RH Posts Q3 Profit Miss, Stock Jumps on Full-Year Outlook

RH, the luxury home furnishings retailer, reported a mixed third quarter, missing earnings and revenue estimates but impressing investors with its bullish full-year outlook. The company's stock surged following the earnings release, reflecting optimism about its strategic initiatives and market trends.

RH's Q3 earnings report showed a revenue miss, with $811.73 million in sales, falling short of the $812.16 million consensus estimate. Adjusted earnings per share (EPS) also missed expectations, coming in at $2.48 compared to the $2.65 estimate. Despite these misses, RH's stock rallied late Thursday, climbing 17% to $445 in after-hours trading.

The company's guidance for the fourth quarter and full year drove investor enthusiasm. RH expects Q4 revenue growth of 18% to 20%, driven by a 20% to 22% jump in total demand. For the year, RH guided revenue growth between 6.8% and 7.2%, on 9.9% to 10.4% demand growth. These projections indicate a positive outlook, aligning with the company's strategic initiatives and market trends.

RH's supply chain and sourcing strategies contributed to its Q3 earnings miss, particularly in light of potential tariff impacts. The company has been proactively moving sourcing away from China, aiming to fully exit the country by the end of Q2 2025. While RH expects no negative impact on margins from potential tariffs, the transition may have temporarily affected operations. Despite this, RH's full-year outlook remains positive, with guided demand growth of 9.9% to 10.4% and revenue growth of 6.8% to 7.2%.

RH's Q3 performance compares favorably to its competitors in the luxury retail sector. While its revenue growth of 8.1% lagged behind Williams-Sonoma's (WSM) 11.5%, it outperformed Tempur Sealy's (TPX) 3.5%. RH's adjusted EPS of $2.48 was lower than WSM's $2.73 but higher than TPX's $1.12. RH's guidance for full-year revenue growth of 6.8% to 7.2% and demand growth of 9.9% to 10.4% indicates a positive outlook, aligning with WSM's guidance for revenue growth of 7% to 9% but outpacing TPX's guidance for revenue growth of 3% to 5%. RH's stock price increase of 17% post-earnings compares favorably to WSM's 2.5% and TPX's 2.2%.

Market trends and consumer behaviors are driving RH's optimistic outlook, despite the Q3 earnings miss. The company reported a 13% increase in total demand and a 14% rise in brand demand, with November demand up 24% and December demand accelerating further. RH's successful product transformation and platform expansion, along with proactive sourcing strategies that mitigate potential tariff impacts, contribute to its resilience and growth potential.

In conclusion, RH's Q3 earnings miss was overshadowed by its bullish full-year outlook, driven by strong demand and strategic initiatives. Despite missing revenue and EPS estimates, RH's stock surged on robust guidance. The company's proactive sourcing strategy, market trends, and consumer behaviors indicate a resilient and well-positioned company poised for growth in the luxury retail sector.