Luxury home furnishings retailer RH (RH) stunned Wall Street with a surprise first-quarter profit and a reaffirmed full-year outlook, sparking a double-digit rally in its stock on Friday.
The report was a welcome relief for investors bracing for the worst, given the backdrop of severe housing market weakness and sudden tariff shocks.
RH Rebounds: A Surprise Profit and Steady Guidance
RH, formerly Restoration Hardware, posted a net income of $8 million for the fiscal first quarter ended May 3, translating to 43 cents per share. That compares to a loss of $3.6 million, or 20 cents per share, in the same period last year. Wall Street had expected a loss again this quarter, making the result a notable beat.
Revenue rose 12% to $814 million, just shy of analyst expectations of $819 million, but well within RH’s own guidance range. Despite the miss, what excited investors was RH’s ability to preserve margins—an adjusted EBITDA margin of 13.1% and operating margin of 6.9%—while facing one of the most disruptive tariff environments in years.
Just two months ago, RH shares had plummeted nearly 40% after President Trump’s surprise announcement of “Liberation Day” tariffs, which imposed duties of up to 100% on goods from China, Vietnam, and other Asian countries. Nearly 75% of RH’s products had previously been sourced from Asia, making it one of the most exposed retailers.
Yet despite the chaos, RH maintained its fiscal 2025 revenue growth forecast of 10% to 13%, with operating margins expected to climb to 14%-15%, and adjusted EBITDA margins between 20%-21%.
RH, formerly Restoration Hardware, posted a net income of $8 million for the fiscal first quarter ended May 3, translating to 43 cents per share. That compares to a loss of $3.6 million, or 20 cents per share, in the same period last year. Wall Street had expected a loss again this quarter, making the result a notable beat.
Revenue rose 12% to $814 million, just shy of analyst expectations of $819 million, but well within RH’s own guidance range. Despite the miss, what excited investors was RH’s ability to preserve margins—an adjusted EBITDA margin of 13.1% and operating margin of 6.9%—while facing one of the most disruptive tariff environments in years.
Just two months ago, RH shares had plummeted nearly 40% after President Trump’s surprise announcement of “Liberation Day” tariffs, which imposed duties of up to 100% on goods from China, Vietnam, and other Asian countries. Nearly 75% of RH’s products had previously been sourced from Asia, making it one of the most exposed retailers.
Yet despite the chaos, RH maintained its fiscal 2025 revenue growth forecast of 10% to 13%, with operating margins expected to climb to 14%-15%, and adjusted EBITDA margins between 20%-21%.
Global Expansion and Domestic Shift Offset Tariff Fallout
RH’s ability to absorb the tariff shock stems largely from its ongoing shift in supply chain strategy. The company now expects to cut Chinese sourcing from 16% in Q1 to just 2% by the end of 2025. More than half of its upholstered furniture will soon be made in the U.S., mainly at its factory in North Carolina, while another fifth will be sourced from Italy.
CEO Gary Friedman emphasized that vendor partners absorbed a meaningful portion of the tariff burden, allowing RH to sidestep passing on costs to consumers. Still, the turmoil has not been without impact. The company said second-quarter revenue will take a 6 percentage point hit due to disruptions in shipping and resourcing.
RH also delayed the launch of a major new concept originally planned for late 2025, now pushed to Spring 2026 to avoid launching into market volatility. Meanwhile, the company continues to generate positive cash flow—$34 million in Q1—and is forecasting between $250 million and $350 million in free cash flow for the full year.
Beyond the U.S., RH’s international Galleries continue to outperform. Demand at RH England rose 47% in Q1, while online demand grew 44%. RH Munich and Dusseldorf saw combined demand jump 60%. The company’s Aynho Park Gallery, a countryside estate two hours from London, generated $46 million in demand last year—impressive given its remote location.
RH’s ability to absorb the tariff shock stems largely from its ongoing shift in supply chain strategy. The company now expects to cut Chinese sourcing from 16% in Q1 to just 2% by the end of 2025. More than half of its upholstered furniture will soon be made in the U.S., mainly at its factory in North Carolina, while another fifth will be sourced from Italy.
CEO Gary Friedman emphasized that vendor partners absorbed a meaningful portion of the tariff burden, allowing RH to sidestep passing on costs to consumers. Still, the turmoil has not been without impact. The company said second-quarter revenue will take a 6 percentage point hit due to disruptions in shipping and resourcing.
RH also delayed the launch of a major new concept originally planned for late 2025, now pushed to Spring 2026 to avoid launching into market volatility. Meanwhile, the company continues to generate positive cash flow—$34 million in Q1—and is forecasting between $250 million and $350 million in free cash flow for the full year.
Beyond the U.S., RH’s international Galleries continue to outperform. Demand at RH England rose 47% in Q1, while online demand grew 44%. RH Munich and Dusseldorf saw combined demand jump 60%. The company’s Aynho Park Gallery, a countryside estate two hours from London, generated $46 million in demand last year—impressive given its remote location.
CEO Gary Friedman’s Vision: Luxury, Resilience, and Market Share
On Thursday’s call, CEO Gary Friedman made it clear that RH is not merely weathering the storm—it’s aiming to dominate through it. The company plans to open seven to nine new European and U.S. Galleries annually. RH Paris, set to open in September on the Champs Élysées, will feature a rooftop restaurant with Eiffel Tower views and the brand’s most elaborate design studio to date.
“If an RH Gallery in the English countryside... can generate $46 million, what can a Gallery in the center of Mayfair do?” Friedman asked rhetorically, referencing the upcoming London location.
Even amid high interest expenses and a still-lofty debt load from past stock repurchases and real estate acquisitions, Friedman expressed confidence in RH’s path forward. The company owns about $500 million in real estate assets it can monetize opportunistically, and he sees the current environment as a chance to take market share while competitors retreat.
“There’s a lot of people going bankrupt... little online things... they can’t raise capital,” Friedman said. “They’re going away.”
Conclusion
After a turbulent spring, RH’s Q1 results offered a rare mix of financial discipline, strategic clarity, and forward-looking optimism. While tariffs and housing market woes remain major headwinds, RH is proving it can pivot fast, invest wisely, and scale globally—even under pressure. Investors who once feared the worst are now betting RH may be building not just homes, but a comeback.
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