MILAN — RH has a lot going on these days, with the rapid development of its RH Galleries across Europe and the U.S., expanding sourcebook offerings as well as the Waterworks luxury bath and kitchen business it bought in 2016, and its residential business.

And on Thursday, the California-based luxury furniture-maker’s numbers disappointed the markets as it reported a $3.6 million net loss, compared to $41.9 million in net income in the prior-year period. Net loss per share was 20 cents as expenses rose across the board and demand slowed up to 3 percent in the quarter, slightly below RH’s guidance. Analysts from Baird, for example, expected an adjusted loss of 13 cents a share.

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Total other expenses, for example, were $57.9 million versus $39.2 million in the first fiscal quarter of 2023. Net revenues were slightly above expectations at $727 million down from $739.2 million in the same quarter of 2023.

The net loss forecast miss sent RH shares down over 18 percent in Friday morning trading, underperforming the NYSE index, which traded nearly flat after market open.

“They [RH] missed EPS vs consensus due to margins being modestly below expectations and a higher-than-expected tax rate,” Seth Basham from Wedbush Securities told WWD.

In the first quarter, RH forged full speed ahead with its ambitious European expansion plans with the opening of two international Galleries, one in Brussels, and one in Madrid. Last year, RH made its debut in Germany with the opening of RH Düsseldorf, The Gallery on the Königsallee and RH Munich, The Gallery on Sendlinger Strasse and RH England, The Gallery at Aynho Park. Milan, Paris and London remain key, according to RH chairman and chief executive officer Gary Friedman. Industry leaders here say introducing RH to markets like Milan and Paris, international hubs for design, will be a challenge given the housing slowdown and sky high inflation tightening consumer purse strings across the continent.

“Europe is a still a big question mark. It has been a slow build there and success won’t be clear for at least a year, after they open galleries in Paris and London. Their move into Europe is an uphill battle with limited visibility to them achieving a strong return on investment,” Basham said. Wedbush maintained its neutral rating, erring on the side of caution regarding RH’s ability to attract new and existing customers through heavy advertising and new gallery openings, which is “a strategy being undertaken when category consideration remains broadly muted and unlikely to change much in the near term,” analysts said in a note.