RH Provides Clarification on Tariff Announcement

April 6, 2025  by Karen Parrish in Business Strategy, Industry   

The Company has been operating with 25% tariffs from China since the last Trump administration and has successfully resourced the majority of its China production to Vietnam at significantly better than pre-tariff landed China pricing. In addition, the Company has successfully resourced a meaningful amount of its China production to its own factory in North Carolina.

As discussed during the Company’s fourth quarter earnings call on April 2, 2025, RH believes President Trump is using the significant tariffs as a tool to accelerate negotiations with an intent to improve and balance trade conditions around the world. The Company believes this appears to be working as earlier today, the President issued the following message on his Truth Social platform:

“Just had a very productive call with To Lam, General Secretary of the Communist Party of Vietnam, who told me that Vietnam wants to cut their Tariffs down to ZERO if they are able to make an agreement with the U.S. I thanked him on behalf of our Country, and said I look forward to a meeting in the near future.”

If the President responds in kind, the Company’s resourcing to Vietnam will be accretive to margins.

On April 2, 2025, the Company reported an 18% increase in net revenues in the 4^th quarter on a 13-week comparable basis, significantly outperforming the furniture and home furnishings industry despite operating in the worst housing market in almost 50 years. The Company also reported RH Brand demand was up 19% in January. Due to the significant market volatility since the reciprocal tariff announcement, the Company is disclosing Total Company demand quarter-to-date is up 17%, and RH Brand demand quarter-to-date is up 20%.

The Company believes that no major furniture or outdoor furniture retailer has any material sourcing advantages based on the current announcements. RH believes it has more transparent reporting regarding countries it sources from than other public furniture retailers, who have more opaque reporting causing an incorrect analysis of the potential tariff impact and competitive positioning. The Company believes that as investors demand more transparent, country specific disclosures, it will be apparent that RH does not have any more market or financial risk than other higher end furniture-based retailers.

Furthermore, the Company is introducing a Free Cash Flow outlook for fiscal year 2025 in the range of $250M to $350M.

Note: Demand is an operating metric that we use in reference to the dollar value of orders placed (orders convert to net revenue upon a customer obtaining control of the merchandise) and excludes exchanges and shipping fees.

Total demand represents the demand generated from all of our businesses including RH Interiors, RH Modern, RH Contemporary, RH Outdoor, RH Baby & Child, RH TEEN, RH Contract, Membership, Dmitriy & Co, Joseph Jeup and Waterworks, as well as sales from RH Hospitality and RH Outlet.

RH Brand Demand represents demand from RH Interiors, RH Modern, RH Contemporary and RH Outdoor generated through our Galleries and online.

Due to fiscal 2023 being a 53-week year, demand growth for fiscal 2024 and for the fourth quarter of fiscal 2024 excludes the extra week, and is therefore calculated on a 52-week and 13-week comparable basis, respectively.

We define free cash flow as net cash provided by operating activities less capital expenditures. Free cash flow is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Free cash flow is included in this release because we believe that this measure provides useful information to our senior leadership team and investors in understanding the strength of our liquidity and our ability to generate additional cash from our business operations. Free cash flow should not be considered in isolation or as an alternative to cash flows from operations calculated in accordance with GAAP and should be considered alongside our other liquidity performance measures that are calculated in accordance with GAAP, such as net cash provided by operating activities and our other GAAP financial results. Our senior leadership team uses this non-GAAP financial measure in order to have comparable financial results for the purpose of analyzing changes in our underlying business from quarter to quarter. Our measure of free cash flow is not necessarily comparable to other similarly titled measures for other companies due to different methods of calculation.