RH 2026 Q1 Earnings Profitable Turnaround with Net Income Up 321.8%

RH (RH) reported its fiscal 2026 Q1 earnings on June 12th, 2025. The luxury home furnishings retailer surpassed expectations by returning to profitability, reporting an EPS of $0.43 compared to a loss of $0.20 per share in the previous year. The company's revenue for the quarter was $813.95 million, reflecting a 12% year-over-year increase. RH maintained its guidance for fiscal 2025, projecting revenue growth of 10% to 13% and free cash flow between $250 million and $350 million.

Revenue

The total revenue for RH in Q1 2026 saw a 12% rise, reaching $813.95 million, up from the previous year's $726.96 million. The RH segment emerged as the main contributor with $765 million, while the Waterworks segment added $48.95 million to the total net revenues.

Earnings/Net Income

RH experienced a significant turnaround in Q1 2026, posting an EPS of $0.43, reversing a loss of $0.20 per share from the previous year. The company achieved a net income of $8.04 million, a notable improvement from the net loss of $3.63 million in Q1 2025. This performance marks a positive shift in RH's earnings trajectory.

Post-Earnings Price Action Review

The strategy of purchasing RH stocks when revenues fall short and holding them for 30 days has proved to be ineffective. This approach yielded a negative return of 15.10%, significantly lagging behind the benchmark return of 89.93%. The excess return stood at -105.03%, resulting in a compound annual growth rate (CAGR) of -3.23%, indicating substantial losses over the backtested period. Moreover, the strategy exhibited a high maximum drawdown of -74.97%, underscoring its susceptibility to market downturns. With a Sharpe ratio of -0.06 and a volatility of 58.44%, the strategy faced considerable risk and return challenges, making it a less favorable choice for investors seeking stable performance.

CEO Commentary

Gary G. Friedman, Chairman and CEO, emphasized RH's 12% revenue growth in Q1 2025, attributing it to strategic investments that have boosted market share despite a challenging housing market. He highlighted the strong performance of RH England, with gallery demand up 47%, and expressed optimism about new galleries in Paris and London. Friedman maintained a long-term perspective, stating that these strategic moves set RH up for sustained growth and profitability. He acknowledged current economic challenges but remained positive about the global appeal of the RH brand.

Guidance

RH is forecasting a revenue increase of 10% to 13% for fiscal 2025, anticipating an adjusted operating margin of 14% to 15% and an adjusted EBITDA margin of 20% to 21%. The company expects to generate between $250 million and $350 million in free cash flow for the year. For Q2 2025, RH projects revenue growth of 8% to 10% with an adjusted operating margin of 15% to 16%, factoring in a 180 basis point impact on margins due to international expansion.

Additional News

In recent developments, RH appointed Lisa Chi as President and Co-Chief Merchandising & Creative Officer, effective May 20th, 2025. This strategic leadership change aims to strengthen RH’s merchandising and creative strategies. Additionally, RH has been actively addressing tariff challenges by shifting production out of China, with plans to reduce Chinese-sourced furniture receipts from 16% in Q1 to 2% by Q4 2025. Furthermore, RH continues to expand its global footprint with new gallery openings in Paris and London, reflecting its commitment to growing its luxury brand presence worldwide.