It would have been more palatable if they had reduced margin available to new accounts, or even stopped allowing new accounts for awhile. That would have been a black eye for them but much less severe than what they did instead.
Even if I believed this excuse, then RH is still greedy for signing up users they don't have the finances to support. They could've closed signups.
This was a lose/lose for them, new signups won’t stick around anyway now and they’re going to absolutely bleed existing users.