RH’s Strong Q1 Still Leaves Investors With One Big Question

Key Points

• RH reported a smaller-than-expected fiscal first-quarter loss and topped revenue estimates, though sales declined 1.7% from the year-ago period due to tariff-related sourcing disruptions.
• The company raised the low end of its full-year revenue growth and adjusted EBITDA margin outlook, citing a backlog reduction, new store growth, and the RH Estates brand as growth drivers.
• Shares were volatile following the report as investors digested the company's raised outlook and the path to achieving its second-half growth targets.

Luxury home furnishings retailer RH NYSE: RH reported first-quarter results after the market closed Thursday, topping Wall Street's earnings and revenue expectations and raising its full-year outlook.

Despite better-than-expected results and the company's enthusiasm for its strategic expansion plans, shares were volatile following the report, as investors appeared focused on the pace of improvement needed to meet the company's second-half forecast.

Shares were recently trading down about 2%.

RH Tops Earnings and Revenue Estimates Despite Q1 Loss

RH reported a fiscal year 2026 (FY2026) Q1 loss of $1.97 per share, compared with earnings of 13 cents per share in the year-ago quarter. Analysts had expected a loss of $2.13 per share.

Revenue of approximately $800 million declined 1.7% from the prior-year period but topped Wall Street estimates by roughly $8 million.

The company said Q1 net revenue was negatively impacted by tariff-related sourcing disruptions, resulting in an approximately $45 million headwind due to higher backorder and special-order balances.

RH reported an adjusted EBITDA margin of 7.1%, exceeding the high end of its expectations despite the impact of backorders and special-order balances.

RH Sees Stronger Growth Acceleration in Second Half

Following its stronger-than-expected Q1, RH raised the low end of its full-year outlook for both revenue growth and adjusted EBITDA margin.

The company now expects FY2026 revenue growth of 4.5% to 8%, compared with its previous outlook of 4% to 8%. It also raised the low end of its adjusted EBITDA margin forecast to 14.2% to 16%, up from its prior range of 14% to 16%.

RH maintained its adjusted free cash flow forecast of $300 million to $400 million.

The outlook includes an approximately 270-basis-point drag from pre-opening and startup costs associated with the company's international expansion efforts.

RH also issued second-quarter guidance calling for revenue growth of 0.5% to 2.5% and adjusted EBITDA margin of 11.5% to 13%. The forecast includes an estimated 380-basis-point headwind related to the international expansion.

In prepared remarks read during the earnings call, Chief Executive Gary Friedman addressed the company's path to achieving its full-year outlook, saying, “How, many may ask, in an economic environment like the one we are navigating through, do you get from your half one numbers to your half two numbers necessary to make the year?"

Friedman pointed to three factors supporting the business's acceleration from flat growth in the first half to approximately 12% growth in the second half: a backlog reduction worth 4.5 percentage points, new-store growth expected to contribute 2.5 percentage points, and RH Estates, which is projected to contribute approximately five percentage points.

Global Expansion and RH Estates Expected to Drive Long-Term Growth

Friedman discussed RH's international expansion efforts, which include openings in Milan, Paris, and London, as well as the launch of RH Estates, a new brand targeting the traditional luxury market.

Friedman described the international locations as "arguably the three most immersive and inspiring brand experiences anywhere in the world," adding that they "will form the foundation necessary to earn the respect and recognition of not only the European and U.K. customer, but a global one."

Friedman described the launch of RH Estates as one of the company's most significant initiatives to date.

"I think it's the most intelligent, deep-thinking launch of a brand we've done," he said. "We're trying to make big moves that are industry-redefining. I think this is one of them. I think this is the biggest move we've ever made."

He also addressed the launch of RH Bespoke Furniture and RH Couture Upholstery, which will offer customizable pieces. Friedman said the new brands make products that were previously available only through trade showrooms more accessible. The company is also launching a compensation program designed to incentivize trade professionals, including interior designers and architects.

Analysts Remain Cautiously Optimistic as RH Faces Execution Test

Despite the stock's decline following earnings, at least two analysts reacted favorably to the report. Guggenheim reiterated its Buy rating on the shares, while Robert W. Baird raised its price target to $150 from $125.

Among the 20 analysts currently covering RH, the consensus rating is Hold, comprising eight Hold ratings, seven Buy ratings, and five Sell ratings. The average 12-month price target is $171.47, implying roughly 13% upside from current levels. Price targets range considerably from $88 to $350.

RH shares closed just under $160 ahead of the earnings release after gaining more than 7% the day leading up to the report. Following the results, the stock swung from as high as $163.55 to as low as $147. Most recently, shares were trading at approximately $157.71, down about 2%. Shares remain down around 13% year to date and roughly 12% over the past 12 months.

The stock has fared better than some peers, however. Shares of luxury furniture retailer Arhaus NASDAQ: ARHS fell after the company reported Q1 results in May and provided cautious guidance for Q2 amid macroeconomic uncertainty. Shares of Arhaus are down roughly 36% over the past year.

RH also remains one of the market's more heavily shorted stocks, with short interest rising to 40.9% of float as of May 29, up from 23.7% at the end of January.

While RH's message centered on the company's long-term growth opportunities, investors appeared cautious about the path to achieving its second-half targets. The company's ability to execute on its international expansion, RH Estates launch, and trade initiatives will remain a key focus in the quarters ahead as investors assess whether those efforts can deliver the growth needed to support management's outlook.