April 4, 2025
CORTE MADERA, Calif. — Shares of RH (NYSE: RH), the luxury home furnishings retailer formerly known as Restoration Hardware, experienced a significant decline following the release of its fourth-quarter earnings report and the announcement of new tariffs by President Donald Trump. The company’s stock closed at $157.86 on April 3, 2025, marking a 37% drop—the largest single-day decline in RH’s history.
Earnings Report Falls Short
In the fiscal quarter ending February 1, 2025, RH reported adjusted earnings per share of $1.58, missing analysts’ expectations of $1.92. Revenue for the quarter was $812 million, slightly below the projected $829 million. The company attributed the shortfall to a weakened housing market and increased supply chain costs.
Impact of Newly Announced Tariffs
The earnings announcement coincided with President Trump’s introduction of a broad range of new tariffs on foreign imports, targeting goods from China, Japan, and the European Union. Chinese imports were hit the hardest, with tariffs ranging from 10% to 50%. These tariffs are expected to significantly affect companies like RH, which rely heavily on international supply chains.
Analysts have expressed concern that the increased tariffs could lead to higher production costs for RH. Stifel and Wedbush analysts projected potential cost increases of up to 38% if the company does not adjust its supply chain. Despite RH’s efforts to stockpile $200–$300 million in inventory to mitigate such risks, this reserve is estimated to cover less than a quarter’s worth of sales.
CEO’s Reaction and Strategic Response
During the earnings call, RH’s CEO Gary Friedman reacted candidly upon learning of the stock’s sharp decline, reportedly exclaiming, “Oh shit.” He acknowledged the immediate challenges posed by the tariffs but expressed support for the administration’s approach, suggesting that the tariffs might not be permanent and could be beneficial in the long term. Friedman also emphasized the company’s plans to shift its supply chain away from China to Mexico to mitigate tariff risks.
Analyst Perspectives
Market analysts have expressed concern that higher tariffs could discourage large consumer purchases, potentially impacting RH’s sales. KeyBanc maintained a Market Weight rating on the stock, while TD Cowen reduced its target price from $510 to $220, reiterating a Buy rating. Analysts foresee slowing growth due to tariff pressures and strained consumer spending.
Future Outlook
Looking ahead to fiscal 2025, RH projects revenue growth of 10% to 13% and an adjusted operating margin of 14% to 15%. The company remains cautious due to the potential impacts of tariffs, inflation, and market volatility. Despite these challenges, RH plans to continue its global expansion, including opening new galleries in the U.S. and Europe, underscoring its strategic adaptability in a complex economic landscape.
