Luxury Furnishing Firm RH Surprises With Q1 Profit: Retail Enthusiasm Jumps As Shares Rally
Synopsis
The company said it is working to mitigate the impact of tariffs by reorganizing its production globally.
RH (RH), formerly known as Restoration Hardware, surprised with a quarterly profit on Thursday, sending its shares up over 20% in extended trading.
CEO Gary Friedman's comments about the company taking steps to mitigate the impact of the tariffs, including shifting a significant amount of product out of China, further boosted confidence.
On Stocktwits, retail sentiment for the company climbed several notches higher in the 'extremely bullish' territory. Message volume jumped 920% in the past 24 hours.
A user said, "The upside move was unbelievable but understandable," and several others indicated expectations of the stock reaching $220 levels.
RH is known for luxury home furnishings, including furniture, lighting, textiles, and decor items.
RH's previous earnings call in April coincided with Donald Trump's announcement of all-nation tariffs, prompting Friedman — likely reacting in real-time — to gasp, "Oh sh**," as the company's stock tumbled 40%.
On Thursday, the retailer reported a profit of $8 million for its fiscal first quarter that ended on May 3, compared to a $3.6 million loss last year.
On an adjusted basis, it earned $0.13 per share, compared to analysts' expectations of a $0.09 per share loss.
Revenue rose 12% at $814 million but came in below expectations of $818.6 million.
Friedman said several risks, such as tariffs, market volatility, and a dire housing market, create a challenging business environment, but the company is working on various mitigation efforts.
He said that the percentage of products imported from China would decrease from 16% in the first quarter to 2% in the fourth quarter. Furthermore, by the end of this fiscal year, 52% of the company's upholstered furniture will be produced in the U.S. and 21% in Italy.
The company is maintaining its forecast for 10% to 13% revenue growth this year, assuming existing tariff rates will remain unchanged.
As of their last close, RH shares are down 55% year-to-date to $176.87.
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