Updated 10:45 a.m. ET on April 1
MILAN — Upscale American furniture-maker RH took a cautious stance on its fiscal first-quarter results for 2026 as it expands internationally amid uncertain times marked by rising costs and geopolitical unrest.
On Tuesday, Corte Madera, Calif.-based RH posted a lower-than-expected rise in revenues of 3.7 percent to $842.6 million in the fourth quarter ended Jan. 31, falling short of company guidance of a 7 to 8 percent growth.
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The firm forecast a 2 to 4 percent decline in sales in the first fiscal quarter of 2026, factoring in the margin impact from preopening and start-up costs for its international expansion, which includes a new Milan RH Gallery opening during Design Week here starting April 20.
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For the fiscal full year 2026, RH expects revenue growth of 4 percent to 8 percent, with adjusted free cash flow of $300 million to $400 million. Shares were down almost 23 percent in pre-market trading on Wednesday.
Trimming Debt
At the end of the fiscal year, the firm posted an improved net debt position of $2.42 billion versus $2.62 billion a year earlier. The firm expects to be debt free by 2029, chief executive officer Gary Friedman said in an earnings presentation, adding that RH plans to monetize assets over time. RH also released its revenues forecasts for 2027 to 2030, stating that it expects growth to accelerate 10 to 12 percent in 2027 and reach $5.4 billion to $5.8 billion by 2030.
“We will emerge from this period…as one of the most high-performing brands in the world.…We are confident in the long-term model,” Friedman added. “While we believe it’s prudent to plan conservatively this year due to uncertainties around interest rates and inflation,” he added.
Net income in the fourth quarter increased 107 percent to $28.8 million, or $1.53 per share. RH posted an adjusted EBITDA margin of 17.7 percent in the same period, which compares to a company forecast of 18.7 percent to 19.6 percent.
Both fourth-quarter and full-year net revenues were negatively impacted by about $30 million due to higher than expected back order and special order balances as a result of tariff related resourcing and about $10 million due to adverse weather at the end of the quarter, the company said in a statement.
In its full fiscal year ended Jan. 31, net revenues rose 8.1 percent to $3.44 billion, while net income increased 72 percent to $124.7 million, or $6.65 a share.
RH Estates
Looking ahead, TD Cowen said that performance hinges in part on the launch of RH Estates. Friedman said the company is focused on expanding into RH ecosystems or clusters of properties under the RH umbrella. The first ecosystem, he said, will be in Greenwich, Conn., where an RH Estates gallery and restaurant will open this summer.
But the focus for international expansion will be on Europe, especially with Milan slated to open at the end of April and London galleries to open soon after. RH Paris the Gallery, on the Champs-Élysées, opened last September and was what Friedman described as his biggest feat of all time. For the full year, TD Cowen sees European revenue at $203 million.
RH Estates is the company’s newest brand extension and will launch in Milan this spring. RH Estates will feature the introduction of RH Bespoke Furniture and couture upholstery, which includes customizable collections of its three trade-focused brands: furniture store Dennis & Leen, interior design firms Formations and Michael Taylor Designs, which were recently acquired by RH. On Wednesday, analysts said they see RH Estates as a major catalyst to business.
“We remain positive on RH’s product transformation, including the launch of RH Estates, and the revenue contribution from new stores, including international,” said analysts at Telsey Advisory Group, who trimmed the target price to $165 from $185 and its 2026 earnings per share estimates to $9.65 versus $10.15, maintaining a market perform rating. Telsey expressed concerns about “the impact on demand from a subdued housing market and ongoing investment spending to scale the international business.”
TD Cowen also trimmed its target price to $170 from $200 per share, maintaining a buy rating. “Given historical demand curves and timing of gallery rollouts, we think that year-on-year revenue growth won’t peak until potentially closer to [second quarter 2027],” analysts at TD Cowen said. “Besides the rollout, in our view, the biggest questions will be around market acceptance and strategies around inventory buys.”
While questions linger about how RH will be accepted in global design hubs like Milan, Friedman underscored physical spaces as the key to growth in the future. “Why physical first in a digital world? Comfort, scale, finish and quality are hard to judge online. We believe the physical manifestation of the brand will continue to be significantly more valuable than an invisible online one. We don’t build retail stores, we create inspiring spaces.”