RH Stock Plunges: Tariffs Crush Margins Despite 9% Revenue Surge

Luxury furniture giant RH just delivered a financial paradox that's rattling Wall Street.

The Growth That Wasn't Enough

Revenue climbed a solid 9%—a figure most retailers would celebrate. But the market shrugged. Investors instead zeroed in on the margin story, where soaring tariff costs are eating profits alive. The stock's plunge tells the real tale: top-line growth means nothing if it doesn't reach the bottom line.

The Tariff Tax

Global supply chains are turning into a financial minefield. For a company like RH, sourcing high-end materials and craftsmanship from overseas, new tariffs act as a direct tax on profitability. Those costs are either absorbed, crushing margins, or passed to consumers, risking demand. It's a classic corporate squeeze play.

A Warning for Traditional Finance

This episode is a textbook case of legacy market fragility—where centralized policy shocks can instantly vaporize shareholder value based on factors entirely outside a company's control. One rule change, one political tweet, and your investment thesis is obsolete. It's enough to make you appreciate assets that trade 24/7 on a global, decentralized ledger, free from the whims of a customs office.

So RH posts a win and gets punished. In today's market, beating the sales number isn't the game anymore. It's all about surviving the squeeze. And for traditional equities, the pressure just keeps mounting.

TLDR

• RH grows revenue 9% but margins shrink under tariffs and expansion costs.
• Market share climbs despite housing slowdown and stiff industry headwinds.
• Strong cash flow and reduced debt boost RH’s financial flexibility.
• Q4 outlook points to growth but continued cost pressure on profitability.
• RH stays resilient with steady demand and disciplined operational strategy.

RH ended the day lower as the stock closed at $153.31, down 2.49%, while the company posted steady third-quarter growth.

Rh, RH

The latest results showed firm revenue momentum but shrinking margins, and this contrast shaped market reaction. The report also highlighted operational pressures that continued to influence expectations.

Revenue Growth Strengthens but Margin Pressure Builds

RH reported a 9% revenue increase to $884 million, and the gain extended its two-year trend of strong expansion. Higher tariff expenses and Paris opening costs reduced margins, and this shifted attention toward operating discipline. The company increased net income by 9% to $36 million, and this underscored ongoing demand.

The operating margin reached 12.0%, while adjusted operating margin settled at 11.6%, and both reflected added cost burdens. Tariff impacts affected orders from prior periods, and this influence limited expected profitability during the quarter. RH maintained EBITDA strength with a 16.2% margin, and adjusted EBITDA reached 17.6%.

Free cash FLOW totaled $83 million, and year-to-date results reached $198 million, which kept the company on track for its annual goal. RH also reduced net debt to $2.427 billion, and the company continued to lower excess inventory. Management estimated real estate equity of $500 million, and this value may support future financial flexibility.

Market Share Gains Continue Despite Housing Headwinds

RH recorded share gains across major segments, and these gains extended over a one-year and two-year period. The company attributed progress to continued demand shifts, and these shifts strengthened its position within the fragmented luxury home sector. It also advanced against regional showrooms and national furniture brands.

The broader housing slowdown influenced category performance, and RH noted the industry faced the weakest environment in decades. Still, revenue growth held steady, and this performance supported the company’s competitive stance. The tariff environment remained challenging, and this dynamic shaped ongoing pricing strategies.

RH continued to reduce inventory while improving product cycles, and this improvement helped streamline operations. Management also prioritized cost control, and this direction aimed to stabilize margins over time. The company highlighted stronger engagement within design-driven categories, and this momentum supported its long-term growth theme.

Updated Outlook Points to Growth and Added Cost Pressures

RH projected fourth-quarter revenue growth of 7% to 8%, and this range aligned with current run-rate trends. The company expected a 12.5% to 13.5% adjusted operating margin, and tariffs again weighed on the forecast. Adjusted EBITDA margin guidance of 18.7% to 19.6% reflected continued cost discipline.

Full-year revenue growth should reach 9.0% to 9.2%, and this outlook stayed consistent with earlier projections. The company planned for an 11.6% to 11.9% adjusted operating margin, and international investments reduced overall profitability. EBITDA margin expectations of 17.6% to 18.0% framed the company’s near-term performance.

Free cash Flow guidance of $250 million to $300 million remained unchanged, and this supported RH’s financial targets. Ongoing expansion efforts influenced expense levels, and this impact continued to shape quarterly outcomes. RH maintained a steady long-term stance, and overall performance signaled resilience despite external pressures.