Key Takeaways
- Fourth quarter earnings per share of $1.53 fell short of the $2.24 analyst consensus
- Quarterly revenue of $842.6M missed the $873.48M estimate
- Tariffs created approximately 190 basis points of margin pressure in Q4
- First quarter 2026 revenue projected to fall between 2% and 4%
- Short positions in RH increased roughly 28% during March
The luxury home furnishings company RH delivered a challenging fourth quarter performance, falling short on both the top and bottom lines. The retailer reported earnings per share of $1.53, significantly trailing the Street’s estimate of $2.24—representing a substantial $0.71 miss. Quarterly sales reached $842.6M, coming up short of the anticipated $873.48M.
Interestingly, shares managed to tick upward during the trading session, potentially buoyed by month-end portfolio rebalancing as market participants positioned themselves for the upcoming quarter.
Looking at the full fiscal year picture, FY2025 showed some bright spots. The company achieved 8% revenue expansion year-over-year, translating to a 15% gain on a two-year stacked basis. Adjusted EBITDA reached $597M with margins at 17.3%. Free cash flow turned positive at $252M, marking a significant improvement from the negative territory seen in 2024.
However, company leadership characterized 2025 as a period of maximum investment, allocating approximately $289M toward adjusted capital expenditures and an additional $37M for brand acquisitions. These investments are creating near-term margin compression.
Trade tariffs emerged as a significant obstacle. The executive team highlighted that tariffs created roughly 190 basis points of margin degradation during the fourth quarter, with the most severe impact hitting metal outdoor furniture, lighting fixtures, area rugs, and various furniture segments. Supply chain restructuring efforts compounded these challenges.
Looking ahead to the first quarter of 2026, management projects a revenue contraction of 2% to 4%. Full-year expectations call for revenue growth in the 4% to 8% range, with adjusted EBITDA margins landing between 14% and 16%.
Wall Street Responds
The analyst community expressed concern following the results. TD Cowen maintained its “buy” recommendation while slashing its price objective from $265 down to $200. UBS reduced its target from $188 to $160 while maintaining a “neutral” stance. Stifel kept its “hold” rating but dramatically lowered its target to $165 from $320.
The consensus analyst rating currently stands at “Hold” with an average price target of $211.07. Among covering analysts, seven maintain buy ratings, ten hold, and three recommend selling.
Bearish positioning intensified as short interest climbed approximately 28% throughout March, creating additional downward pressure.
Growth Initiatives
Despite near-term challenges, RH continues advancing its expansion strategy. The company plans to unveil RH Estates in mid-May, introducing new sub-brands RH Bespoke and RH Couture. These launches follow the strategic acquisitions of Michael Taylor, Formations, and Dennis & Leen.
Global expansion remains a priority with flagship location 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 per share. Collectively, company insiders have sold approximately $2.86M in stock over the trailing 90-day period.
RH shares reached a 52-week peak of $257.00. The stock has declined 41.51% over the past twelve months, with a 52-week low of $123.03.
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