RH stock drops 40% due to tariffs and housing market challenges, facing risks and potential impact.

From Yahoo Finance: 2025-04-06 12:07:00

Luxury furniture company RH (NYSE: RH) suffered a 40% drop in shares due to tariff announcements coinciding with President Trump’s “Liberation Day.” CEO Gary Friedman noted challenges in the housing market and expects higher risk due to tariffs and volatility. The company’s expansion into Europe includes elaborate showrooms in expensive locations.

RH faces challenges with $2.6 billion in debt and 4.8 times leverage. Most furniture is sourced from Asia, facing tariff increases. Quarterly revenue rose 10% to $812 million, but missed expectations. Gross margins improved, but merchandise inventories jumped 35% to $1 billion.

RH forecasts full-year revenue growth of 10-13% and Q1 revenue growth of 12.5-13.5%. The company trades at a forward P/E of 14x, but faces potential impact from tariffs and economic downturn. The company caters to wealthier clients but carries significant risks due to leverage and potential sales struggles.

RH’s stock may have potential, but risks should be considered. The Motley Fool Stock Advisor did not identify RH as a top stock pick. Interested investors could consider a small position in the stock. RH’s future performance will depend on its ability to navigate challenges in the market.



Read more at Yahoo Finance: Down 40% in 1 Day, Is It Time to Buy RH Stock on the Dip?