RH Chairman and Chief Executive Officer Gary Friedman was surprised by after-hours drop in his company’s stock late Wednesday.
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RH CEO Gary Friedman began his fourth quarter earnings call for the company formerly known as Restoration Hardware on Wednesday afternoon in high spirits. He welcomed the analysts on the call to the “new world” and reassured them that “this is not a time to panic, not a time to react,” alluding to Trump’s sweeping tariff announcement on imports to the U.S., which had been announced an hour earlier.
The market, however, did react–and investors did panic, with shares of RH falling 26% in after-hours trading on Wednesday. And so did Friedman, about an hour into the 5 pm (Eastern time) call, with the only words that seemed apt to describe the situation as he watched RH stock tank: “Oh shit.”
As of Thursday at 3 pm Eastern, RH stock had fallen nearly 40%, rattled by the uncertainty of Trump’s tariffs and last year’s poor performance.
The sudden stock downturn makes Friedman the biggest billionaire loser of the ongoing trade war so far, in percentage terms. In fact, he lost so much that he’s no longer a billionaire at all, estimates. When we published the annual World Billionaires list on Tuesday, the CEO was worth an estimated $1.2 billion. On Thursday, Friedman’s fortune had plunged 39% to an estimated $750 million.
Friedman first became a billionaire in June 2020. Shares of RH tripled in value in four months beginning March that year. Just as more people were spending time in their homes during the pandemic, the company announced ambitious plans for its expansion into hospitality and residential housing. In a letter to shareholders on June 3, 2020, Friedman detailed grand plans to grow the firm’s revenue streams and turn it into a luxury powerhouse that included adding a luxury yacht available for charter and RH branded hotels.
In its most recent annual report, $3.2 billion (revenue) RH (known as Restoration Hardware until 2017) said that it sources 72% of its products from countries in Asia (based on purchase dollar volume) and other nations hit by the new round of tariffs. During the earnings call on Wednesday, Friedman said that RH’s reliance on Asia was “not a secret” and insisted that this was no different from his competitors in the industry.
Friedman also referred to the extra furniture in RH’s inventory – worth $200 million to $300 million – as a “friend” for the first time in his career.
Right now, only 10% of RH’s products are made domestically, but Friedman forecasts that by year’s end, 14% of the company’s total business will be produced in the U.S., as the company works to shift more of its production to its North Carolina factory.
The furniture retailer, known for its aspirational galleries and luxurious home furnishings–including dining room tables that cost as much as $25,800, and a $5,600 (starting price) cloud sofa–has been struggling in recent months, amid a depressed housing market, defined by high home and mortgage prices that have slowed buying.
Despite a terrible day for RH and Friedman, the CEO ended the call with an optimistic outlook. “Its a good time to be RH, even though it looks like a bad time,” he said. “This is just another one of those opportunities to learn and grow and invent and innovate and leapfrog to another better place we can’t even see yet.”
