RH Q1 Earnings Beat, Raises FY2026 Guidance
RH Q1 earnings beat and a raised FY2026 outlook were offset by softer Q2 revenue guidance and tariff-related backorders that pressured the stock.
KEY TAKEAWAYS
- Q1 net revenues were $800.3 million with adjusted EBITDA margin of 7.1%.
- Raised FY2026 revenue growth guide to 4.5%-8.0% and adjusted free cash flow to $300-$400 million.
- Q2 revenue guide of 0.5%-2.5% plus about $45 million tariff-related revenue drag weighed on the stock.
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RH reported stronger-than-expected Q1 earnings for the quarter ended May 2, 2026, and raised its FY2026 guidance on June 11, 2026. However, softer Q2 revenue guidance and tariff-related backorders pressured the stock.
Q1 Results and Cash Flow
RH issued its first-quarter fiscal 2026 results in a shareholder letter. The company reported net revenues of $800.3 million, down 1.7% year over year, and a GAAP net loss of $13.7 million. Adjusted EBITDA, a proxy for operating profit, was $56.9 million, representing a 7.1% margin. EBITDA totaled $71.8 million, or a 9.0% margin. The company generated free cash flow of $13.3 million during the quarter.
Guidance, Tariffs, and Market Reaction
RH raised its FY2026 outlook, projecting revenue growth of 4.5% to 8.0%, an adjusted EBITDA margin between 14.2% and 16.0%, and adjusted free cash flow of $300 million to $400 million. For Q2, the company guided revenue growth of 0.5% to 2.5% and an adjusted EBITDA margin of 11.5% to 13.0%. International pre-opening and startup costs related to expansion will reduce adjusted EBITDA margins by about 270 basis points for the full year and 380 basis points in Q2.
Management said Q1 net revenues were negatively affected by roughly $45 million due to backorder and special-order balances that were about $75 million higher than a year earlier, primarily because of tariff-related resourcing. These elevated balances are expected to normalize by the end of 2026, implying a revenue boost of approximately $75 million in the second half. The company attributed the improved full-year outlook to better-than-expected Q1 execution and the anticipated backlog normalization.
Shares fell more than 6% after the report as investors focused on the softer Q2 revenue guidance and tariff-related backlog. Analysts raised forecasts following the stronger quarter and higher full-year outlook.
"As a result of our better than expected first quarter results we are raising our outlook for fiscal year 2026," the shareholder letter said.
