RH Swings to a Loss as Tariffs Squeeze Backorders
RH posted a $13.7 million net loss in its most recent quarter, its first in five, as backorders swelled by roughly $75 million on tariff-related delays.
RH (RH) swung to a GAAP net loss of $13.7 million, or $0.73 a share, in the quarter ended May 2, 2026, reversing a year-earlier profit of $8.0 million, or $0.40 a share, and marking the first loss in the home-furnishings retailer's trailing five reported quarters.
The reversal followed four straight quarters of expanding sales and profit. Revenue growth had accelerated from 8.4% in the second quarter of fiscal 2025 to 9% in the third and held at 3.7% in the fourth, before net revenues fell 1.7% year over year to $800.3 million in the most recent period. Adjusted EBITDA margin, which had stayed in the high-teens for three consecutive quarters, dropped to 7.1% from 17.7% the quarter before, a roughly 10-point sequential decline the company tied to tariff-related backorder drag and pre-opening costs tied to its international expansion.
Backorder and special-order balances ran about $75 million above year-earlier levels, roughly 2.5 times the elevated $30 million balance RH had disclosed just one quarter earlier. Management said it expects a similarly elevated backlog in the current quarter before normalization by the end of 2026, with roughly $75 million of deferred revenue expected to flow back in the second half of the year. Gross margin also continued to erode, falling to 41.4% from 43.7% a year earlier and from 42.9% in the prior quarter.
Free cash flow fell to $13.3 million from $34.1 million a year earlier, down sharply from $83.0 million and $54.6 million in the two preceding quarters, even as full-year fiscal 2025 free cash flow had totaled $252.4 million. A $31.7 million favorable legal settlement tied to credit-card interchange fees helped offset some of the pressure in the SG&A line, a new item not present in the adjustment schedules of the prior four quarters, which had instead featured asset impairments, reorganization costs and a smaller legal settlement of about $10 million.
RH pointed to new growth initiatives to offset the near-term drag. The company introduced RH Estates, RH Bespoke Furniture and RH Couture Upholstery for the first time in its most recent shareholder letter, framing the launches as a driver expected to contribute 5.0 percentage points to its second-half revenue bridge — none of the four prior quarterly letters had referenced the new lines.
Despite the quarterly loss, RH raised its full-year outlook. The company lifted its fiscal 2026 revenue growth guidance to a range of 4.5% to 8.0% from 4% to 8% given a quarter earlier, and nudged its adjusted EBITDA margin guide to 14.2%-16.0% from 14%-16%. The guidance implies a bumpier path in the near term: RH's outlook for its own most recent quarter calls for revenue growth of just 0.5% to 2.5%, well below the pace embedded in its full-year target, even though results for the most recent quarter had beaten the -2% to -4% decline the company had guided to a quarter earlier.
RH also dropped two disclosures that had featured prominently in its prior three shareholder letters: the "demand" comparable-growth metric, which stood at 13.7% as recently as the second quarter of fiscal 2025, and a two-year peer revenue-growth comparison table carried through the fourth quarter of fiscal 2025. Neither appeared in the company's most recent release.
The latest regulatory filing tied to RH consisted of an insider Rule 13d-3 disclosure covering a stock transaction by Chairman and Chief Executive Gary Friedman, rather than a new set of quarterly operating results.