RH (RH) Q2 2023 Earnings: Strong Performance and Optimistic Outlook
RH (NYSE:RH) has reported a strong performance for the second quarter of fiscal 2023, exceeding its guidance due to faster-than-expected deliveries and a shift in advertising costs. The company has raised the lower end of its revenue guidance for the year and is maintaining its outlook for adjusted operating margin. Despite the challenging luxury housing market and broader economy, RH continues to make strategic moves to expand its brand globally and transform its North American galleries. The company also repurchased a significant number of shares in the second quarter, further demonstrating its confidence in its financial position.
Financial Highlights
RH reported revenues of $800 million and an adjusted operating margin of 22.2% for the second quarter, exceeding its guidance due to a $25 million revenue benefit from faster-than-expected deliveries. The company has raised the lower end of its revenue guidance for the year to a range of $3.04 billion to $3.1 billion, up from its prior outlook of $3 billion to $3.1 billion. The company is maintaining its outlook for adjusted operating margin of 14.5% to 15.5%. RH repurchased 3.7 million shares in the second quarter at an average price of $325.65, representing approximately 17% of the total shares outstanding at the beginning of the quarter.
Product Elevation and Platform Expansion
RH continues to elevate its product offerings and expand its platform. The company recently mailed its new 604-page RH Interiors Sourcebook and is expecting business trends to inflect in the second half of the year with the mailing of its RH Contemporary Sourcebook and RH Modern Sourcebook. The company is also planning to refresh its galleries over the next several quarters. RH's global expansion plans include openings in Dusseldorf and Munich later this year, with Paris, Brussels, Madrid, London, Milan, and Sydney scheduled for the coming years. The company is also planning to open RH Indianapolis and RH Cleveland in the second half of this year, while RH Palo Alto and RH Monaco will open in early 2024.
Outlook
RH is optimistic about its future performance. The company is forecasting revenues of $740 million to $760 million and an adjusted operating margin in the range of 8% to 10% for the third quarter of fiscal 2023. For the fourth quarter, the company is forecasting revenues of $760 million to $800 million and an adjusted operating margin in the range of 14.4% to 16.6%. The company's long-term strategy includes building the world's first consumer-facing architecture, interior design, and landscape architecture services platform inside its galleries, and moving into the $1.7 trillion North American housing market with the launch of RH Residences.
Conclusion
RH's strong performance in the second quarter of fiscal 2023 and its optimistic outlook for the future demonstrate the company's resilience in a challenging market. The company's strategic moves to elevate its product offerings, expand its platform, and enter new markets position it well for continued growth and success.
This article first appeared on GuruFocus.
