RH Stock Jumps After Mixed Quarter as Investors Look Ahead

Restoration Hardware Holdings (RH) shares rallied despite soft earnings and lowered guidance. Luxury home retailer RH delivered a mixed third-quarter update, but the stock surged as investors focused on improving cash flow and long-term strategy rather than near-term margin pressure.

Key Points

• RH beat revenue expectations but missed earnings estimates for the quarter.
• Guidance for next quarter came in light, but free cash flow improved sharply.
• Investors appear focused on long-term growth initiatives, including international expansion.

RH Sees a “Better-Than-Feared” Quarter Despite EPS Miss

RH entered the quarter with low expectations after a 61% year-to-date stock decline. Revenue rose 8.9% year over year to $883.8 million, matching Wall Street estimates and showing that demand held up even in what management called the worst housing market in nearly 50 years.

Earnings were a different story. Adjusted EPS came in at $1.71, missing forecasts by nearly 21%. Margin pressure stemmed largely from tariffs on backordered goods, which increased costs on products that were sold before tariff changes took effect.

Still, investors welcomed the company’s improved liquidity. RH generated $83 million in free cash flow, compared with a loss of nearly $96 million a year earlier. Inventory fell 11% from last year, another sign of operational improvement.

Why Did RH Shares Rise After Weak Guidance?

RH’s fourth-quarter revenue guidance of $869–$877 million fell short of the $897 million analysts expected. Margin projections also reflected continued tariff-related headwinds and investments in international expansion.

Even so, shares climbed more than 7% as the market shifted its attention to the company’s long-term strategy. CEO Gary Friedman emphasized growth across international locations, hospitality ventures and the company’s Gallery model—elements that management believes will create meaningful separation from competitors over time.

Analysts did lower price targets, but Friday’s trading action showed that many investors believe the worst may be behind the company for now.

Is RH Still One of the Best Company Investments in Retail?

The company’s fundamentals present a mixed picture for investors who analyze stocks looking for companies that are good to invest in. Over the past three years, RH’s annual sales declined 2.9% despite opening new stores. Same-store sales grew just 1.3% annually, suggesting the company needs stronger traffic and productivity before accelerating physical expansion.

However, analysts expect revenue to grow 10.3% over the next 12 months—a sharp improvement that could point to better product cycles ahead. Meanwhile, RH’s long-term investments in design services, product development and international showrooms could support a multiyear growth runway if macro conditions stabilize.

What It Means for Investors

For investors tracking investment news and looking for the best stocks to buy, RH presents a complex setup. The company is navigating a tough macro environment that continues to weigh on margins, including tariff-related costs and a historically weak housing market.

But RH also demonstrated resilience: revenue is growing, cash flow is improving and the company is gaining early traction in new markets like RH Paris. Management is investing heavily in initiatives they believe will unlock long-term value, even if near-term profitability remains pressured.

Shares still trade below their 50-day and 200-day moving averages, indicating that broader momentum has not yet returned. For long-term investors, the question is whether RH’s strategic expansion ultimately outweighs those risks.

Conclusion

RH delivered a mixed quarter, but strong revenue growth, improving liquidity and a long-term strategic focus helped shares rebound. While uncertainty remains—especially around tariffs and the housing market—investors appear increasingly confident that RH’s long-game strategy may pay off over time.

FAQs

1. Why did RH stock rise despite missing earnings?

Investors focused on better-than-feared results, improving cash flow and long-term strategic investments rather than the EPS miss.

2. Is RH increasing revenue?

Yes. Revenue grew 8.9% year over year in Q3, and management expects 7–8% growth in Q4.

3. What challenges is RH facing?

Tariffs, international expansion costs and a historically weak housing market continue to pressure margins.

4. Is RH still considered a growth story?

Analysts expect revenue to grow more than 10% over the next 12 months, suggesting renewed momentum.

5. How is RH’s balance sheet?

The company ended the quarter with improved cash flow, reduced inventory and $43 million in cash, though it still carries $2.4 billion in net debt.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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