RH (NYSE:RH) posted blowout earnings for its first quarter as revenue rose 11% and gross margins increased sharply.
The designer furniture retailer's adjusted net income rose 59% to $7.78 per share, versus the consensus of $5.38. Revenue was $957 million, versus the consensus of $924.81 million. The was up 11% from last year and 98% from 2020.
Gross margin increased 480 basis points in the quarter to 52.1%. This was driven by a 390 basis point increase in product margins and the firm's resistance to promote the business as demand trends began to slow.
"While there has been a widespread return to discounting across our industry as evidenced by the barrage of sale emails filling our inboxes, and there may be short-term risk of market share loss by choosing not to promote, we believe there is certain long-term risk of brand erosion and model destruction once you begin down that path," the company said in a letter to shareholders.
While the first quarter was strong, the company is seeing softening demand trends and as a result, is revising its second quarter and fiscal 2022 guidance.
RH sees second-quarter net revenue in the range of (1%) to (3%). They see Fiscal 2022 net revenue growth in the range of 0% to 2%.
Shares of RH fell 2% after-hours.