Are RH's New Design Galleries Set to Drive Global Brand Value?

RH RH, previously known as Restoration Hardware, is currently undertaking several in-house initiatives to enhance its revenue visibility and profitability prospects amid an uncertain macroeconomic environment. The main strategic efforts include global expansion, among other initiatives, a customer-friendly membership approach and supply-chain optimization. The global expansion through new retail design galleries is likely to be boding well for the company, strengthening its long-term prospects.

RH is mainly seeking untapped markets and capitalizing on those opportunities by opening new design galleries with the aim of expanding market share and brand visibility. For the remainder of 2025, RH expects to open six Design galleries. For the second quarter of fiscal 2025, the scheduled gallery opening includes RH Montreal, with RH Oklahoma City opening already announced in June-end 2025. For the second half of the year, the scheduled openings are in RH Paris, RH Detroit, RH Manhasset, RH San Diego and RH Palm Desert.

Although the market in the United States is currently risky due to housing demand softness and tariff-related ambiguity, RH is cashing out of the international market, especially Europe. During the first quarter of fiscal 2025, the company witnessed demand growing 60% across RH Munich and RH Dusseldorf, with continued growth noticed across noncomparable galleries in RH Brussels and RH Madrid. Owing to these robust trends, RH remains optimistic about the September 2025 opening in Paris, alongside another two openings in London and Milan in 2026.

In the long term, RH targets to open seven-nine new galleries annually, with two-three Design Studios or Outdoor galleries, or new concept galleries per year. By reaching such annual targets, it will be able to enhance its existing market presence and explore unreached markets.

RH Stock’s Price Performance vs. Other Market Players

Shares of this California-based luxury retailer in the home furnishing space have gained 23.4% in the past three months, outperforming the Hoya Capital Housing ETF (HOMZ) index. HOMZ is an exchange-traded fund that offers a diversified glimpse of the U.S. residential housing industry through 100 companies across homebuilding, rental operators, home improvement, furnishings, mortgage services and real estate tech, to name a few.

Sharing market space with RH, other renowned players, including Williams-Sonoma, Inc. WSM and Ethan Allen Interiors Inc. ETD, seem to be also undertaking global expansion plans. However, compared with RH, the intensity of this strategic effort is likely to be dim. During the past three months, the share price performance of Williams-Sonoma and Ethan Allen has gained 17.2% and 12.1%, respectively.

RH’s Valuation Trend

RH stock is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 16.34X. This is compared with the forward 12-month P/E ratios of 19.89X and 14.27X, respectively, at which Williams-Sonoma and Ethan Allen are currently trading. The discounted valuation of the stock compared with one of the mentioned renowned market players looks promising for investors.

Earnings Estimate Revision of RH

RH’s earnings estimates for fiscal 2025 have trended upward in the past 30 days to $10.76 per share, while the same have trended downward for fiscal 2026 to $14.61, respectively. However, the revised estimated figures for fiscal 2025 and 2026 reflect 99.6% and 35.8% year-over-year growth, respectively.

EPS Trend

The current uncertainties in the housing market and global unrest have induced mixed sentiments among analysts. However, the favorable year-over-year comparisons indicate that despite external risks, RH will be able to capitalize on its in-house business strategies and ensure incremental prospects.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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