Analysts Trim RH’s Target Price After Firm Cuts 2025 Guidance

Core Viewpoint - RH, an upscale American furniture maker, has cut its 2025 guidance due to the ongoing impact of tariffs on the industry, despite reporting a 9% increase in revenues to $884 million for the third quarter [1][2]. Financial Performance - The company reported a revenue increase of 9% to $884 million, which was better than expected [1]. - The adjusted operating margin was 11.6%, falling short of the 12.5% midpoint guidance due to higher-than-expected tariff expenses [1][2]. Revised Outlook - RH has revised its 2025 revenue growth outlook to 9% to 9.2%, down from a previous forecast of 9% to 11% [2]. - The adjusted operating margin forecast has been lowered to 11.6% to 11.9%, down from 12% to 13% [2]. - The adjusted EBITDA margin is now expected to be 17.6% to 18%, reduced from 19% to 20% [2]. Tariff Impact - The company indicated that the outlook includes a negative impact of approximately 210 basis points on operating margin due to start-up costs for international expansion and a 90 basis point impact from tariffs, net of mitigation [3]. Market Reaction - Following the better-than-expected revenue results, RH shares rose by 10.64% in early trading, reaching $168.64 [4]. - However, RH shares have declined by about 60% over the past year, significantly affected by U.S. trade policies [4]. Analyst Ratings - The Telsey Group maintained a market perform rating but reduced its target price from $220 to $185, citing concerns over incremental tariffs and costs associated with new international gallery openings [5][6]. - TD Cowen also lowered its target price from $265 to $200 while maintaining a buy rating [6]. Challenges - RH faces challenges related to delivering backorders purchased at pre-tariff prices, which are now subject to tariffs, and higher expenses linked to the opening of RH Paris [6][7].