RH quarterly earnings calls have been a predictable ritual for the past few years. Chairman and CEO Gary Friedman hops on the line, announces fantastic numbers, discusses his company’s progress on its trek up the “luxury mountain” and fields congratulatory questions from analysts—rinse, repeat. Last week, however, was a sober affair, with RH’s first genuinely disappointing numbers in a long time. Now, the big question being asked throughout the home furnishings industry—particularly in the luxury tier—is: Is this the beginning of the end, or the end of the beginning?

RH’s 14.4 percent drop in revenues (more than the analysts who are supposed to know such things forecasted) and its rather lackluster, diminished outlook for the next year confirm that the prestigious home retailer is feeling the same pain as just about everybody else in the business. Until now, RH and Williams-Sonoma had been the biggest outliers to the general post-pandemic slowdown in sales that has cut across virtually the entire sector. Currently, only Ethan Allen and Arhaus seem to still be bucking the trend, but even the latter is less than optimistic about what’s ahead for business.

“Less than optimistic” would probably be a step up from Friedman’s current outlook. Never one to mince words or sugarcoat business conditions, on the call with investors he was in rare form, railing against the Federal Reserve, the banking industry and the stock market in general for RH’s weak quarter. “Inflation that was thought to be transitory is now deemed persistent by the Federal Reserve,” he said on the call, “resulting in a record rise in interest rates, triggering a dramatic decline in the housing market, with luxury home sales down 45 percent in the most recent quarter versus a year ago. … We’re in unchartered waters today from an economic environment perspective.”

So what’s a CEO to do about it? Friedman said RH had begun some serious cost-cutting measures, including eliminating some 440 jobs, which would be part of about $50 million in savings. The company is also reducing inventory levels, something that on previous calls RH had lauded as one of its notable achievements.

All of this subpar performance comes as RH is in the middle of some significant expenditures, mainly in its expansion into Europe. Its first outpost in the United Kingdom is still expected to open later this year, followed by additional retail locations in France and elsewhere starting in 2024. If you’ve been to a recent RH Gallery, you know these are not cheapies to build out—the U.K. location, in a historic estate with multiple restaurants, promises to be especially spectacular (and costly).

So, back to the original question: Will it get worse before it gets better? Looking at the RH forecasts for both the first quarter and the next 12 months, it appears the answer is pretty straightforward. RH lowered its next-quarter revenues forecast to between $720 million and $735 million, well short of the $827 million consensus outlook from the Street. For the year, it expects overall sales in the $2.9 billion to $3.1 billion range versus the original analyst forecast of $3.5 billion.

“It’s clear that the stay-at-home restrictions of the pandemic created an exponential life for home-related businesses,” Friedman wrote in his shareholder letter, in the esoteric and almost Zen-like style that is his trademark. “And it’s also clear the lift, like the pandemic, was a temporal isolated event versus something structural or systematic.”

Friedman said it all “points to business in our sector likely getting worse before it gets better.”

Question asked, question answered—unfortunately.

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Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.