Rh reported a solid top-line improvement in QQ2 2024 with revenue of USD 829.7 million, up 12.4% year-over-year, accompanied by meaningful margin stability and a rise in net income to USD 28.95 million. Gross margin stood at 45.17%, and operating margin reached 11.59%, underscoring RH’s ability to monetize a premium product mix despite a challenging wholesale and retail backdrop. Diluted EPS of USD 1.45–1.57 reflects a constructive operating trajectory in a quarter characterized by healthy gross profitability and disciplined cost management.
However, the quarterly performance is tempered by pronounced balance-sheet and cash-flow risks. RH entered QQ2 with USD 78.3 million in cash and USD 3.75 billion of total debt, yielding a net debt position of approximately USD 3.67 billion and a negative stockholders’ equity of about USD 234.7 million. Operating cash flow was modest at USD 11.2 million, while free cash flow was negative USD 37.9 million driven by a substantial negative swing in working capital (change in working capital of USD -170.1 million) and sizable capital expenditures (USD -49.1 million). Inventory levels remained elevated (USD 917.3 million) with days of inventory outstanding around 181 days, signaling potential working-capital intensity amid a luxury-home cycle that can be cyclically sensitive.
The near-term investment thesis hinges on RH’s ability to deleverage meaningfully while sustaining topline momentum and gross-margin resilience. The brand moat, omni-channel reach, and high-margin product categories are favorable; yet the debt burden, negative book value, and a cash-flow profile that requires ongoing capital allocation discipline present material headwinds. Investors should monitor deleveraging progress, inventory optimization, and any management commentary on guidance and capital-allocation priorities moving through the balance of 2024.