RH Stock Rockets on Surprise Profit and Tariff Shift

Key Points

• RH stock jumps 20% after crushing EPS estimates with a surprise profit of $0.13 vs. a projected $0.09 loss.
• Tariff mitigation strategy reduces China exposure to 2% and shifts over half of production to the U.S., easing key investor concerns.
• High short interest, ongoing debt from share buybacks, and improved guidance position RH as a potential turnaround play for value-focused investors.

Shares of RH NYSE: RH rocketed nearly 20% higher after the company delivered mixed first quarter earnings. Revenue of $814 million missed expectations for $818.1 billion. However, the company posted positive earnings per share of 13 cents. Analysts were expecting negative earnings per share of nine cents, so this wasn’t just an upside surprise, it was a stunner.

Adding fuel to the earnings story was the company’s commentary around tariff mitigation. In addition to missing on revenue and earnings in the prior two quarters, one of the main reasons RH stock fell over 55% in 2025 was uncertainty surrounding tariffs. The U.S.-based company has heavy exposure to China. Or maybe the better word is had.

The company announced that as part of its tariff mitigation efforts, it expects “receipts” (i.e., imports) from China to decrease to 2% from 16% by the end of the year. Furthermore, the company said it expected “a meaningful portion of the tariff” to be absorbed by its vendors.

The cherry on top that must delight the White House is that RH is projecting that 52% of its upholstered furniture will be produced in the United States. Italy will produce 21%.

RH also said that it was delaying the launch of a new concept until 2026, when it will have more clarity about tariffs.

Will Investors Overcorrect?

The sharp spike in the RH stock price has caused it to push above its 50-day simple moving average (SMA). That’s a bullish sign, but it may also indicate a stock that’s run too far too fast. The company still expects to feel the impact of supply chain disruptions following Liberation Day in the coming quarter.

That means the real growth won’t happen until the back half of the year. Are investors simply pulling those gains forward? It’s possible. It’s also possible that there could be a slight pullback when the market opens on June 13.

It’s also important to note that short interest in RH stock is around 20%. But when you factor in that the CEO owns about 18% of the company’s stock, that percentage is higher. That means this could be a short squeeze.

RH Continues to Bet on Itself

One area that investors may not be bullish on is the level of debt that remains on RH’s balance sheet. The company’s long-term debt grew from 2019 to 2023 as RH bought back about half of its outstanding shares.

That level of buying by itself would constitute a big bet. However, it was the financing of that debt through convertible notes and other debt instruments that raised the stakes.

In this case, the gamble paid off, until it didn’t. Rising interest rates and weakness from the company’s core consumer caused a steep drop in earnings. At one point, RH stock dropped over 60%.

However, in the press release announcing the company’s earnings, chief executive officer Gary Friedman expressed confidence that the company will be able to weather the current storm and reduce the debt over time.

How to Approach RH Stock?

Retail stocks and consumer staples stocks continue to get battered in 2025. Even though RH targets a more affluent consumer, it’s not immune to the weakness in the housing market.

In fact, the company has announced a promotion that offers a 30% discount to members as opposed to 25%. That’s not a margin-crushing increase, but it also acknowledges that the state of the consumer may continue to be weak.

That said, investors who believe in the turnaround story are getting RH stock at a significant discount. It’s also attractively valued. Even with a price-to-earnings (P/E) ratio of over 50x, it’s trading at a discount to itself.

The RH analyst forecasts on MarketBeat have a consensus price target of $270. That was a 52% increase from the closing price, but it’s narrowed considerably after the after-market gains.