How RH Stock Could Fall to $110?

Note: RH FY’24 ended on February 1, 2025

RH stock, the luxury home furnishings retailer formerly known as Restoration Hardware, slid 8% in extended trading Thursday. Why? The company cut its full-year revenue growth outlook and missed Q2 estimates on both the top and bottom line. Add in tariff pressures—both current and potential—and warnings of “significant inflation” ahead, and investors are once again worrying about margin compression.

If you’ve followed RH for a while, you know this isn’t the first time the stock has stumbled. History shows how vulnerable it can be in downturns: shares plunged 71% during the 2022 inflation shock and 68% in the 2020 pandemic crash. Yes, RH rebounded after COVID, but it has never recaptured its 2021 highs. The takeaway? RH doesn’t weather recessions well. Read RH Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The stock is already down more than 40% this year. Could it fall further? Absolutely. Revenues, margins, and valuation are the three levers that could pull RH toward $110 levels, a 50% drop from current levels. Let’s break them down.

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1. Revenues: Stalled Growth Ahead?

On the surface, RH’s sales have looked better. Over the past year, revenue grew 8% to $3.3 billion, with Q2 up 8% year-over-year to $899 million. But look deeper: over the past three years, revenue has actually shrunk at an average rate of 5%.

The risk is what comes next. RH’s business is closely tied to housing. If high mortgage rates and weak home sales persist, demand for luxury furniture could cool quickly. Layer on tariffs and inflation, and revenues could stagnate—or even slip back toward $3.0 billion. For a stock priced like a growth play, that’s a red flag. For more details, see: RH Revenue Comparison

2. Margins: Pressure from All Sides

In the last 12 months, RH generated $324 million in operating income, translating to a 9.9% operating margin. Net income came in at just $84 million—a slim 2.6% net margin.

And those numbers face pressure. Tariffs could inflate costs, inflation is pushing up materials and labor, and freight isn’t cheap. If margins slide from about 10% toward the mid-single-digits, earnings could be cut in half. For a premium brand that trades on growth, shrinking profitability can unravel the story fast.

3. Valuation: The Real Risk

Run the numbers: RH currently trades at $228 per share, which works out to a hefty 58x earnings based on its FY 2024 EPS of $3.92. That’s a premium valuation for a retailer tied closely to housing and discretionary spending. Should revenues flatten out due to persistent housing market weakness, tariffs, and inflation, while margins slip from the current 10% toward the mid-single digits, earnings could fall back toward $2.00–$3.00 per share. From there, the bigger issue is multiple compressions. Investors may no longer be willing to pay 58x earnings for a cyclical retailer, and if the stock instead gets valued more like peers at 25–40x, the implied share price would land in the $100–$120 range. Put together, softer earnings and a valuation reset over the next three to four years could realistically bring RH’s stock down to about $110, a 50% drop from where it trades today.

This won’t happen overnight. Risks may take two to four years to play out. In the meantime, the upcoming Q3 results will be key. Any stabilization in comps or gross margin could ease investor fears; further weakness will likely deepen skepticism.

That said, RH isn’t without strengths. Its wealthy customer base is less price-sensitive. Its galleries and catalogs give it a brand moat. The membership model builds loyalty. And expansion into international markets and new categories—from hospitality to private jets—could open fresh growth avenues. If execution is steady, these advantages could even keep the bear case from fully materializing.

For investors, the question is timing. Will the next three years bring stabilization—or a reset closer to $110 per share?

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