MILAN – High-end furniture maker RH underscored late Friday that U.S. President Donald Trump is using the “significant tariffs as a tool to accelerate negotiations and balance trade conditions around the world.”
In response to its shares plummeting to their lowest closing point in almost five years due to lackluster earnings and potential tariff exposure, the Corte Madera-based company issued a statement that clarified its exposure to the new tariffs announced Wednesday.
RH noted that since the last Trump administration it has been operating under a 25 percent tariff on goods from China. As a result, it has shifted the majority of its China production to Vietnam, where it benefited from significantly better tariff rates at the time. In addition, the company has successfully resourced a meaningful amount of its China production to its own factory in North Carolina.
RH expressed optimism about further negotiations with Vietnam after Trump and Vietnam’s leader, To Lam, agreed on Friday to discuss revising tariffs from 46 percent.
“Just had a very productive call with To Lam, General Secretary of the Communist Party of Vietnam, who told me that Vietnam wants to cut their tariffs down to zero if they are able to make an agreement with the U.S. I thanked him on behalf of our Country, and said I look forward to a meeting in the near future,” Trump wrote on Truth Social.
MUNICH, GERMANY – NOVEMBER 28: Sipke (Sip) Halbertsma, CEO of RH Gary Friedman, and Maarten Janssen attend the RH Store Opening on November 28, 2023 in Munich, Germany. (Photo by Gerald Matzka/Getty Images for RH)
Gerald Matzka, Getty Images for RH
Due to the significant market volatility since the reciprocal tariff announcement, the company revealed that its demand quarter-to-date is up 17 percent overall, fueled by demand of its RH Brand, whose quarter to date is up 20 percent.
“The company believes that as investors demand more transparent, country specific disclosures, it will be apparent that RH does not have any more market or financial risk than other higher end furniture-based retailers,” it affirmed, adding that its shares were subject to an “incorrect analysis” with regard to its tariff exposure.
Hit by dwindling consumer confidence, the company formerly known as Restoration Hardware posted fourth-quarter growth that missed its own expectations. On the same day as the tariff announcement, it said net revenues for the fiscal three months ending Feb. 1 increased by 10 percent to $812 million. The company posted an operating margin of 8.7 percent and adjusted earnings before interest, taxes, depreciation, and amortization or EBITDA margin of 17.1 percent.
This was lower than guidance issued in December, when RH forecast fourth-quarter revenue growth of 20 percent, an operating margin of 13.2 percent, and an adjusted EBITDA margin of 19 percent. This sent its shares plummeting over 20 percent in after hours trade.
RH reported adjusted earnings per share of $1.58, compared to $0.72 in the three-month period a year before. This fell short of a poll of FactSet analysts, who had expected $1.92 per share and $830 million in sales.
As a result, TD Cowen slashed its target price on Thursday to $220 from $510 in response to the results, citing slowing demand.
Despite a challenging housing market, the worst in 50 years, according to chief executive officer Gary Friedman, RH forecasted revenue growth of 10 to 13 percent in fiscal 2025, an adjusted operating margin of 14 to 15 percent and an adjusted EBITDA margin of 20 to 21 percent. Friedman also said the company is working on a long-term sourcing strategy to diversify production.
RH shares were among the worst hit in the home sector on Thursday. Shares of premium home furnishings brands like Arhaus dipped to a near-three year low on Thursday, while Williams Sonoma Inc.’s losses were contained, hitting a five-month low.
