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RH Earnings Miss: Unpacking the Tariff Hit and What It Means for Investors

Earnings per share were $2.93, missing the forecast of $3.18. The big culprit? Tariffs are adding an extra $30 million in costs and forcing a delay in product launches. As a result, RH lowered its full-year growth expectations to 9-11% from 10-13%. The stock dropped around 10-13% after the news, showing how sensitive markets are to such surprises. CEO Gary Friedman noted "significant inflation" could hit this year and speed up in 2026, adding to the worry.

Why Tariffs Matter Here

Tariffs are like extra taxes on imported goods. For RH, which sources from places like China and India, this means higher costs. President Trump's recent 50-day investigation into furniture tariffs has created uncertainty, potentially pushing prices up for everyone.

It's not all doom—RH is moving production to places like Vietnam and the US to dodge some hits.

A Look at Similar Cases

Think of John Deere, the tractor maker. They've faced $600 million in tariff costs this year, leading to lower sales and even layoffs.

This shows tariffs can hurt big companies across sectors, reducing demand and squeezing profits.

Tips for Investors

Stay diversified, watch news on trade policies, and consider stocks in less affected areas like tech or healthcare. For more, check our posts on How Tariffs Affect Retail Stocks and Investing in Uncertain Times.

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RH, the luxury home furnishings retailer formerly known as Restoration Hardware, has once again found itself in the spotlight due to the interplay between global trade policies and corporate performance. On 12 September 2025, the company released its fiscal second-quarter earnings, revealing a combination of revenue shortfalls, earnings misses, and heightened concerns over tariffs. This event not only triggered an immediate stock price decline but also sparked broader discussions about the vulnerabilities of import-dependent industries in an era of resurgent protectionism. In this comprehensive analysis, we'll delve into the details of the earnings report, explore the historical and current context of tariffs on RH, compare it to analogous situations like John Deere's challenges, examine the ripple effects on the furniture sector, and provide actionable insights for investors. We'll incorporate financial data, expert commentary, and strategic tips to offer a well-rounded perspective.

Understanding RH's Company Background and Evolution

To appreciate the significance of this earnings miss, it's helpful to understand RH's roots and growth trajectory. Founded in 1979 by Stephen Gordon in Eureka, California, as a small shop specialising in vintage hardware and fittings, the company initially focused on restoration supplies for historic homes.

By the 1980s, it expanded into retail stores, emphasising high-quality, unique items that appealed to affluent customers. Over the decades, RH transformed from a niche hardware provider into a global luxury brand, rebranding from Restoration Hardware to RH in 2017 to reflect its broader lifestyle focus . Today, headquartered in Corte Madera, California, RH operates a portfolio that includes furniture, lighting, textiles, and decor, sold through galleries, sourcebooks, and online channels. The company's strategy centres on experiential retail—think grand galleries with restaurants and wine vaults—to create an immersive brand experience. This evolution has driven impressive growth; for instance, in fiscal 2024, RH reported net revenues of approximately $3.5 billion, with a focus on premium margins through controlled sourcing and pricing.

However, this reliance on international supply chains has made it susceptible to trade disruptions, as evidenced by past and present tariff episodes.

Breaking Down the Q2 2025 Earnings Report

RH's fiscal second-quarter results, ending in July 2025, painted a picture of resilience amid adversity but ultimately fell short of market expectations. Here’s a closer breakdown of the key metrics:

Metric	Actual	Expected	Year-Over-Year Change	Notes
Revenue	$899 million	$905 million	+8.4%	Missed estimates due to delayed product launches and softer demand.

Adjusted EPS	$2.93	$3.18	N/A	Impacted by higher costs and tariff-related expenses.
Demand Growth	+13.7%	N/A	N/A	Positive indicator of underlying consumer interest, despite revenue shifts.
Adjusted Operating Margin	13.0%-14.0% (full-year guidance)	Higher prior estimates	N/A	Lowered due to cost pressures.
Full-Year Revenue Growth Guidance	9%-11%	10%-13% (prior)	N/A	Revision reflects $30 million additional tariff costs and $40 million revenue deferral.
Adjusted EBITDA Margin Guidance	19%-20%	20%-21% (prior)	N/A	Downgraded amid uncertainty.

The earnings miss was exacerbated by a two-month delay in the Fall Interiors Sourcebook launch, shifting about $40 million in revenues to later quarters. This decision stemmed from the need to adjust pricing amid tariff uncertainties. CEO Gary Friedman, in his shareholder letter, emphasised the company's strong positioning: "Despite the uncertainties, RH is well-equipped to compete in any environment." He also warned of "significant inflation" emerging this year and accelerating into 2026 and beyond, attributing it to tariff-induced cost pressures and broader economic factors. Stock reaction was swift: shares plummeted 10-13% in after-hours trading and continued to slide slightly the next day, reflecting investor concerns over profitability and growth. Analysts, such as those from Stifel, adjusted price targets downward to $320, citing tariff risks.

The Tariff Factor: Current and Historical Impacts on RH

Tariffs have been a recurring thorn for RH. During the previous Trump administration, the company navigated 25% tariffs on Chinese imports by reshoring production to Vietnam and its North Carolina factory, achieving better-than-pre-tariff pricing.

By April 2025, when new reciprocal tariffs were announced, RH clarified that its China sourcing had dropped significantly, with only minimal exposure remaining. China receipts are expected to fall from 16% in Q1 to 2% in Q4 2025. However, new challenges emerged with 50% tariffs on Indian imports affecting 7% of businesses, and President Trump's August 2025 announcement of a 50-day investigation into furniture tariffs aimed at repatriating manufacturing. Friedman expressed scepticism about the feasibility of large-scale US furniture production, noting the complexities of high-quality manufacturing. Historically, tariffs have led to margin compression for RH, as seen in share plunges to five-year lows in April 2025. The current $30 million hit in the second half of 2025 underscores ongoing vulnerabilities.

Comparison with Other Companies: The John Deere Example

RH's plight isn't isolated. Consider John Deere, an iconic American manufacturer of agricultural equipment. In 2025, tariffs on steel and aluminum have cost the company nearly $600 million, up from an initial $500 million estimate.

This has contributed to a 16% decline in sales and revenue to $12.76 billion in Q2, with net income down 24%. Lower crop prices and damped demand have led to production cuts and hundreds of layoffs. Like RH, Deere assembles most products domestically (80%) but relies on imported materials, illustrating how tariffs inflate costs and erode margins.

Both cases highlight a common theme: tariffs intended to protect US jobs can inadvertently harm domestic firms by raising input prices and reducing competitiveness. For investors, this parallel suggests monitoring supply chain exposures across sectors.

Company	Tariff Cost (2025)	Stock Impact	Key Response
RH	$30 million (H2) + ongoing	10-13% decline	Sourcing shifts to Vietnam/India, and/US.

John Deere

$600 million (full year)

Sales down 35% in some quarters

Production cuts, layoffs.

Broader Impact on the Furniture Industry in 2025

The furniture sector, heavily reliant on imports valued at nearly $28 billion in 2024, faces substantial headwinds from 2025 tariffs.

Industry executives predict price hikes of 10-25%, potentially reducing demand by 5-10%. Companies may resort to cheaper materials or lower-quality products to offset costs, eroding consumer trust. For buyers, this means acting sooner to avoid rises, while US-made options like Amish furniture could gain appeal despite higher baselines. Tariffs have already generated $88 billion in revenues by September 2025, but at the expense of economic efficiency. Retailers like RH are pivoting, but smaller players may struggle more, potentially leading to consolidations or failures. External sources like ABC News note that even domestic manufacturers will face higher parts costs, amplifying inflation.For deeper dives, link to our internal posts: Tariffs and Retail Supply Chains and Furniture Market Trends 2025. Authoritative externals include CNBC's coverage and MarketWatch

How Tariffs Generally Affect Stock Prices: Lessons from History

Tariffs can disrupt stock prices through direct cost increases, reduced demand, and heightened volatility. For example, a 5% tariff rise might cut S&P 500 earnings by 1-2%.

In trade wars, global growth slows, hurting export-heavy firms. Investors demand higher returns for riskier assets, particularly in affected sectors. A 20% tariff hike could shave 2-2.5% off growth via higher prices and wealth effects. Despite this, markets have hit records in 2025, betting on moderated tariffs.

Practical Tips for Investors During Trade Wars and Tariffs

Navigating this landscape requires strategy. Here are detailed tips:

• Diversify Your Portfolio: Spread investments across sectors less exposed to tariffs, like technology or services. Avoid over-concentration in retail or manufacturing.

Monitor Policy and News: Stay updated on trade developments; tools like alerts from J.P. Morgan can help. Focus on Defensive Sectors: Invest in resilient areas like healthcare or AI, which UBS recommends for long-term growth amid volatility. Look for Opportunities: Tariffs can create bargains; focus on companies with strong domestic supply chains or pricing power. Avoid Knee-Jerk Reactions: Don't rely solely on Fed interventions; maintain a long-term view.