BofA slashes furniture retailer RH target by $280 on tariff shock

Investing.com -- Bank of America downgraded high-end furniture retailer RH (NYSE: RH) to Underperform, citing macroeconomic headwinds and sharply higher global tariffs that could erode the company’s earnings power and sourcing advantages. The brokerage hacked its price objective to $130 from $410, saying recent trade policy shifts under a potential Trump administration would significantly raise costs and pressure margins.

RH shares are trading down 5% at $157.

BofA sees three key risks: higher friction for inventory sourcing, risk to demand from wealth effects, and lower free cash flow with rising leverage.

Analysts at BofA say that RH’s 2025 revenue and EBITDA guidance of $3.5 billion and $514 million now looks unachievable.

Tariffs announced last week affect several of RH’s key sourcing countries, including Vietnam, India, Indonesia, and the European Union, in addition to China.

Vietnam alone accounts for 35% of RH’s sourcing and faces a 46% tariff. RH had planned to end sourcing from China by mid-2025 but now expects a full exit by year-end.

While RH has a strong history of mitigating prior tariff rounds, BofA said the speed and scale of this wave presents a much larger challenge.

2025 guidance does not incorporate the full magnitude of the new tariffs, analysts at BofA said.

BofA sees potential cash flow of $205 million in 2025, helped by $200–300 million in excess inventory. But net debt ended 2024 at $2.56 billion with a 4.8x leverage ratio, and the firm flagged increased refinancing risk for the $2 billion in debt maturing in 2028.

Our downgrade reflects mounting uncertainty and a tougher path ahead, the analysts said.

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