Tariffs squeezing RH’s margins, Telsey says downgrading furniture retailer

Investing.com -- Telsey Advisory Group cut its rating on luxury home furnishings retailer RH to Market perform from Outperform, due to weaker revenue and profit forecasts tied to tariff costs and a delay in its Sourcebook mailing.

The brokerage lowered its price target to $220 from $255, applying an 18-times multiple to 2026 earnings per share estimates of $12.35, down from $14.25.

RH now expects 2025 revenue growth of 9% to 11%, compared with prior guidance of 10% to 13%. Operating margins are forecast at 13% to 14%, down from earlier projections of 14% to 15%.

The revised outlook includes about $30 million in net tariff costs in the second half of the year, trimming full-year margins by 90 basis points.

Free cash flow guidance was also narrowed to $250 million–$300 million, down from as much as $350 million.

For the third quarter, the company guided to revenue growth of 8% to 10% and margins of 12% to 13%, reflecting a 120 basis-point tariff hit.

Management delayed the Fall Interiors Sourcebook by eight weeks, which it said will push about $40 million of revenue into later quarters.

While Telsey noted RH continues to benefit from product refreshes, international expansion and a new brand extension planned for 2025, it flagged risk from tariffs, especially if a new furniture duty is imposed.

Furniture accounts for about two-thirds of RH sales, with just 10% of sourcing in the U.S.

RH is shifting production away from China and exploring alternatives to India after tariffs on hand-knotted rugs rose to 50%.

The company has also expanded domestic upholstery manufacturing at its North Carolina plant.

“We are downgrading our rating on RH given the reduced revenue and profit outlook, mostly due to a delay in a Sourcebook mailing and incremental costs as a result of recently enacted tariffs,” Telsey said.

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