MILAN — Since taking over RH, then a trusted furniture business in 2001, chief executive officer Gary Friedman has navigated many a storm. During the course of his career, however, none have been as chaotic as the current one, he admitted.
He contended that RH, due to its magnitude and sales momentum, will be able to weather further tariffs better than most. Inflation remains a top concern. “We think interest rates are high now. Lose control of inflation, and you can have chaos. So what do I worry the most about? Just kill inflation. I’m more motivated about killing inflation than getting an interest rate cut right now,” he told analysts during the Corte Madera, Calif.-based firm’s second-quarter conference call.
RH shares extended losses in early Friday trading, dropping 3.84 percent at $219.62.
The U.S. consumer price index rose 2.9 percent year-on-year in August, the fastest pace since January, according to the Bureau of Labor Statistics.
After the news, analyst Cristina Fernandez of Telsey Advisory lowered her target price to $220 from $255 due in part to tariffs, against which the company will not be totally immune.
“Tariffs are negatively affecting the business in multiple ways — on revenues as the company has seen disruption to the supply chain and delayed the mailing of its fall 2025 catalog as it awaited tariff updates. And on profitability, it is becoming harder to mitigate incremental tariffs on imports from countries like Vietnam and India,” she said, maintaining a market perform rating. Fernandez expects the U.S. economy, particularly the outlook for the housing market, and tariff levels to have a bigger impact on the stock performance.
Still reeling from the opening of the majestic new property, RH Paris, The Gallery, on the Champs-Élysées on Sept. 5, his biggest feat yet, he said the firm recorded a better-than-expected turnout in terms of foot traffic, exceeding RH New York day-by-day. He also underscored the performance of RH England, The Gallery at Aynho Park.
“If the early reads coming out of RH Paris are indication of what’s to come, RH Europe and the Middle East should enable us to double the size of RH over the next five to seven years,” Friedman said, hinting at Middle East expansion.
RH England, the 73-acre, 17th-century estate opened in 2023 in the English countryside, generated $46 million in total demand in its second full year, which was higher than expectations. Paris, plus London in spring 2026 and Milan during the city’s design week, represent a turning point of the brand, market watchers agreed.
Gary Friedman inside RH Paris, the Gallery on the Champs-Élysées.
Courtesy of RH
After the Paris opening and the second quarter results, TD Cowen raised its target price to $265 from $235 and kept a buy rating on the share, insisting that sentiment is shifting on the shares and RH has a lot of positives on which it can build.
“We think it would make sense for RH Paris by year two to outpace RH England, with a range of $50 million to $75 million feasible and upside possible as our estimate could be conservative. We estimate that would make Paris one of the stronger galleries outside of several flagship locations in top U.S. markets,” TD Cowen’s Max Rakhlenko said in the statement.
In the second quarter of the fiscal year, RH saw its revenues rise 8.4 percent to $899.2 million. In the three-month period ended Aug. 2, its net profit almost doubled, surging 79 percent to $51.7 million, as it generated $81 million of free cash flow in the quarter.
In light of a challenging housing market, the worst in almost 50 years, RH trimmed its revenue growth forecast for the full fiscal year to 9 to 11 percent growth, down slightly from a previously forecasted 10 to 13 percent in fiscal 2025. It now sees adjusted operating margin of 13 to 14 percent, down from 14 to 15 percent and an adjusted EBITDA margin of 19 to 20 percent versus 20 to 21 percent it estimated in the first quarter.
Friedman assured the financial community that these hard times will pass, quoting Warren Buffett. “Every decade or so, dark clouds will fill the economic skies and they will briefly rain gold… The clouds will break as Warren Buffet said, the sun will come out again, and when it does, we’ll be there.”
In response to U.S. President Donald Trump’s trade policy and the ongoing investigation into the furniture industry and further tariffs, he had a dire message for the current administration.
“We’re on the cusp of going too far there. That’s what I worry about.”
Friedman expressed worry for the wider industry of small, medium-sized and family-run companies that represent the backbone of the U.S. furniture industry — from the heartlands of North Carolina to the lakeside factories of Michigan. He insisted the Trump administration heed his warning and possibly take his counsel.
“I run the biggest luxury home brand in the world. No one’s talking to me. I’ve got a point of view, and so I’m making that known now.”
