RH Q1 Earnings Review: Better Than Feared, Braced for Tariff Storm

RH (formerly Restoration Hardware) delivered a better-than-feared Q1 earnings report that has bulls breathing easier—and shorts scrambling. Shares surged more than 14% in early trade following a surprise EPS beat and steady full-year guidance, despite macro headwinds and tariff uncertainty. The company’s aggressive shift in sourcing, disciplined operational execution, and global brand momentum helped it navigate what management called “the worst housing market in 50 years.” With only a 15 million share float and short interest around 20%, RH’s post-earnings spike had all the makings of a classic squeeze.

Earnings Snapshot: EPS Surprise, Revenue In Line

For the fiscal first quarter, RH reported adjusted EPS of $0.13, well ahead of consensus expectations for a ($0.09) loss. Revenue came in at $814 million, just shy of the $818 million estimate, but still up 12% year-over-year—a testament to brand strength despite persistent housing and macro softness. Adjusted EBITDA margin of 13.1% landed at the top end of guidance, aided by SG&A leverage even as gross margin came in slightly below expectations.

Full-year guidance was maintained: revenue growth of 10–13%, adjusted operating margin of 14–15%, and EBITDA margin of 20–21%. The company also reaffirmed plans to generate $250–$350 million in free cash flow for FY25, while noting the impact of the “Liberation Day” tariffs could weigh on Q2 sales by around 6 points before being recaptured in the second half.

Strategic Execution: Tariffs, Sourcing, and Margin Protection

RH continues to proactively shift sourcing away from China, anticipating Chinese receipts to drop from 16% in Q1 to just 2% by Q4. Management noted that 52% of upholstered furniture will be made in the U.S. by year-end, with another 21% coming from Italy. To manage risk, RH delayed the launch of a new concept from H2 2025 to Spring 2026, pending more clarity on tariff policy.

The company remains confident in navigating any trade scenario, citing partnerships with vendors to absorb part of the tariff impact and a resourced supply chain that reflects long-term strategic investment. These moves should cushion the blow of future tariff escalations and offer operational flexibility in an uncertain environment.

Consumer Trends and Sector Commentary: A Resilient Luxury Buyer

Despite industrywide headwinds, RH is clearly seeing strength in the high-end segment. Management highlighted accelerating demand trends in Europe, especially in RH England, where online demand rose 44% and the local gallery is on track to deliver up to $39 million in demand in its second year. Galleries in Munich, Düsseldorf, Brussels, and Madrid also saw strong growth, painting a picture of international momentum even as U.S. housing remains stagnant.

Notably, RH has increased its membership discount from 25% to 30%—a strategic investment designed to drive volume and share gains during a downturn. While it reflects increased promotional activity, the company framed this as a permanent shift to lock in long-term loyalty rather than a sign of desperation.

For the broader home furnishings and housewares sector, RH’s results imply that while discretionary demand remains fragile, the luxury segment is outperforming the mass market. RH’s ability to maintain pricing power and drive expansion through experiential retail (e.g., RH Paris, set to open in September) shows the value of branding, exclusivity, and product differentiation in an otherwise tepid environment.

What to Watch: Q2 Dynamics and Macro Overhangs

Looking ahead, RH guided Q2 revenue growth of 8–10% and an EBITDA margin of 20.5–21.5%. Management warned that global shipment delays tied to April's tariff shift will weigh on Q2 revenue, but they expect the impact to reverse in the back half of the year. The company continues to expect operating margin compression of 180bps in Q2 due to startup costs from international expansion—namely RH Paris, London, and Milan.

Investors should keep an eye on tariff policy developments in July, particularly the reciprocal tariff deadline. Any resolution could remove an overhang—or reignite cost pressures. Also worth watching: consumer credit and housing transaction trends, which remain key swing factors for luxury home demand.

Conclusion: Strategic Separation in a Cloudy Sector

RH continues to differentiate itself in a crowded and volatile sector by making bold, long-cycle bets on branding, global expansion, and platform elevation. In the face of macro gloom, the company is playing offense—investing in iconic locations, transforming supply chains, and building a hospitality-driven retail model. For a company operating in a depressed housing cycle, that’s no small feat.

Investors are rewarding RH for showing control of the narrative and confidence in its strategic vision. With the float tight, sentiment fragile, and a setup ripe for further short covering, the stock could stay volatile—but RH is reminding the market that sometimes, “ordinary and unremarkable” just won’t cut it.