RH, the former Restoration Hardware, saw its stock drop more than 7% in pre-market trading after the company lowered its annual revenue forecast. The current expectation for revenue growth is now between 9% and 11%, down from the prior range of 10% to 13%. This year, RH shares have decreased by approximately 42%.
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RH is known for its upscale furniture offerings. Recently, the company reported a profit of $51.7 million, compared to $29 million last year. However, its adjusted revenue was $2.93 per share, falling short of the $3.21 that analysts anticipated. Revenue increased by 8.4%, reaching $899.2 million, but again, this was below the expected $955.4 million.
Customs Costs Impact RH’s Outlook
Despite these results, concerns over tariffs have dampened investor confidence. CEO Gary Friedman indicated that the company is bracing for a challenging business landscape due to tariff unpredictability, market fluctuations, and inflation. He also mentioned that RH is navigating what some are calling the worst housing market in nearly five decades.
Furthermore, the company mentioned that later this year, an adjusted outlook will factor in an additional $30 million in tariff costs, following some easing. They also expect some revenue delays into next year due to an eight-week postponement of the launch of their fall sourcebook while awaiting clarity on customs fees.
This has led RH to anticipate that about $40 million in revenues will be deferred from the current quarter, extending into the next two quarters.
Is RH Worth Buying Now?
Analysts generally have a moderate buy rating on RH stocks, with seven buy recommendations, seven holds, and two sells noted over the past three months. The average price target for RH stock stands at $262.00, suggesting a potential upside of about 15% from current levels.
