Luxury home furnishings company RH (RH, Financial) has reached a nearly five-year low after missing Q4 earnings expectations and issuing concerning guidance for Q1 and FY26. The company faces multiple challenges, including inflation, high interest rates, a weak housing market, and new tariffs.

Last year, nearly 75% of RH's products were sourced from Asia, with 35% from Vietnam, 23% from China, and the rest from Indonesia and India. Only 10% were U.S.-made. Recent tariffs on these countries, ranging from 26% to 46%, have put RH in a difficult position. The company has been stockpiling inventory, which grew by 35% year-over-year in Q4. CEO Gary Friedman is optimistic about managing inventory costs ahead of tariffs and views the tariffs as a potential negotiation tactic.

Despite these challenges, RH aims to avoid turning its situation into a major setback.

• In Q4, RH experienced a shift from its previous bullish Q3 results. Although demand increased in November and December, rising mortgage rates led to a decline in demand by mid-December. This resulted in revenue growth of only 10% year-over-year to $812.41 million, missing the initial forecast of $868.5 million.
• CEO Friedman remains hopeful, noting that despite operating in the worst housing market in 50 years, RH is performing as expected in a strong housing market.
• For FY26, RH projects revenue growth of 10-13%, an improvement from FY25's 5% growth but below analyst expectations. The company has significant debt from a $2.2 billion stock buyback but plans to monetize $500 million in assets and convert $200-300 million of excess inventory into cash to reduce debt and interest expenses.

Even before tariffs, RH faced significant hurdles, making a swift recovery difficult. Competitors also face import tax challenges, with notable losses for companies like Wayfair (W, Financial), Williams-Sonoma (WSM, Financial), Haverty Furniture (HVT, Financial), La-Z-Boy (LZB, Financial), and Ethan Allen Interiors (ETD, Financial).