RH (RH): A Bull Case Theory

We came across a bullish thesis on RH on Speedwell Memos’s Substack by Speedwell Research. In this article, we will summarize the bulls’ thesis on RH. RH's share was trading at $204.15 as of January 29th. RH’s trailing and forward P/E were 36.99 and 17.48 respectively according to Yahoo Finance.

RH, together with its subsidiaries, operates as a retailer and lifestyle brand in the home furnishings market in the United States and internationally. RH reported 3Q25 results, driving a +6% stock gain, with revenues growing 9% y/y to $884 million, accelerating from 8% last quarter as earlier demand signals translated into sales. The shareholder letter highlighted quantified market share gains from competitors, emphasizing RH’s strong execution despite a challenging macro environment.

LTM revenues of $3.4 billion remain below 2022 peaks, yet RH continues to expand internationally, introduce new collections, and grow galleries from 67 to 74, while competitors like Arhaus, Wayfair, Ethan Allen, and West Elm show mixed performance with operating margins under pressure. RH’s smaller accessory business, originally exited to focus on higher-margin furniture, may be partially relaunched with branded items like candles and blankets to attract new customers without diluting the brand.

Strategic initiatives include opening the first standalone RH Interior Design office in Palm Desert, generating $1 million monthly, and the RH Ocean Grill restaurant in Newport Beach, projected to reach $20–25 million in revenue, helping offset gallery rent. Paris studio traffic surged 62% in a recent six-week period despite initial staffing challenges, highlighting strong international potential. Gross margins remained resilient at 44.1%, while operating margins contracted slightly to 12% amid $57 million in interest expense and a $3.75 billion debt load. Inventory declined $82 million q/q, reflecting ongoing optimization efforts.

Looking ahead, RH targets 9% revenue growth, 11.6–12% adjusted operating margins, and $250–300 million in free cash flow for 2025. Long-term ambitions remain aggressive, with North American revenues projected at $5–6 billion and international expansion eventually surpassing domestic sales. While execution risk and leverage are notable, RH’s unique experiential offerings, market share gains, and multi-decade growth trajectory provide a compelling risk/reward profile, positioning the company to capitalize on a housing recovery and evolving luxury consumer trends.

Previously, we covered a bullish thesis on Williams-Sonoma, Inc. (WSM) by Charly AI in April 2025, which highlighted margin expansion, operational efficiency, and disciplined capital allocation amid modest revenue declines. The company's stock price has appreciated by approximately 29.95% since our coverage. The thesis still stands as WSM benefits from vertical integration. Speedwell Research shares a similar perspective but emphasizes RH’s international expansion and experiential offerings.

RH is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held RH at the end of the third quarter which was 49 in the previous quarter. While we acknowledge the potential of RH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.