1 Home Furnishings Stock Set to Rally Hard?

Mortgage rates remain near multi-decade highs, and existing home sales are still down about 30% compared to pre-pandemic levels. That slowdown has created a ripple effect, dragging down everything tied to housing, from builders to brokers to the companies selling furniture and décor.

One name that stands out in this group is RH. The stock is still trading down substantially from just a few years ago when cheap money and a red-hot housing market drove record demand. Since then, sales have cooled, but RH hasn’t gone away, it has adapted.

Key Points

• RH is still trading well below its peak, but falling mortgage rates could revive home sales, sparking a rebound in demand for high-end furnishings.

• Despite a weak housing market, RH maintains industry-leading margins.

• Expansion into Europe, restaurants, luxury guesthouses, and even fully furnished RH Residences gives the company multiple new growth levers.

The Numbers Behind the Pullback

Last week, RH shares slipped after the company trimmed its full-year outlook and posted revenue just shy of $900 million.

On the surface, that looks like a miss. But peel back a layer, and demand, a more forward-looking measure, actually rose by north of 13%. That’s an encouraging sign in the middle of what CEO Gary Friedman has called “the worst housing market in 30 years.”

Margins also remain unusually strong for a retailer with EBITDA margin of over 20% and operating margin at 14%.

Those margins put RH in rare company. For perspective, many big-box furniture chains struggle to post double-digit operating margins. RH isn’t just selling sofas but selling status, and customers are paying up for it.

Why RH Could Soar From Here

With the Federal Reserve cutting interest rates most recently, mortgage costs were set to ease. That could unlock the “lock-in effect” that has kept homeowners sitting on the sidelines, reluctant to trade up because of ultra-low pandemic mortgages. More transactions in housing mean more demand for furniture, and that’s RH’s sweet spot.

What many investors may not realize is how aggressively RH has been planting seeds for future growth/ RH is building a footprint in Europe and aiming to replicate its U.S. luxury lifestyle positioning overseas.

Beyond furniture, RH has experimented with restaurants, luxury guesthouses, and even jet charters. These might sound quirky, but they’re part of Friedman’s broader plan to make RH not just a retailer, but a luxury brand ecosystem.

The company has teased entering the housing market directly by designing and selling fully furnished homes, an innovative move that could blur the line between real estate and retail.

Valuation and Upside Potential

Looking ahead, Wall Street expects RH to trade at about 18x fiscal 2027 earnings, which is not expensive for a brand with such strong margins and a global growth runway.

For context, many mid-tier retailers with thinner margins trade at similar multiples without RH’s aspirational appeal.

The company isn’t without risk, the housing recovery may take time, and higher-end furniture sales could remain uneven in the short run. But with shares still down nearly 70% from their peak, the bar for a rebound isn’t set high.

The Bottom Line

RH has been punished by the housing downturn, but its ability to expand margins, grow demand despite headwinds, and reinvent its brand suggest it could be a stealth winner if rates keep falling.

For investors willing to tolerate some volatility, RH is one of the more intriguing ways to play both the housing recovery and the premium consumer trend in one shot.