MW RH's stock slammed by new tariffs and outlook, but CEO offers this praise for Trump administration

By Bill Peters

'I think we've got a very smart administration negotiating at a level we haven't seen any administration, at least in our lifetimes, negotiate,' CEO says

As President Donald Trump announced new across-the-board tariffs on Wednesday, RH Chief Executive Gary Friedman began the company's earnings call by saying "Welcome to the new world."

That would-be new world greeted the luxury-furniture chain harshly. Shares of RH $(RH)$ tumbled 25%, as President Donald Trump's new tariff plans roiled markets, and after the company's full-year sales outlook came in shy of expectations.

Still, when asked whether RH planned to raise prices in response to those new duties, Friedman said: "I don't think we're going to do anything right now."

He said the chain was already well-stocked on furniture, as it embarks on a plan to refresh its merchandise and roll out an array of new collections. And as those tariffs threaten to upend plans for corporate America, he said it was better to wait and see how the current trade backdrop played out.

And while he called Trump's new tariff regime "shocking" in its level of aggressiveness, and said the housing market "might" get worse and that the Trump administration's trade fight could create "noise" from nations abroad, he also said the trade escalations could deliver big longer-term economic benefits to the nation.

Trump on Wednesday announced new tariffs on China, European Union members and other nations, as well as a baseline tariff of 10% on all imports.

Trump has said the tariffs, which charge businesses a tax on imports, will encourage more companies to make products and hire workers in the U.S. Wednesday's announcement could also force more countries and corporations to try to carve out exemptions. However, economists have worried that tariffs will ultimately raise prices for consumers.

Friedman, during RH's call, said the U.S. had leverage to negotiate more favorable trade deals and extract other concessions. And he said other nations would likely start playing the few cards they had, as the steeper tariffs threaten their economies.

"I would predict that there will be concessions," he said. "I don't believe it's going to continue at this level. It may for longer than we think, but it can't be good for the other side, right?"

He added: "I think we've got a very smart administration negotiating at a level we haven't seen any administration, at least in our lifetimes, negotiate. It's like I say to our team, don't move until you see it. Take your time. This is a chess game, not a checkers game."

RH, in its most recent annual report, said that two-thirds of its products were sourced from Asia, based on dollar volume of purchases. The company in December said it had been shifting its manufacturing away from China over recent years, with expectations of fully leaving the nation by the end of its second quarter. It said it was also "transitioning" products made in Mexico, another nation that has been the target of Trump's tariffs.

Friedman, during Wednesday's call, said RH had doubled production capacity at a North Carolina factory that makes its upholstered furniture. He said he expects 48% of RH's upholstered furniture to be made in the U.S., and said 14% of the company's total business would be produced domestically by year's end.

The furniture retailer, known for its expansive catalogs and grandiose sales floors, has battled a tight housing market, marked by home prices and mortgage rates that are still out of reach for many potential homebuyers. Its wealthier customers, who are likelier to invest in their homes, are also more sensitive to stock-market fluctuations, of which there have been several, as Wall Street and businesses try to adapt to Trump's tough-to-predict tariff prescriptions.

On Wednesday, RH said it expects revenue growth of 10% to 13% for its full fiscal year, which is set to run through January. That was a bit below the roughly 15% forecast by FactSet.

"Maybe we would have been even more conservative had we known, but that I don't know if we would have, because I don't know how much impact this is going to have on us, even if it stays in place all year," Friedman said of the forecast and the tariffs.

In the company's earnings release, Friedman said he expected a "higher-risk business environment this year due to the uncertainty caused by tariffs, market volatility and inflation risk." But he said "we believe it's important to separate the signal from the noise," adding that the company has also been navigating "the worst housing market in almost 50 years."

"Despite that fact, we are performing at a level most would expect in a robust housing market," he added later.

RH has overhauled and expanded its product offerings, via dozens of new collections for furniture, lighting, rugs and other decor. Friedman said demand was up 17% in the fourth quarter.

Still, results overall missed Wall Street's estimates. RH reported fourth-quarter revenue of $812 million, a 10% year-over-year gain. The company reported adjusted earnings of $1.58 a share.

Analysts polled by FactSet expected RH to report adjusted earnings of $1.92 a share for the fourth quarter, on revenue of $829.6 million.

During the call, Friedman said that the company had $200 million to $300 million in inventory that it could sell that its rivals didn't. Those rivals, he said, might have to order new furniture at a markup.

"There's just always another move in times like these, and so I'm just excited about finding the other moves way before any of our competitors do," he said. "So, um, fun time."

-Bill Peters

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April 02, 2025 19:48 ET (23:48 GMT)

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