Key Highlights
- Q4 earnings per share landed at $1.53, falling short of the $2.24 consensus by $0.71
- Quarterly revenue totaled $842.6M, missing the $873.48M Street estimate
- Company executives identified tariffs as creating approximately 190 basis points of margin compression in Q4
- First quarter 2026 revenue projected to fall between 2% and 4%
- Short positions in RH increased approximately 28% during March
The luxury home furnishings retailer delivered a challenging fourth quarter performance, falling short on both profit and sales metrics. RH recorded earnings per share of $1.53, significantly trailing the analyst consensus estimate of $2.24 — representing a notable $0.71 gap. Sales reached $842.6M, underperforming the anticipated $873.48M.
Interestingly, shares managed to gain ground during the trading session, potentially benefiting from end-of-month portfolio rebalancing as market participants positioned themselves for the upcoming quarter.
Looking at the complete fiscal year FY2025, the picture showed some bright spots. The company achieved 8% revenue growth year-over-year, with a two-year compound growth rate of 15%. Adjusted EBITDA reached $597M, representing a 17.3% margin. Free cash flow turned positive at $252M, a significant improvement from the negative territory seen in 2024.
However, leadership characterized 2025 as a “peak investment year,” allocating approximately $289M toward adjusted capital investments along with $37M for brand acquisitions. This substantial spending is creating near-term margin compression.
Trade tariffs emerged as a significant obstacle. Company executives noted that tariffs created roughly 190 basis points of margin erosion during the fourth quarter, with the most severe impact hitting metal outdoor furniture, lighting fixtures, area rugs, and various furniture lines. Supply chain restructuring efforts compounded these challenges.
Looking to the first quarter of 2026, management projects revenue will contract by 2% to 4%. For the full fiscal year, guidance anticipates revenue expansion of 4% to 8% with adjusted EBITDA margins landing between 14% and 16%.
Wall Street’s Take
The analyst community responded cautiously to the results. TD Cowen maintained its “buy” stance but reduced its price objective from $265 down to $200. UBS lowered its target from $188 to $160 while maintaining a “neutral” recommendation. Stifel preserved its “hold” rating with a new target of $165, substantially down from its previous $320 target.
The current consensus among analysts stands at “Hold” with an average price target of $211.07. The coverage universe includes seven buy ratings, ten hold recommendations, and three sell calls.
Bearish sentiment intensified as short interest jumped roughly 28% throughout March, creating additional downward pressure on shares.
Growth Strategy
Despite facing near-term obstacles, RH continues advancing its expansion initiatives. The company plans to unveil RH Estates in mid-May, introducing new sub-brands RH Bespoke and RH Couture. These launches follow strategic acquisitions including Michael Taylor, Formations, and Dennis & Leen.
Global expansion remains a priority with flagship store openings scheduled for Paris, Milan, and London. The company currently manages 26 in-gallery dining concepts and targets reaching 40 locations by 2027.
Regarding insider activity, executive Eri Chaya divested 7,000 shares on March 24th at $129.42 per share, generating proceeds of $905,940. Director Mark Demilio sold 2,254 shares in January at $220.00 each. Combined insider transactions totaled $2.86M in stock sales over the trailing 90-day period.
RH’s 12-month peak stands at $257.00. Shares have declined 41.51% over the past year, with a 12-month floor of $123.03.
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