RH's Achievements Amid Challenges: Earnings Report & Paris Gallery Unveiling

1 rh montreal the gallery at royalmount Market Watch | Sep 12, 2025 This past week wasn’t just about the grand unveiling of RH’s Paris gallery for CEO Gary Friedman; it also encompassed the more sobering task of reporting second-quarter earnings. While the event in Paris attracted high-profile personalities and showcased the company’s luxury aesthetic, Friedman faced a different audience on Wall Street, where he had to explain the company's financial performance amidst challenging market conditions. RH recorded a revenue increase of 8.4 percent, amounting to $899 million, and posted a net profit of $51.7 million. Moreover, the company’s free cash flow improved significantly, rebounding to $81 million after experiencing a negative quarter last year. Operating margins also showed a positive trend, although as emphasized by Friedman, these gains come against the backdrop of "the worst housing market in 50 years." Despite this improvement, RH’s results did not fully meet some analysts’ expectations, leading the company to revise its forecasts for the rest of the year. The situation is further compounded by the company’s substantial debt of $2.5 billion and nearly $1 billion in unsold inventory, causing some turbulence in RH's stock, which initially fell approximately 13 percent in after-hours trading but later recovered some losses. A significant portion of the earnings call was devoted to the topic of tariffs, with Friedman expressing concerns regarding proposed furniture tariffs that could impact the industry. While RH has previously maintained a positive outlook in light of tariff disruptions, recent developments have led to a more urgent discourse. “God forbid they throw another tariff on furniture,” Friedman warned, underscoring the potential jeopardy to jobs and the broader furniture sector. Friedman articulated that, while RH might navigate through tariffs relatively unscathed, the implications for competitors could be dire. He remarked, “You lose 15 percent of the people that are presenting at High Point Market or Las Vegas Market, those markets will shut down. They'll be bankrupt.” His sentiments echo widespread fears that additional tariffs could disrupt the entire furniture manufacturing ecosystem. Friedman also noted that, regardless of new tariffs, existing import duties would lead to increased prices across the furniture market. He anticipates a surge in inflation, with current data revealing a 9.5 percent rise in prices for kitchen, dining room, and living room furniture over the past year. “I think there’s going to be big furniture inflation in the second half everywhere,” he stated. Additionally, the earnings discussion revealed RH's recent purchase of Los Angeles-based brands Formations and Dennis & Leen for $32 million. Another acquisition, Michael Taylor Designs, was noted but not detailed in the official filing, suggesting RH may have acquired it at a bargain. Europe also featured prominently in the conversation, especially with RH's recent financial performance in its English location projected at $37 million to $39 million this year. Although some European locations have posed challenges, Friedman is committed to strengthening RH’s presence, citing the importance of establishing a strong brand foundation in major cities. With Paris being a focal point for RH, Friedman described the gallery's stunning architectural features, saying, “If only for a moment, we kind of broke through and poked our head up at the top of the luxury mountain.” He emphasized the opportunity for the company to cement its presence in the luxury market. For ongoing updates and in-depth insights into the industry, sign up for our newsletter, and explore further by sub