RH raises outlook after Q1 beat as Estates launch takes center stage

RH reported first-quarter revenue of $800.3 million, topping estimates by $8.7 million, and raised its full-year outlook as the luxury home furnishings company pivots toward its Estates concept and international expansion.

"As a result of our better-than-expected first quarter results, we are raising our outlook for fiscal year 2026," Chairman and Chief Executive Officer Gary Friedman said.

The adjusted loss of $1.97 a share was narrower than the $2.13 loss analysts projected. Revenue fell 1.7% from a year earlier, with elevated backorder and special-order balances — about $75 million above normal — reducing top-line results by roughly $45 million because of tariff-related resourcing and transportation disruptions, according to management.

The company now expects fiscal 2026 revenue growth of 4.5% to 8%, up from its prior range of 4% to 8%, and adjusted EBITDA margin of 14.2% to 16%. Management attributed the expected second-half acceleration to three factors: backlog reduction contributing 4.5 percentage points, new store growth adding 2.5 points, and the RH Estates concept contributing 5 points.

Friedman described RH Estates as the company's entry into the highest tier of the luxury home market, with more customization, higher-end craftsmanship, and broader access to goods traditionally available only through trade showrooms. The concept aggregates brands and ateliers including Dmitriy & Co, Joseph Jeup, Dennis & Leen, Formations, Waterworks and Michael Taylor. Friedman said the traditional classic market represents roughly 60% of the luxury home segment and that RH is "vastly under-penetrated" in that category.

The company also plans to introduce a compensation program for interior designers, architects and trade members. Friedman said the timing is tied to Estates, which opens access to a higher-end product mix. RH had previously removed trade incentives and now views that decision differently, he said during the call.

International expansion remains a major investment. RH is opening galleries in Paris, Milan and London, which Friedman described as foundational for the company's global luxury ambitions. Pre-opening and startup costs are expected to create an approximate 270-basis-point drag on adjusted EBITDA margin for the full year and 380 basis points in the second quarter.

For the second quarter, RH guided for revenue growth of 0.5% to 2.5% and adjusted EBITDA margin of 11.5% to 13%. The company maintained its adjusted free cash flow forecast of $300 million to $400 million.

On the balance sheet, Friedman said debt reduction remains a priority, pointing to planned asset sales of $200 million to $250 million per year over the next two years. The company recently completed a transaction related to its Aspen real estate that gave RH 100% control of eight properties, which could aid monetization efforts.

Shares traded at about $157.71 following the report, down roughly 2%, after swinging from as high as $163.55 to as low as $147. Short interest stands at 40.9% of float, up from 23.7% at the end of January, according to data from MarketBeat.

The guidance raise signals management expects the Estates launch and international openings to drive a meaningful acceleration in the second half. Investors will watch second-quarter results for evidence that backlog normalization and the new concept are delivering the projected 12% growth rate.

This article is for informational purposes only and does not constitute investment advice.