For the quarter ending in October 2025, RH reported revenues of $883.81 million, an increase of 8.9% from the previous year. However, the earnings per share (EPS) for this period was $1.71, down from $2.48 a year ago. The revenue slightly exceeded the Zacks Consensus Estimate of $882.95 million by 0.1%. On the other hand, the EPS fell short of expectations by 19.72%, as the consensus estimate was $2.13. Key metrics for RH this quarter matched closely with analyst predictions. The total number of RH galleries reached 73, surpassing the average estimate of 68. RH Modern galleries remained stable at 1, meeting expectations. The number of Waterworks showrooms met the estimate at 14. Total leased selling space at the end of the period was 1,639.00 Ksq ft, higher than the estimated 1,594.30 Ksq ft. RH Design galleries numbered 37, while Baby & Child and Teen Galleries had 1, both aligning with projections. The overall store count stood at 88, consistent with estimates. RH Legacy galleries totaled 26, slightly below the estimate of 27, while outlet locations matched expectations at 43. Although RH’s earnings per share for the third quarter fell significantly short of expectations—almost 20% below consensus—this usually leads to a decline in the stock price. The notable drop from $2.48 to $1.71 in one year suggests a bearish outlook for the upcoming weeks. Looking at the wider economy, recent data from the U.S. Census Bureau through November 2025 shows a slight drop in retail sales for furniture and home goods. This follows interest rate hikes earlier in the year. Historically, stocks can decline between 5% and 15% in the weeks following significant earnings misses like this, adding to the negative sentiment. This stands in contrast to the strong housing market of 2023 and 2024, which previously supported companies like RH. Nonetheless, it’s important to note that RH is expanding, with the total number of galleries and leased square footage exceeding analyst estimates. This expansion indicates that management has a long-term growth strategy, which conflicts with the current poor profitability. The clash between weak short-term results and ambitious long-term goals can lead to significant price volatility. For those expecting a price drop, purchasing put options that expire in January or February 2026 is a direct way to benefit from the decline. Alternatively, given the mixed signals, considering a volatility strategy like a straddle could be effective. This strategy could yield profits if the stock makes a sharp movement in either direction as the news unfolds. For current shareholders, selling covered calls might be a smart way to generate income and offer some protection against a potential decline. With the holiday season approaching, trading volumes may decrease, which can amplify price fluctuations. This makes risk management especially important as 2025 comes to an end.

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