024 as the company works through an extensive product overhaul. Looking ahead, management expects full-year fiscal 2024 revenue growth of 8% to 10% and adjusted operating margin of 13% to 14%, contingent on demand trends accelerating as interest rates eventually ease.
- Demand trends inflected positive with 3% growth in Q1
- Challenging housing market with interest rates exceeding 7%
- Gross margin compression from 47.0% to 43.5%
- Revenue lagging demand by 4-8 points due to product transformation
- Increased interest expense of $56.8 million versus $39.8 million year-ago
“We are pleased to report that our demand trends inflected positive in the first quarter and continue to build momentum despite operating in the most challenging housing market in three decades. We believe our investments in the most prolific product transformation and platform expansion in our history has positioned RH to gain significant market share in North America while building the foundation for our long-term global expansion across the United Kingdom, Europe, Australia and the Middle East over the next several years.”
RH CEO, on the earnings call
What Was RH's Outlook in Q1 2024?
For full-year fiscal 2024, RH expects demand growth of 12%-14% and revenue growth of 8%-10% on a 52-week basis, adjusted operating margin of 13%-14%, and adjusted EBITDA margin of 18%-19%. Revenue is expected to lag demand by approximately 4-8 points during fiscal 2024 due to the extensive product transformation. Year-end backlog is forecasted to increase by approximately $110-$130 million, negatively impacting operating margin by approximately 140 basis points. International expansion startup costs are expected to be an approximately 200 basis point drag. For Q2 fiscal 2024, management forecasts demand growth of 9%-10%, revenue growth of 3%-4%, adjusted operating margin of 11%-12%, and adjusted EBITDA margin of 17%-18%. Business conditions are expected to remain challenging until interest rates ease and the housing market rebounds, though demand trends are expected to accelerate throughout fiscal 2024.
RH YoY Financials
| Metric | Q1 2024 | Q1 2023 | Year over year |
|---|---|---|---|
| Revenue | $727.0M | $739.2M | −1.7% |
| Gross Profit | $316.0M | $347.6M | −9.1% |
| Operating Income | $54.7M | $105.3M | −48.1% |
Figures from SEC filings and company reports. Not investment advice.