RH Defies 50-Year Housing Slump: What's Driving Its Growth?

RH (RH, formerly Restoration Hardware) delivered strong first-quarter 2025 results, defying macro headwinds that have crippled much of the housing and home furnishings sector. Despite what CEO Gary Friedman calls “the worst housing market in almost 50 years,” RH reported 12% revenue growth year over year to $814 million, along with adjusted operating and EBITDA margins at the high end of guidance—7.0% and 13.1%, respectively. Net income reached $8 million, a sharp rebound from a loss in the prior year.

So, what’s driving this unexpected growth? RH’s performance appears rooted in its high-end strategy: converting luxury design into immersive experiences. While many competitors have gone promotional, RH is expanding its physical footprint globally with new Design Galleries in Paris, Oklahoma City, and Montreal. RH England’s second-year demand rose 47% in the first quarter, with RH Madrid and RH Dusseldorf also contributing to European momentum.

Membership discounts were deepened to 30–35% to capture share in a tight demand environment. Meanwhile, the company is shifting sourcing from China to the United States and Italy to mitigate tariff risks and control quality. With plans to generate $250–$350 million in free cash flow this year and long-term global ambitions—including a new brand extension and hospitality ventures—RH is playing offense in a weak housing cycle.

While its 4.6x net debt-to-EBITDA ratio may raise eyebrows, the company’s bold investments could position it for accelerated gains once housing rebounds. For now, RH’s strategic separation in product, place, and platform continues to fuel growth against the odds.

RH vs. Williams-Sonoma and Arhaus: Who is Winning?

As RH charts growth in a battered housing market, its premium peers—Williams-Sonoma WSM and Arhaus ARHS—offer a telling contrast. Williams-Sonoma, owner of Pottery Barn and West Elm, has leaned on its digital prowess and operational discipline to weather macro volatility. However, WSM’s growth has decelerated as mid-tier consumers pull back and housing-related discretionary spending softens. While Williams-Sonoma is profitable and resilient, it lacks the experiential, high-touch retail concepts RH is aggressively scaling.

Arhaus, meanwhile, continues to expand showrooms and emphasize custom, artisan-crafted furniture. Arhaus shares RH’s focus on upscale design and experiential selling, but it’s more domestically concentrated. Though Arhaus has shown solid comp growth and margin control, its brand visibility and international scale lag RH.

Both Williams-Sonoma and Arhaus remain formidable, but RH is differentiating through global expansion, luxury hospitality, and design services. If the housing market recovers, RH could emerge with deeper brand equity than Williams-Sonoma or Arhaus.

RH Stock’s Price Performance

Shares of this California-based luxury retailer in the home furnishing space have gained 15.9% 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.

RH’s Valuation Trend

RH stock is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 16.88. This is compared with the forward 12-month P/E ratios of 20.62 and 21.04, respectively, at which Williams-Sonoma and Arhaus 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 and 2026 have trended downward in the past 60 days to $10.76 per share and $14.61, respectively. However, the revised estimated figures for fiscal 2025 and 2026 reflect year-over-year growth of 99.6% and 35.8%, respectively.

EPS Trend

The RH 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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