RH RH

By Micah Maidenberg 

Luxury home-furnishing retailer RH raised its forecast for sales and profit this year, a move that cheered investors worried about the impact of higher tariffs on China could have on the company.

In May, the Trump administration implemented a 25% tariff on certain Chinese goods, up from the 10% tariff imposed in October. Last year, RH sourced 41% of its products from China, based on total dollar volumes of the purchases, according to the company's annual report filed in March.

RH said Wednesday it renegotiated product costs and raised prices to reduce the impact of higher costs related to the tariffs. The company said it was moving production and new-product development out of China, and looking at expanding its manufacturing facilities in the U.S.

"Long term, we do not believe the current trade climate will impair our ability to achieve our stated financial goals," RH said.

Shares of the company, formerly called Restoration Hardware, jumped 25% in after-hours trading, as it also delivered stronger-than-expected financial results in the latest period. The stock gained about 2% during regular hours Wednesday.

Earlier this week, beanbag maker Lovesac Co. pointed to the higher tariffs in explaining its worse-than-expected results in the first quarter.

"We are on a straight path to exit China as a manufacturing source almost completely over the next 18 months," Lovesac Chief Executive Shawn Nelson said on a conference call. He said the Stamford, Conn.-based company would prefer to see the tariffs suspended "to keep the most efficient parts of our China supply chain intact to support our growth."

Hooker Furniture Corp., based in Martinsville, Va., said earlier Wednesday that it planned to shift certain products out of China because of the increase in tariffs. In its last fiscal year, 44% of imported purchases were from China, Hooker said in its annual report in April.

RH said it expected full-year sales, after adjustments, of $2.64 billion to $2.66 billion, up from a previous forecast of $2.59 billion to $2.64 billion.

RH also predicts an adjusted profit of at least $8.76 a share, which is higher than the top end of its prior forecast.

For the quarter ended May 4, RH reported $598.4 million in revenue, up 7% compared with last year. Analysts polled by FactSet predicted $584 million in revenue.

The Corte Madera, Calif., company said first-quarter profit rose to $35.7 million, or $1.43 a share, up from $25.5 million, or $1.01 a share, a year earlier.

After adjustments, the company reported earnings of $1.85 a share, surpassing the $1.53 a share analysts were looking for.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

June 12, 2019 17:53 ET (21:53 GMT)

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