RH Stock Falls After Q1 Earnings Beat and Raised Outlook

Luxury home goods 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 the better-than-expected results and the company's enthusiasm for its expansion plans, shares remained volatile following the report, as investors appeared to be focused on the pace of development needed to meet the company's second-quarter forecasts.

Shares recently traded down about 2%.

RH Goes Big on Profits 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 about $800 million was down 1.7% from the year-ago period but beat Wall Street estimates by about $8 million.

The company said its Q1 earnings were negatively impacted by tax-related earnings disruptions, which led to a windfall of nearly $45 million due to higher backorder and special order balances.

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

RH Sees Strong Growth Acceleration in Second Quarter

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 revenue growth in FY2026 of 4.5% to 8%, compared to its previous outlook of 4% to 8%. It also raised the lower end of its adjusted EBITDA forecast to 14.2% to 16%, from the previous range of 14% to 16%.

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

The outlook includes a nearly 270-basis-point drag from the previous opening and startup costs related to 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 volatility associated with international expansion.

In prepared remarks read during the earnings call, CEO Gary Friedman talked about the company's approach to achieving its full-year vision, saying, “Many would ask how, in an economic environment like the one we're navigating, do you get from half your numbers to half your double digits for the year?”

Friedman pointed out three factors supporting the acceleration of the business from low growth in the first quarter to almost 12% growth in the second quarter: the reduction of the backlog at a rate of 4.5 percent, the growth of new stores that is expected to include 2.5 points, and RH Estates, which is expected to contribute about 5 percent.

Global Expansion and RH Areas 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 mainstream luxury market.

Friedman described the international locations as “three very focused and inspiring events around the world,” adding that they will “build the foundation needed to gain respect and recognition not only from European and UK customers, but from around the world.”

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

“I think it's the smartest, most thoughtful product launch we've ever done,” he said. “We're trying to make big moves that redefine the industry. I think this is one of them. I think this is the biggest move we've ever made.”

He also spoke about the launch of RH Bespoke Furniture and RH Couture Upholstery, which will offer bespoke pieces. Friedman said these new products make products that were previously only available through trading rooms more accessible. The company also introduced a compensation program designed to motivate trade professionals, including interior designers and architects.

Analysts Remain Optimistic As RH Faces Issuance Test

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

Among the 20 analysts currently covering RH, the consensus rating is Hold, which includes eight hold ratings, seven buy ratings, and five sell ratings. The 12-month price average is $171.47, which is about a 13% upside from current levels. The target price ranges from $88 to $350.

Shares of RH closed just under $160 before the earnings release after gaining more than 7% the day before the report. After the results, the stock moved from a high of $163.55 to a low of $147. Most recently, shares were trading around $157.71, down about 2%. Shares are down about 13% year to date and about 12% over the past 12 months.

The stock has outperformed other peers, however. Shares of luxury furniture retailer Arhaus NASDAQ: ARHS fell after the company reported Q1 results in May and gave cautious guidance for Q2 amid macroeconomic uncertainty. Arhaus shares are down about 36% in the past year.

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

While RH's message focused on the company's long-term growth prospects, investors appeared cautious about how to achieve its second-quarter targets. The company's ability to carry out international expansion, the launch of RH Estates, and exchange programs will remain a focus in the near future as investors assess whether those efforts can deliver the growth needed to support management's vision.

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