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RH (RH)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2025 (Q1 2026) delivered $813.952M (+12% YoY) with GAAP operating margin 6.9% and adjusted operating margin 7.0%; adjusted EBITDA margin was 13.1% and free cash flow $34.1M .
  • Versus S&P Global consensus, Q1 EPS beat (actual $0.13 vs -$0.07*), revenue slightly missed ($813.952M vs $818.570M*), and EBITDA was below consensus (actual $91.147M* vs $104.350M*)—management reported adjusted EBITDA of $106.4M .
  • Guidance for FY2025 was maintained in Q1 (revenue +10–13%, adj. op margin 14–15%, adj. EBITDA margin 20–21%), but revised in Q2 to +9–11%, 13–14%, and 19–20%, respectively, reflecting tariff costs and Sourcebook timing .
  • Near‑term catalyst: permanent membership discount increased to 30% and tactical 35% outdoor promotion to capture share amid tariff disruptions; Q2 expected ~6-point revenue deferral to 2H recovery .

What Went Well and What Went Wrong

What Went Well

  • Double‑digit top‑line growth (+12% YoY) and margins at high end of expectations; adjusted operating margin 7.0% and adjusted EBITDA margin 13.1% .
  • Positive free cash flow ($34.1M) with inventory sequentially lower; management forecasts FY2025 FCF of $250–$350M .
  • Europe momentum: RH England gallery demand +47% and online +44% in Q1; strong pipeline ahead of RH Paris opening .
    • “We have never been more excited or confident about the desirability of the RH brand globally.” — Gary Friedman .

What Went Wrong

  • Tariff shocks disrupted shipments globally, deferring ~6 points of Q2 revenue to 2H; reciprocal tariff uncertainty persists .
  • Interest burden remains heavy: Q1 net interest expense $56.6M; TTM net debt/adjusted EBITDA 4.6x .
  • Tactical promotions (limited‑time 35% outdoor) and permanent membership discount to 30% could pressure near‑term profitability despite management’s confidence in offsets .

Financial Results

MetricQ4 2025Q1 2026
Revenue ($USD Millions)$812.406 $813.952
Gross Margin %44.7% 43.7%
Operating Margin % (GAAP)8.7% 6.9%
Adjusted Operating Margin %11.3% 7.0%
Net Income ($USD Millions)$13.917 $8.039
Diluted EPS ($)$0.69 $0.40
Adjusted Diluted EPS ($)$1.58 $0.13
EBITDA ($USD Millions)$98.920 $103.005
Adjusted EBITDA Margin %17.1% 13.1%
Free Cash Flow ($USD Millions)$(69.665) (Q4) $34.076

Actual vs S&P Global consensus (Primary EPS, Revenue, EBITDA):

MetricQ4 2025 ConsensusQ4 2025 ActualQ1 2026 ConsensusQ1 2026 Actual
EPS ($)1.90748*1.58 -0.06815*0.13
Revenue ($USD)829,528,050*812,406,000 818,570,060*813,952,000
EBITDA ($USD)153,933,330*125,387,000*104,350,000*91,147,000*

Values retrieved from S&P Global. Company also reported adjusted EBITDA of $138.8M in Q4 and $106.4M in Q1 with margins 17.1% and 13.1%, respectively .

KPIs and regional/category indicators:

KPIQ1 2026Notes
RH England Gallery Demand YoY+47% Second full fiscal year demand expected ~$37–39M
RH England Online Demand YoY+44% Online demand expected ~$8M
Europe Comparable Galleries (Munich/Düsseldorf) Demand YoY+60% Acceleration across EU footprint
FCF ($USD Millions)$34.1 Positive despite tariff disruptions

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2025)Q1 2026 GuidanceQ2 2026 GuidanceChange
Revenue GrowthFY2025+10% to +13% Maintained +9% to +11% Lowered
Adjusted Operating MarginFY202514% to 15% Maintained 13% to 14% Lowered
Adjusted EBITDA MarginFY202520% to 21% Maintained 19% to 20% Lowered
Free Cash FlowFY2025n/a$250M to $350M $250M to $300M Tightened lower end
Revenue GrowthQ2 2025n/a+8% to +10% (includes ~-6 pts tariff deferral) Actual reported later n/a
Adjusted Operating MarginQ2 2025n/a15.0% to 16.0% (incl. ~-180 bps investment drag) Actual reported later n/a
Adjusted EBITDA MarginQ2 2025n/a20.5% to 21.5% Actual reported later n/a

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q4 2025)Previous Mentions (Q-1: Q1 2026)Current Period ViewTrend
Tariffs/MacroExpected no negative impact from earlier tariffs; mitigation with partners Reciprocal tariffs disrupted shipments; ~6-point Q2 revenue deferral; shift sourcing out of China from 16% (Q1) to 2% (Q4) Elevated uncertainty; mitigation ongoing; vendors absorbing portion Deteriorating near-term; mitigations accelerating
Membership/PromotionNot highlightedPermanent membership discount to 30%; outdoor 35% for ~3.5 weeks to capture seasonal share Strategic pricing lever to drive share; maintain margin targets More aggressive membership value
European ExpansionOpening Paris in 2025; London/Milan in 2026 RH England demand +47% gallery/+44% online; Paris opening planned early Sept Q2 update: Paris opened; traffic > RH New York; strong design pipeline Accelerating; strong early reads
Supply Chain/Manufacturing48% upholstered U.S. by EOY; 21% Italy 52% upholstered U.S., 21% Italy by EOY; receipts from China to 2% by Q4 Responding to India 50% tariffs; re-sourcing rugs; continued U.S./Italy/Mexico mix Increasing U.S./Italy mix; China exposure sharply reduced
Leverage/DeleveragingNet debt/adj. EBITDA 4.8x 4.6x; deleveraging via EBITDA growth; no strict targets 4.2x by Q2 TTM; continued focus on FCF and capex moderation Improving leverage profile

Management Commentary

  • “Our industry leading growth continued… adjusted operating margin of 7.0% and adjusted EBITDA margin of 13.1% were at the high end of our expectations.” .
  • “We have never been more excited or confident about the desirability of the RH brand globally.” .
  • “Our debt is reflective of a washtub bet on ourselves… we repurchased 60% of our outstanding shares… and 30% during this housing downturn.” .
  • On tariffs and sourcing: “We expect receipts to decrease from 16% in Q1 to 2% in Q4… with a meaningful portion of the tariff absorbed by our vendor partners.” .

Q&A Highlights

  • Europe ramp/forecasting: Management expects European galleries to reach four‑wall profitability at or above U.S. levels over time; strong early demand signals and operational fixes (in‑stock, fabrics) could double current business in coming years .
  • Membership strategy: Permanent move to 30% discount as strategic share capture; limited‑time 35% outdoor to address compressed peak season amid tariff disruptions .
  • Margins: Core product margins up YoY; expectation for continued YoY improvement through year, despite volatility post tariffs .
  • Balance sheet/Capital: Ample ABL availability; opportunistic capital raising possible at higher stock prices (historically via converts); focus on monetizing real estate and inventory over 12–18 months .
  • Tariff deferral mechanics: Demand exceeded revenue due to shipment pauses; backlog expected to convert to 2H revenue .

Estimates Context

  • Q1 FY2025 (Q1 2026): EPS beat vs consensus (0.13 actual vs -0.07*), revenue slight miss ($813.952M vs $818.570M*), EBITDA below consensus (91.147M* vs 104.350M*); company reported adjusted EBITDA $106.4M (13.1% margin) .
  • Q4 FY2024 (Q4 2025): EPS beat vs consensus (1.58 actual vs 1.91*), revenue miss ($812.406M vs $829.528M*), EBITDA below consensus (125.387M* vs 153.933M*) .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near‑term volatility from tariffs (reciprocal and India) creates shipment timing and cost headwinds, but RH is aggressively mitigating through re‑sourcing and vendor cost sharing; expect revenue deferrals to 2H .
  • Strategic pricing moves (30% membership; tactical outdoor promo) aim to capture share and sustain top‑line, with management signaling confidence in margin offsets from product transformation and pricing architecture .
  • Europe is a multi‑year growth vector—strong RH England comp momentum and successful Paris opening (traffic > RH New York; robust design pipeline) support the international thesis .
  • Cash generation improving: positive Q1 FCF; FY2025 FCF outlook $250–$300M, with capex trending lower in 2026–2027 to support deleveraging .
  • Balance sheet still carries high interest costs; reducing net leverage via EBITDA growth and potential asset monetization remains a key medium‑term priority .
  • Narrative risk/reward: Brand elevation and platform expansion underpin long‑term separation, but tariff policy path and macro housing demand remain key swing factors for estimates and valuation .