RH(US:RH) The Motley Fool·2025-10-21 08:25Core Viewpoint - The high-end furniture chain RH is expected to eventually make a turnaround despite recent challenges and a significant decline in stock value [1][3]. Group 1: Recent Performance and Challenges - RH's stock has decreased by 76% from its peak in 2021 and is down approximately 57% year to date due to a weak housing market, inflation, and new tariffs [2][3]. - The company reported an 8.4% increase in revenue to $899.2 million in its fiscal second quarter, with demand rising by 13.7% [5]. - Adjusted operating margin and adjusted EBITDA improved by 340 basis points to 15.1% and 20.6%, respectively, indicating strong profitability despite macroeconomic headwinds [5][6]. Group 2: Strategic Adjustments - CEO Gary Friedman has proactively responded to tariffs, with a projection that 52% of upholstered furniture will be sourced from the U.S. by year-end [7]. - RH has significantly reduced its reliance on China, with sourcing expected to drop from 16% in Q1 to just 2% in Q4, while also addressing production in India facing high tariffs [8][9]. Group 3: Historical Context and Future Growth - RH's stock previously collapsed in 2016 after shifting to a membership model, but rebounded to an all-time high by 2017, suggesting potential for recovery despite current challenges [10][11]. - The company is expanding in Europe, with gallery demand in RH England up 76% in the second quarter, and new stores in major markets like Paris showing strong performance [12]. - RH is diversifying its business by opening restaurants, guesthouses, and engaging in turnkey home sales through RH Residences, positioning itself for future growth [13].