RH (NYSE:RH), formerly Restoration Hardware, shares plummeted more than 40% as the luxury homewares brand’s quarterly earnings disappointed, exacerbated by concerns about how Donald Trump’s new “reciprocal” tariffs will impact the brand.
For the fourth quarter, RH's earnings per share of $1.58 were short of the $1.91 expected.
Revenue of $812.4 million also missed the Wall Street consensus of $829.5 million.
Notably, Q4 gross margins were stronger than expected at 44.7%, compared to the consensus forecast of 44.4%.
The company’s full-year revenue guidance also disappointed. RH projected growth of 10% to 13%, below the consensus of 14.2%.
“The big picture takeaway is that forward estimates are likely to move lower,” analysts at UBS wrote following RH’s earnings.
“This is due to both RH's below-Street guidance and the market's perception of tariff risk for its business and broader industry demand.”
However, they highlighted that RH is still outperforming the broader industry.
“RH has been able to drive this outperformance despite its higher mix of furniture in its business compared to peers, which continues to be more challenged compared to other home categories,” they wrote.
They believe sentiment towards the company could rebound quickly if RH can string together a few quarters of stable to improving performance.
Impact of tariffs
During RH’s earnings call afterhours on Wednesday, RH CEO Gary Friedman reacted to Trump’s tariff announcement with an expletive.
The UBS analysts noted RH was in a tough position having to host its earnings call during the president’s announcement.
“While the company's guidance doesn't reflect the reciprocal tariffs, the company noted it thinks it will be able to mitigate the impact to its business,” they wrote.
“It once again pointed to its strong vendor partnerships. Plus, it flagged how it is willing to take a variety of actions to avoid an outsized impact. For example, it moved a sizeable portion of its upholstery business to the US.”
The analysts expect the latest tariffs will result in RH seeing an additional -8% to -24% earnings per share pressure.
“Though, with RH ordering significant inventory ahead of time, it won't likely begin to see higher merchandise costs until later in 2025,” they wrote.
UBS has a ‘Neutral’ rating on RH and lowered its price target to $235 from $250.
Shares of RH traded down 42.4% at $143 in early trade on Thursday.