Sometimes the stock market cares about earnings, and sometimes it cares about the vibe. Friday was a vibe day for RH (RH), which managed to rally even after missing earnings estimates and trimming its full-year outlook. Turns out investors were more interested in antique furniture and European expansion than quarterly numbers.

The Numbers Weren't Pretty

RH reported earnings of $1.71 per share for Q3, missing analyst expectations of $2.16 by a hefty 20.87%. Telsey Advisory Group analyst Cristina Fernández responded by maintaining her Market Perform rating while slashing her price target from $220 to $185.

The culprits? Tariff pressures hitting backlogs and costs from opening the Paris location. In response, RH narrowed its 2025 sales growth guidance to 9.0%-9.2% from a previous range of 9%-11%, and cut operating margin expectations to 11.6%-11.9% from 13%-14%.

Forecasts Take a Hit

Fernández adjusted her estimates accordingly, lowering 2025 EPS projections to $7.20 from $9.10 on $3.47 billion in revenue. Her 2026 EPS forecast dropped to $10.15 from $12.35, reflecting ongoing tariff headwinds and investment in new galleries launching in London and Milan.

But here's where things get interesting. Despite the cuts, Fernández remains optimistic about RH's product evolution. The company plans to launch RH Antiques in spring 2026, pivoting toward classic styles after years of pushing contemporary designs. This follows the acquisition of the Michael Taylor brand, known for its iconic Diamond table, and will debut alongside the Milan opening in April.

New antique galleries are planned for San Francisco, West Hollywood, and Greenwich, Connecticut.

The Business Model Is Clicking

Even with the quarterly miss, the unit economics tell a compelling story. RH Ocean Grill in Newport generates roughly $20 million in annual sales. The Palm Desert design studio pulls in $1 million monthly. And RH Paris is showing sharp demand gains since opening.

RH still expects to generate $250 million to $300 million in free cash flow for 2025, with capital spending set to ease as international investments wind down.

RH shares were up 8.77% at $166.76 at the time of publication Friday.