MILAN — RH shares are still recovering from the “Liberation Day” duties announced by President Donald Trump on April 2. Since then, the firm has shifted sourcing out of China and rerouted a significant portion of its upholstered furniture to its own North Carolina factory, RH chief executive officer Gary Friedman said Thursday, as the company released its first-quarter results.
The Corte Madera, Calif.-based RH firm formerly known as Restoration Hardware fell slightly short of analyst expectations, as well as the revenue target RH issued in April. Sales rose 12 percent to $814 million in the fiscal three-month period ended May 3. This compares to RH’s guidance of a 12.5 percent to 13.5 percent rise. A Factset poll of analysts forecasted sales of $818.6 million.
In the same period, RH posted an operating margin of 6.9 percent and adjusted earnings before interest, taxes, depreciation and amortization or EBITDA margin of 13.1 percent.
“While there remains uncertainty until the reciprocal tariff negotiations are complete, we have proven we are well positioned to compete favorably in any market conditions,” Friedman continued, adding that the firm sees disruption negatively impacting its revenues by approximately 6 points in the second quarter and will recover in the second half. Friedman said the company is sticking to its full-year fiscal guidance.
Offsetting Market Headwinds
Despite a challenging housing market, the worst in 50 years, RH forecasted revenue growth of 10 to 13 percent in fiscal 2025, an adjusted operating margin of 14 to 15 percent and an adjusted EBITDA margin of 20 to 21 percent. Friedman also said the company is working on a long-term sourcing strategy to diversify production.
In fiscal 2024, the company sought to offset macro headwinds by investing $2.2 billion into stock repurchases and expanding its portfolio with real estate assets totaling an estimated equity value of approximately $500 million. “We plan to monetize opportunistically as market conditions warrant,” he said. With regard to excess inventory worth $200 to $300 million, the company plans to turn it into cash over the next 12 to 18 months.
In April, President Trump’s trade policy announcement drove RH’s shares to their lowest level in almost five years. On Thursday, shares closed down 1.18 percent.
RH England, The Gallery at Aynho Park
Courtesy of RH
Taking Market Share, Amid Downturn
During the first-quarter earnings conference call, Friedman was enthusiastic about upcoming openings in London, Milan and Paris. RH Paris will open in September, during the Maison&Objet trade show. Located on Champs Élysées, it will be RH’s most “elegant and inspiring Gallery yet.” RH has built a freestanding RH Interior Design Studio and will open Le Jardin RH restaurant that will serve up American classics. Its rooftop is privy to views of the Eiffel Tower and Grand Palais. London and Milan will open in 2026.
The Galleries are a winning concept, he added, and European revenues continue to rise. RH England, The Gallery at Aynho Park — a 73-acre, 17th-century estate opened in 2023, is testament to that success, he said, noting that it generated $46 million in total demand in its second full year. This bodes well for all new Galleries, including the upcoming London Gallery in Mayfair.
“If an RH Gallery in the English countryside, with an estimated population of 100,000 in a 10-mile radius two hours outside of London, can generate $46 million… what can an RH Gallery in the center of Mayfair, the most exclusive shopping district in London with a population of 9.7 million, do in its second full fiscal year?”
RH’s expansion strategy is focused on taking market share despite macro headwinds. Moving forward, RH will opening seven to nine new Galleries per year.
On Thursday, China affirmed a trade deal announced by President Trump, marking a truce between the world’s two largest economies. The U.S. will impose 55 percent duties on Chinese goods, while China will impose 10 percent tariffs on all U.S. goods.