Rh delivered solid top-line performance in QQ3 2024 with year-over-year revenue growth and strong gross margins, but faces meaningful balance-sheet leverage and cash-flow headwinds driven by working-capital dynamics. Revenue reached $811.7 million, up 11.7% versus the prior-year quarter, while gross profit rose 14.3% to $361.3 million and gross margin held at ~44.5%. Operating income expanded to $101.5 million and net income to $33.2 million, yielding an EPS of $1.79 (diluted $1.66). Despite the earnings strength, operating cash flow remained negative at $(31.4) million and free cash flow was deeply negative at $(95.99) million, signaling heavy working-capital consumption and inventory-related outflows.
Balance-sheet health remains a key concern. Total debt stood at $3.86 billion with net debt of $3.77 billion and total liabilities exceeding assets, resulting in negative stockholders’ equity of $(183.0) million. Liquidity is modest with cash of $87.0 million and a current ratio of 1.43, but leverage metrics remain elevated (long-term debt to equity and capitalization near 1.0x). The company operates in a high-inventory environment (inventory days ~195.5) and a short receivables cycle (~7 days), implying substantial capital tied in working-capital needs. The blend of premium branding, a multi-channel distribution model, and price discipline, however, supports a potential path to margin resilience and cash-flow recovery as product mix, pricing, and operating-expenditure discipline improve.
Looking ahead, management has not published explicit quantitative guidance in QQ3 2024 filings. Investors should monitor deleveraging progress, inventory optimization, and cash generation initiatives, as well as any shifts in demand for premium home furnishings amid macro volatility. Given RH’s brand strength and scalable direct-to-consumer channels, a gradual improvement in cash flow and leverage could unlock multiple expansion potential, particularly if margins stabilize and working-capital efficiency improves.