MILAN — In a moment of reckoning, upscale American furniture maker RH cut its 2025 guidance as the tariff effect continues to batter the industry.
On Thursday, Corte Madera, Calif.-based RH posted a better-than-expected 9 percent increase in revenues to $884 million. However, its adjusted operating margin of 11.6 percent fell short of its 12.5 percent midpoint guidance estimates due to higher-than-forecasted tariff expenses.
The firm also trimmed its 2025 outlook to 9 to 9.2 percent revenue growth, down from a previous forecast of 9 to 11 percent issued in September. It now expects adjusted operating margin of 11.6 to 11.9 percent, down from 12 to 13 percent and an adjusted earnings before interest, taxes, depreciation and amortization margin of 17.6 to 18 percent down from 19 to 20 percent.
“The above outlook includes an approximately negative 210 basis point operating margin impact from investments to start-up cost to support our international expansion and a 90 basis point impact from tariffs net of mitigation,” the firm said in a statement.
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The better-than-expected third-quarter revenues sent RH shares up 10.64 percent in early Friday trading at $168.64. Shares of RH (formerly Restoration Hardware) have lost about 60 percent over the past 12 months, suffering a hard hit by U.S. President Donald Trump’s trade policy first announced in April.
Following the results, the Telsey Group advisory maintained its market perform rating but cut its target price of $220 per share to $185, on concerns about incremental tariffs and the cost of new international gallery openings.
“We remain positive on RH’s product transformation, revenue contribution from international stores, and the new brand extension planned for spring 2026 focused on classic and antique styles. However, we are concerned about the impact on profitability from incremental tariffs and ongoing investment spending to scale the international business, given gallery openings in the key cities of London and Milan in 2026,” the advisory said. TD Cowen also slashed its target price to $200 from $265 but kept a buy rating on the stars.
Telsey Advisory also kept a market perform rating but cut its target price to $185 from $220, explaining that part of RH’s challenge is attributed to pressure caused from delivering backorders that customers purchased at pre-tariff prices but that are now subject to tariffs, as well as higher expenses associated with the opening of RH Paris which bowed in September.
“We are concerned about the impact on profitability from incremental tariffs and ongoing investment spending to scale the international business, given gallery openings in the key cities of London and Milan in 2026,” Telsey said.
Following efforts to amp up its product offering with European-made designs and an international roster of fresh and established creatives, emphasizing RH’s European potential following the Paris opening earlier this year, which “pushed” the firm “to another level,” chief executive officer Gary Friedman said during the conference call with analysts. The Milan opening during design week here in April is the next milestone, he said.
“Because Milan is really one of the prime capitals of the world, not only for design, but also for fashion. But it’s where the biggest design show in the world is, Salone, where 500,000 people go once a year, and it’s also the time we’re going to open RH Milan,” he declared. Salone del Mobile.Milano, the world’s largest luxury interiors and furniture trade show, will unfold April 21 to April 26.
Analysts were positive on the upcoming launch of RH Antiques business, which will be unveiled during the Milan opening in April. RH originally announced the acquisition of Michael Taylor Designs in 2022. Taylor, who died in 1986, is credited with creating the “California Look” throughout his career in interiors and furniture.
After Milan, RH Antiques will be rolled out across the store base. “The brand extension will have a separate Sourcebook and three freestanding galleries in San Francisco, West Hollywood and Greenwich, Conn.,” Telsey noted.
