Even the unflappable Gary Friedman was caught off guard as the CEO watched RH’s stock dip sharply during the brand’s fourth-quarter earnings call, reacting with an audible curse. A 10 percent gain in top-line revenues and a 9 percent bottom-line boost for the fourth quarter was not enough to stop Wall Street analysts from harshly punishing the brand’s stock with a staggering 40 percent drop in its share price, taking it to its lowest level since before the pandemic.

RH’s earnings news had the unfortunate timing of coming on Wednesday, April 2—the same day as President Trump’s long-promised tariff tsunami, which took down the entire market. Still, RH’s share price crash was much larger than furniture retailing competitors like Arhaus (17 percent down) and Ethan Allen (a 6 percent drop), as well as luxury brands like Ralph Lauren—all of which have faced the same sluggish market conditions. In trading on Thursday afternoon, RH’s share price was around $150—a far cry from in August 2021, when it topped out at just over $700 a share. According to CNBC, it was RH’s worst-ever day on Wall Street.

The irony is that the brand’s fourth-quarter and year-end results did show improvements for the beleaguered overall home space, especially when compared to RH’s own numbers earlier in 2024, and those of its fellow publicly traded competitors.

Net revenues for the quarter were $812 million—below analyst expectations, but up 10 percent from $738 million a year ago. While operating income did rise 9 percent, net income was up much less, at $13.9 million. For the full year, revenues rose 5 percent to $3.2 billion, while net income was down 43 percent to $72 million.

The company, in RH-speak, did offer two encouraging numbers: Its 2024 “total demand” increased 9 percent, and RH “brand demand” increased 12 percent. And the retailer is forecasting growth for this year, with its fiscal 2025 revenue projected to increase in the 10 to 13 percent range, including first-quarter spikes in the 12.5 to 13.5 percent range. However, these too are below analyst forecasts.

As Trump was announcing an unprecedented wave of tariffs—with furniture-producing nations especially hard hit—RH CEO Gary Friedman began his comments to analysts on his call Wednesday evening by saying, “It’s a new world when inventory is your friend.” He posited that in this current climate, “it’s a good time to be RH,” since the company has $200 million to $300 million in excess inventory and may not need to place tariff-burdened orders in the short term.

In his shareholder letter, Friedman expounded on that idea, writing that RH could be less vulnerable to tariff hikes, as it has worked to increase the percentage of products it makes domestically, specifically in upholstery: “We believe it is also important to note that we have been manufacturing upholstered furniture in our own North Carolina factory for over 10 years, and have recently expanded the facility, doubling our capacity. We are currently projecting that 48 percent of our upholstered furniture will be produced in the U.S. … by the end of this year.” However, the majority of the brand’s overall merchandise does continue to come from Asia.

Friedman was largely complimentary of the Trump tariff program, saying he saw it as a negotiating tactic and expected the worst of the duties to be scaled back. Still, he said it was a “higher-risk business environment this year.”

Not helping matters, RH is carrying a burdensome debt load from a $2.2 billion loan it took out in 2021 to purchase its own stock. At the moment, the company has just over $30 million cash in hand, down significantly from $123 million at this time last year. This decline—and other RH woes—were chronicled in a January report by media-finance firm Hunterbrook. At the time, it didn’t seem to move the stock much, but it can’t have helped.

Despite the doom and gloom, there’s still plenty in the pipeline. Friedman said RH is working on “the launch of a significant new brand extension in the fall of 2025 that we believe will meaningfully expand the market size and share of the RH brand.” From the details he shared, the initiative seems to be targeted at an even more upscale customer than the regular RH shopper, integrating its Couture Upholstery and Bespoke Furniture divisions—born out of its acquisition several years ago of the high-end workrooms Dmitriy & Co. in New York and Joseph Jeup in Michigan. This new brand will have two freestanding RH Galleries, including one in Greenwich, Connecticut, as well as its own sourcebook and website—beyond that, he promised only to share more details on the next analyst call in three months.

Never one to miss a chance to wax poetic, Friedman pulled out a quote from Teddy Roosevelt to wrap up his presentation: “Every moment has a lunatic fringe.” As ever, the furniture magnate did not disappoint—even if RH’s earnings did.

____________

Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.