RH, the high-end home furnishings retailer, took a nose dive, down as much as 35%. This drop followed closely after a lackluster quarterly earnings report and after President Donald Trump tweeted the imposition of new tariffs on foreign imports. The company’s CEO, Gary Friedman, reacted live to the plunge, exclaiming “Oh, sh–” as he witnessed the stock’s decline.
RH’s shares have plummeted since the company released lackluster third-quarter earnings. For their fourth quarter, they announced $1.58 earnings per share on $812 million in revenues—good numbers, but below Wall Street’s lofty expectations. Analysts were expecting much better, adding to the market’s negative reaction. RH is guiding its revenue to increase 12.5% – 13.5% this quarter. For the entire fiscal year, the revenue shortfall estimate is between 10% and 13%. Even these massive numbers weren’t enough to stem the tide of collapsing investor confidence.
Friedman validated the issues RH is up against in today’s economic climate. He noted to investors that the company is fighting one of the worst housing markets in almost half a century. The perfect storm of the current environment has exacerbated the issues created by the new tariffs even further. Consequently, China’s effective tariff rate has been raised to 54%.
The RH CEO had lamented during the hearing that a significant amount of RH’s products are sourced from Asia. He referred to this reality as “not a secret.” He pointed out that all big players in the home sector depend on Asian sources.
“Anybody of scale in the home business has a high percentage of their content coming out of Asia,” – RH CEO Gary Friedman
Friedman expressed concern about the implications of the new tariffs, stating that it would “force everyone to just play a different game.” This feeling exemplifies a real change in operational strategies throughout the industry as companies continue making their way through the current cost pressures and up-and-down market conditions.
Given all of that, RH has not made public any concrete assurances about what their long-term sourcing strategy will be. Friedman himself called it “big and bold.” He hinted that changes could come much sooner than planned due to the constantly shifting trade environment.
“This move is quite stunning,” – RH CEO Gary Friedman
In his last quarterly call with analysts, Friedman encouraged them to prepare for a “higher-risk business environment.” He noted that this is due to tariffs, continuing inflation headwinds, and overall market uncertainty. He was clear that RH’s financial success has outpaced even the rosiest projections for a booming housing market. Now, damaging reversals have taken place.
Even as RH tries to recover and pivot through the storm, those same investors are spooked. The moral of the story is that the cumulative impact of uninspired earnings and macroeconomic headwinds has resulted in doubt cast over the company’s ability to perform in FH 2024.