Key Highlights
- Q4 earnings per share reached $1.53, falling short of the $2.24 analyst consensus by $0.71
- Quarterly revenue totaled $842.6M versus analyst expectations of $873.48M
- The company identified tariffs as responsible for approximately 190 basis points of margin compression in Q4
- First quarter 2026 revenue projected to contract between 2% and 4%
- Short positions in the company increased approximately 28% during March
The luxury home furnishings retailer delivered fourth-quarter results that fell below Wall Street expectations across both profitability and sales metrics. Earnings per share registered at $1.53 compared to the Street consensus of $2.24, representing a significant $0.71 gap. Top-line performance also underwhelmed, with revenue reaching $842.6M against projections of $873.48M.
Despite the disappointing quarterly performance, shares managed to gain ground during trading hours, potentially supported by end-of-month portfolio rebalancing as investors positioned themselves for the upcoming quarter.
Looking at the complete fiscal year 2025, performance showed more encouraging signs. Annual revenue advanced 8% compared to the prior year, representing a two-year cumulative increase of 15%. Adjusted EBITDA reached $597M, translating to a 17.3% margin. Free cash flow generation totaled $252M, marking a reversal from the negative position recorded in 2024.
Company leadership characterized 2025 as a year of maximum capital deployment, with approximately $289M allocated to adjusted capital expenditure alongside $37M directed toward brand acquisitions. This elevated investment level has created margin pressure in the immediate term.
Tariff-related costs emerged as a significant challenge. Leadership quantified the impact at roughly 190 basis points of margin compression during the fourth quarter, with the greatest effects felt across metal outdoor furniture, lighting fixtures, area rugs and various furniture segments. Efforts to reconfigure supply chain sourcing contributed additional operational strain.
Management’s forecast for the first quarter of 2026 anticipates revenue declining in the range of 2% to 4%. For the complete fiscal year, guidance calls for revenue expansion of 4% to 8% with adjusted EBITDA margins landing between 14% and 16%.
Wall Street Response
Analyst firms delivered mixed reactions following the earnings release. TD Cowen maintained its “buy” recommendation while reducing its price objective from $265 down to $200. UBS lowered its target from $188 to $160 while maintaining a “neutral” stance. Stifel preserved its “hold” rating but significantly adjusted its target to $165 from a previous $320.
Current analyst sentiment averages out to a “Hold” rating across coverage, with a mean price target of $211.07. The breakdown includes seven firms with buy ratings, ten with hold recommendations, and three advising sell positions.
Short interest activity intensified during March, climbing roughly 28% and adding to downward pressure on the equity.
Growth Initiatives
The company continues advancing its expansion strategy despite current headwinds. RH plans to introduce RH Estates in mid-May, accompanied by newly created 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 operates 26 in-gallery dining establishments and has set a target to reach 40 locations by 2027.
Regarding insider transactions, executive Eri Chaya divested 7,000 shares on March 24th at a price of $129.42 per share, generating proceeds of $905,940. Director Mark Demilio sold 2,254 shares during January at $220.00 per share. Combined insider selling activity totaled $2.86M over the trailing 90-day period.
The stock reached a 12-month peak of $257.00 and has declined 41.51% over the past year, with a 52-week low of $123.03.
