2025-04-03T07:14:12Z

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In a striking moment during a recent earnings call, Gary Friedman, the CEO of RH (formerly known as Restoration Hardware), reacted candidly when he learned about a significant drop in the company’s stock prices. The incident, which occurred on Wednesday, highlighted the pressures facing businesses in the wake of new tariff announcements. Friedman’s exclamation, "Oh shit," underscored the gravity of the situation as RH's stock plummeted by 26% in after-hours trading, leaving investors rattled.

This sharp decline came in the wake of President Donald Trump’s announcement of substantial tariffs aimed at China and Vietnam, countries from which RH sources a large portion of its luxury home goods. During the call, Friedman expressed his surprise and concern, stating, "We're just really well positioned right now. I think that's the headline. If you're going to bet on somebody in this race, and what's our stock now? Oh really? Oh shit, okay. I just looked at the screen." His reaction captured the frustration felt by many in the retail sector as they navigate the complex landscape of international trade and tariffs.

According to RH's reports, an overwhelming 72% of its products are sourced from Asia, with a significant portion coming from Vietnam and China. The latest tariffs announced include a 34% retaliatory tax on Chinese goods and 46% on Vietnamese imports. Additionally, India and Indonesia were subjected to 26% and 32% tariffs, respectively. These steep tariffs pose a significant threat to RH's pricing strategies and overall profitability, as the company relies heavily on these markets for its product offerings.

Friedman acknowledged that the entire home decor and furnishing sector is grappling with similar challenges. "I know most of the businesses pretty well," he said, indicating that the difficulties are widespread across the industry. This collective struggle is further compounded by the current state of the housing market, which Friedman characterized as the worst it has been in nearly 50 years. He illustrated this point by comparing historical sales figures; in 1978, with a U.S. population of 223 million, 4.09 million existing homes were sold. Fast forward to 2024, and only 4.06 million homes were sold in a country with a population of 340 million. This stark contrast highlights the severe stagnation in the housing market.

Despite these challenges, Friedman pointed out that RH is still performing at levels typically expected in a more robust housing market. In the latest reporting period, the company saw a 5% increase in revenue, reaching $3.18 billion compared to the previous year. However, it is important to note that RH's stock has declined over 37% since the beginning of the year, reflecting heightened investor concerns about the ongoing trade tensions and their economic implications.

Import tariffs, such as those recently implemented, are intended to promote domestic manufacturing but can inadvertently raise production costs for companies reliant on foreign materials. Often, these costs are passed down to consumers, leading to increased prices for everyday goods. While some companies may absorb part of the tariff impact, the majority of the financial burden typically falls on customers.

During the announcement of the new tariffs, President Trump stated, "April 2, 2025, will forever be remembered as the day American industry was reborn, the day America's destiny was reclaimed, and the day that we began to make America wealthy again." This statement aims to frame the tariffs as a necessary step towards revitalizing the American economy, yet the immediate repercussions for companies like RH reveal a more complicated reality.

As of now, RH has not responded to requests for further comments regarding the impact of these tariffs on their operations. The uncertainty surrounding international trade policies leaves many businesses in a precarious position, struggling to adapt to the shifting landscape of global commerce.