Escalating trade tensions between the U.S. and China have been having an impact on most stocks.
With the recent round of retaliatory tariffs hurting many major companies that operate in both countries, one retail chain announced today they’ve managed to come up with a way to mitigate most of the impact Chinese tariffs will have on them.
RH (NYSE: RH), formally known as Restoration Hardware, shot up almost 25 percent on Wednesday after the company reported strong quarterly financial results alongside news that it had figured out how to drastically reduce the impact of Chinese tariffs on their operations.
Highlights for the first quarter saw net revenues for the year increased by 7.4 percent to $598 million, while first fiscal quarter net income was at $35.7 million, in comparison to the $25.5 million seen a year ago.
Most other metrics were strong, a big deal especially in the retail chain sector where many companies have struggled, RH seems to have avoided much of these difficulties due to their more niche market.
The most interesting part of the announcement, however, came when the company stated they managed to reduce the impact of Chinese tariffs to effectively only costing them an extra 10 percent in comparison to the 25 percent tariff most other companies will have to face.
“Regarding China tariffs, we have renegotiated product costs and selectively raised prices to mitigate the impact of the increase from 10 to 25 percent. We are also moving certain production and new product development out of China, plus exploring new partnerships and expanding our own manufacturing facilities in the United States. Long term, we do not believe the current trade climate will impair our ability to achieve our stated financial goals and the expected impact from the increased tariffs is embedded in our guidance for the year” said the company in a press release.
Retail chains across the country continue to struggle, often times shedding stores and employees in a last-ditch effort to find cost savings.
Niche brands are among the only retail chains somewhat immune from this trend, especially those that cater to the higher-end, luxury category of consumer demand, as is the case with RH.
Other retail chains like GameStop (NYSE: GME) and Bed, Bath & Beyond (NASDAQ: BBBY) have been struggling, while the lucky few manage to secure private buyout offers, as is the case with Barnes & Noble (NYSE: BKS).
Shares of RH have fallen significantly over the past year, declining from their early 2018 high in the $160s to a 52-week low in June 2019 at $84.11. Currently the stock jumped from $94 to $119 as a result of today’s spike.
RH has had a history of significant single-day moves in stock price, with the company losing around 25 percent of its stock on March 28th of this year.
Restoration Hardware Company Profile
RH is a luxury retailer operating in the $121 billion furniture and home furnishing industry. The company offers merchandise across many categories including furniture, lighting, textiles, bath, decor, children, and more.
RH innovates, curates, and integrates products, categories, services, and businesses across channels and brand extensions (RH Teen, RH Modern, and Waterworks, for example). The company is fully integrated across store, Web, and catalog channels, with 44% of sales from the direct-to-consumer channel. – Warrior Trading News
