RH (NYSE:RH) shares surged more than 6% intra-day on Friday after the luxury home furnishings retailer reported third-quarter revenue that exceeded expectations, even as the company described operating conditions as the weakest housing market in nearly five decades.
The company posted third-quarter revenue of $884 million, slightly above the consensus estimate of $883.26 million and representing 9% year-over-year growth. Adjusted earnings per share came in at $1.71, however, missing analyst expectations of $2.16.
RH generated $83 million in free cash flow during the quarter, bringing year-to-date free cash flow to $198 million. The company reaffirmed its full-year free cash flow guidance of $250 million to $300 million.
Adjusted operating margin was 11.6%, below the midpoint of management’s guidance of 12.5%. RH attributed the shortfall to higher-than-expected tariff costs tied to earlier orders and expenses related to the opening of its Paris location.
For the fourth quarter, the company forecast revenue growth of 7% to 8% and adjusted operating margin of 12.5% to 13.5%. RH also narrowed its fiscal 2025 revenue growth outlook to 9.0% to 9.2%.
Inventory declined 11% year-over-year and was down $82 million from the second quarter, reflecting progress toward reducing excess inventory, which management had previously estimated at $300 million.
