For the quarter ending October 2025, RH reported revenues of $883.81 million, marking an 8.9% increase from the previous year. The earnings per share (EPS) for this period was $1.71, compared to $2.48 a year ago.
The revenue surpassed the Zacks Consensus Estimate by 0.1%, which was $882.95 million. However, the EPS was below expectations by -19.72%, with the consensus EPS estimate at $2.13.
Key metrics for RH reported in this quarter were closely aligned with analyst projections. The number of total RH galleries stood at 73, exceeding the average estimate of 68. RH Modern gallery numbers remained steady at 1, meeting expectations.
The number of Waterworks showrooms matched the estimate at 14. The total leased selling square footage at period end was 1,639.00 Ksq ft, higher than the 1,594.30 Ksq ft estimated.
RH Design galleries counted 37, and Baby & Child and Teen Galleries had 1, both aligning with projections. The overall store count was 88, consistent with estimates. RH Legacy galleries numbered 26, slightly below the estimate of 27. Outlet locations were in line with expectations at 43.
We see that RH’s earnings per share for the third quarter significantly missed expectations, coming in almost 20% below the consensus. This kind of miss on profitability, dropping from $2.48 to $1.71 in a year, often leads to immediate negative pressure on a stock’s price. Therefore, a bearish outlook is the most straightforward initial reaction in the coming weeks.
Looking at the broader economy, recent data from the U.S. Census Bureau through November 2025 has shown a slight cooling in retail sales for furniture and home furnishings, following interest rate hikes earlier in the year. Historically, we have observed that stocks can fall between 5% and 15% in the weeks following an earnings miss of this magnitude, and this economic backdrop reinforces the negative sentiment. This contrasts with the strong housing market we saw back in 2023 and 2024, which previously bolstered companies like RH.
However, we must also consider that the company is expanding its physical footprint, with total galleries and leased square footage beating analyst estimates. This expansion suggests management has a long-term growth plan, creating a conflict with the current poor profitability. This clash between weak short-term results and ambitious long-term plans can create significant price volatility.
For those anticipating a price drop, buying put options with expirations in January or February 2026 offers a direct way to profit from the downside. Alternatively, given the conflicting signals, a volatility play like a straddle could be effective. This strategy would be profitable if the stock makes a sharp move in either direction as the market digests the news.
We should also note that for existing shareholders, selling covered calls could be a prudent move to generate income and provide a small cushion against a potential decline. With the holiday season upon us, trading volumes may become thinner, which can sometimes exaggerate price swings. This makes managing risk particularly important heading into the end of 2025.
