RH (NYSE:RH) executives used the company’s latest earnings call to emphasize what Chairman and CEO Gary Friedman described as a period of “clutter,” driven by tariffs, global conflict and what he called “the most dire housing market in decades,” while arguing that the company is using the environment to position the brand for longer-term growth.
Fiscal 2025 results and “peak investment year”
Friedman said RH delivered 8% revenue growth in 2025 and 15% two-year growth, which he said outpaced furniture industry peers by “8-30 points.” He reported adjusted EBITDA of $597 million, or 17.3% of revenue, compared with $539 million, or 16.9% of revenue, in 2024. Friedman also highlighted a swing to free cash flow of $252 million versus negative free cash flow of $214 million in 2024.
RH Estates launch and product expansion
Friedman positioned RH Estates as a major growth driver and said it is designed to address the traditional category where RH is “under-penetrated.” He cited RH’s internal view that 60% of luxury homes feature classic or traditional architecture, which influences furniture purchasing behavior.
RH Estates is slated to introduce RH Bespoke Furniture—customizable collections supported by the company’s recently acquired trade brands—and RH Couture Upholstery by Dmitriy & Co., which Friedman described as “tailor-made sofas, sectionals, and chairs” that can be custom-ordered in sizes and finishes, including COM fabrics. Friedman said these offerings should allow interior design firms to specify RH “with their most discerning clients in custom projects.”
Friedman said RH Estates will premiere with the opening of RH Milan, a “70,000 sq ft former palace” on Corso Venezia during Salone, which he said draws an estimated 500,000 visitors. He added that the launch will include a dedicated source book mailing in mid-May, an international advertising campaign, and freestanding RH Estates galleries in Greenwich, Connecticut and the San Francisco Design District opening early summer, with a West Hollywood Design District location planned for 2027.
On the Q&A, Friedman provided additional timing details, saying the source books will arrive “mid-May” and that the company made “a bigger inventory buy.” He said about 30-40 galleries—the company’s “top 30-40” large design galleries—will take over the first floor with RH Estates in the second half, calling it “a significant launch and a significant bet.”
Physical-first strategy, hospitality, and new gallery formats
Friedman reiterated RH’s “physical first” approach, arguing furniture is “the least digitized large retail category” with an “80/20 store to online split,” while luxury furniture is “as high as 95/5.” He said RH’s galleries are designed as immersive spaces with courtyards, rooftop restaurants, and beverage concepts intended to be difficult to replicate online.
He also highlighted “strategically significant businesses embedded in our galleries,” including RH Interior Design, which he said has become “the largest residential interior design firm in the world,” as well as RH To The Trade and RH Hospitality. Friedman said RH currently operates 26 restaurants and expects to reach 40 by the end of 2027, adding that RH is “one of only seven globally owned and operated luxury restaurant brands with 20 or more locations worldwide.”
To address post-COVID cost inflation in luxury construction, Friedman said RH has developed more capital-efficient concepts:
- RH Design Compounds, described as 6-8 independent buildings connected by courtyards and anchored by an atrium restaurant, with compounds in development in Naples, Miami, and Walnut Creek.
- Design ecosystems featuring a multi-building street presence, including projects in Greenwich and Palm Desert, and in development in the West Hollywood Design District. Friedman said the Greenwich ecosystem will include the Historic Post Office gallery, an outdoor gallery opened last year, and a new RH Estates gallery with an integrated restaurant in a former Ralph Lauren building this summer.
- A new single-story gallery concept of 15,000-20,000 square feet aimed at secondary markets, under construction in Los Gatos, California, with designs in development for Richmond and Milwaukee.
Friedman said RH sees an opportunity to expand in 27 existing markets and open new concepts in 48 new markets across North America, which he characterized as a $2 billion opportunity. He also noted plans for additional freestanding interior design offices after what he called strong performance from the first such office in Palm Desert; a second office is planned for Malibu in the fall.
Margins, tariffs, and resourcing disruption
During analyst questioning, Friedman said margin pressure has been “somewhat disconnected and unrelated from the demand,” attributing pressure primarily to RH’s investment cadence—particularly European expansion and the ramp costs tied to RH Estates—along with tariffs and a “transition in timing and resourcing.” He said RH Estates will create “significant costs” in the second quarter for source books and advertising before meaningful revenue flows in the third and fourth quarters, noting the rollout is running late versus the company’s original plan.
Tariffs and resourcing were also raised as a factor affecting operations. CFO Jack Preston said RH previously cited tariffs as a 90-basis-point drag for last year, with an expected 170 basis points in Q4 that ultimately came in at 190 basis points. Preston said tariff conditions have been volatile and that the company is “nimble and dynamic,” adding that the prior tariff impact was “fully baked” by Q4 and could provide some indication for the first half, though the second half remains uncertain.
In response to a question from Zelman’s Marius Morar, Preston said backorder and special order pressures tied to resourcing would likely take “until the second half to fully resolve,” with a “modest impact” in the first quarter above what the company felt in Q4. Friedman added that the resourcing disruptions are largely tied to tariff-driven moves affecting core categories such as furniture, outdoor furniture (especially metal), lighting, and rugs, which he said are more complex to transition than smaller accessory categories.
Outlook, asset monetization, and leadership changes
Friedman said RH is planning conservatively amid uncertainty, with planned revenue growth of 4%-8% in 2026. He said the company expects growth to accelerate to 10%-12% in 2027 and projected revenue of $5.4 billion to $5.8 billion by 2030. He guided to adjusted EBITDA of 14%-16% in 2026, reaching 25%-28% by 2030.
On cash flow, Friedman projected $300 million-$400 million in 2026 and $500 million-$600 million in 2027, inclusive of $200 million-$250 million of asset sales each year. He said RH expects cumulative cash flow of $3 billion by 2030, including asset sales, and expects to be debt-free by 2029.
Asked about monetization, Friedman said the “majority” of planned asset sales are expected to be sale-leaseback transactions on operating properties, alongside some investment properties the company no longer plans to pursue, including a building in Madrid and certain assets in Aspen. He reiterated the company has referenced roughly $500 million of real estate assets it could monetize.
Friedman also discussed executive additions referenced in company press releases, including Dave Stanchak, who rejoined RH and was described by Friedman as an experienced real estate executive with an investor background, and Veronica, whom Friedman said brings manufacturing expertise. Friedman said RH sees an opportunity to build “the most unique manufacturing and sourcing platform in the world,” potentially combining owned, joint ventured and outsourced production to improve efficiency and long-term economics.
Throughout the call, Friedman maintained that RH is cycling a “peak investment” period alongside what he called a trough for housing demand, and argued that as capital intensity and related expenses decline over time, the company expects operating leverage to improve. He closed by saying RH views the current environment as “the most important period in our history,” and that management is “more excited about the outlook” despite uncertainty.
About RH (NYSE:RH)
RH, formerly Restoration Hardware, is a design-driven luxury retailer specializing in high-end home furnishings, décor, textiles, lighting and outdoor living products. The company offers a curated collection of furniture pieces—including seating, casegoods, beds and dining items—alongside rugs, art and decorative accessories. RH’s product lines are organized into distinct collections, each reflecting a cohesive design philosophy and premium craftsmanship aimed at the residential and hospitality markets.
Founded in 1979 in Eureka, California, by Stephen Gordon, Restoration Hardware began as a small warehouse in Northern California.
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