Restoration Hardware (RH), the high-end home furnishings retailer based in California, saw its shares plummet more than 39% by Tuesday afternoon, following a volatile trading session earlier that morning where losses reached as much as 44%. The drastic sell-off came after the company released its quarterly earnings report, which fell short of market expectations.
The company reported adjusted earnings of $1.58 per share, well below the $1.92 projected by analysts surveyed by FactSet. Investors reacted swiftly, driving RH’s stock down and making it one of the day’s steepest market losers. Adding to investor unease were comments from CEO Gary Friedman during the company’s earnings call, which highlighted the dual pressures of underperformance and external economic factors.
CEO Friedman Responds Candidly to Market Reaction and Tariff Impact
In a rare moment of blunt honesty during the earnings call, CEO Gary Friedman was caught reacting in real time to the company’s plunging stock price. “I just looked at the screen… [Oh sh—t],” he exclaimed, expressing surprise and frustration at the market’s reaction. Friedman attributed much of the stock’s decline not just to disappointing earnings but also to the broader implications of trade tariffs.
According to Friedman, RH has been significantly impacted by tariffs, particularly on goods imported from Asia, which constitute a major part of the company’s supply chain. “It got hit when I think the tariffs came out,” he noted, signaling that geopolitical factors continue to weigh heavily on the company’s operations and investor sentiment.
Despite acknowledging these hurdles, Friedman offered support for the Trump administration’s trade negotiation strategy. “I think we’ve got a very smart administration negotiating at a level we haven’t seen in our lifetimes,” he said. He likened the situation to a strategic game, advising his team to remain cautious and deliberate. “Take your time. This is a chess game, not a checker chain.”
Strategic Inventory Positioning and Future Outlook
Despite the current market turmoil, Friedman struck a more optimistic tone about RH’s positioning for the near future. He emphasized the company’s solid inventory levels, suggesting that its warehouses are well stocked to manage potential disruptions in the supply chain. “I’m really happy about the inventory position we’re in,” he said. “I think we can really cut back on receipts until we have clarity.”
Restoration Hardware currently operates 111 retail locations across 30 U.S. states, offering upscale home furnishings that cater to a niche market. While the company has built a reputation for luxury and design innovation, it now faces the dual challenge of navigating economic uncertainty and restoring investor confidence.
The earnings shortfall, coupled with international trade headwinds, marks a critical moment for restoration hardware (RH) and its leadership. As the company looks to regroup, analysts and stakeholders alike will be watching closely to see how it adapts to an increasingly complex economic landscape.
