RH (RH)
Interest coverage
| Feb 3, 2024 | Jan 28, 2023 | Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 393,721 | 550,494 | 887,051 | 445,663 | 356,359 |
| Interest expense | US$ in thousands | 237,899 | 151,730 | 64,947 | 69,250 | 87,177 |
| Interest coverage | 1.65 | 3.63 | 13.66 | 6.44 | 4.09 |
February 3, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $393,721K ÷ $237,899K
= 1.65
The interest coverage ratio for RH has fluctuated over the past five years. In the most recent period ending February 3, 2024, the interest coverage ratio stands at 1.65, indicating that RH's ability to cover its interest expenses with its operating income has weakened compared to the previous year. This decrease may raise concerns about RH's ability to comfortably meet its interest obligations using its current level of operating income.
Comparing the current ratio to historical data, there is a notable decline from the high levels seen in January 29, 2022, and January 30, 2021, where the interest coverage ratios were 13.66 and 6.44, respectively. This indicates a significant reduction in RH's ability to cover its interest payments from its operating income. However, the current ratio still remains above the ratio observed on February 1, 2020, which was 4.09, suggesting that RH's interest coverage has historically been stronger than the most recent period.
Overall, the decreasing trend in RH's interest coverage ratio raises concerns about the company's ability to service its interest payments. Further analysis of the company's financial health and operational performance may be necessary to fully assess the impact of this trend on RH's financial stability.