Why RH Rallied To Start The New Year

Shares of luxury furniture-maker RH (NYSE: RH) were up strongly to start 2026, rising 9.6% as of 2:52 p.m. EDT.

RH rallied along with its furniture sector peers on news that the Trump Administration's harsh furniture tariffs, initially announced back in September, wouldn't increase as expected until 2027, amounting to a one-year delay.

Trump listens to U.S. furniture-makers

In September, the Trump administration imposed a 25% tariff on imported upholstered furniture, kitchen cabinets, and vanities. Moreover, the tariff rate on upholstered furniture was set to rise to 30%, and the tariff rate on cabinets and vanities was set to rise to 50% on January 1. However, President Trump signed an executive order just before the new year, delaying those increases until 2027, citing progress on trade talks as the reason.

While the Administration's stated objective was to revive North Carolina's furniture manufacturing industry, RH CEO Gary Friedman has noted on the company's previous earnings calls that the tariffs could have severe negative consequences for smaller furniture-makers. RH also lowered its operating margin guidance for the year on its last earnings call, citing a 90-basis-point impact from tariffs.

Friedman said on the call, "Tariffs are disrupting supply chains and driving higher prices. There have been 16 different tariff announcements over the past 10 months that have resulted in significant resourcing product delays, out-of-stocks, and driven multiple rounds of price negotiations and increases."

Therefore, the fact that tariffs won't be rising yet again to start the year took some pressure off the company, leading to today's stock rise.

Image source: Getty Images.

RH: A turnaround candidate?

RH was plagued by the tremendous housing market downturn that began after the pandemic, as the company's sales are generally tied to people buying a new house and furnishing it. Furthermore, management took on substantial debt to repurchase stock over the past two years, a move that appears to have been ill-timed and premature, given the continued weakness of the housing market. Then, RH got hit with this year's tariffs.

The toxic combination has left RH's stock down 76% from its pandemic-era highs. But that also means the stock could be a turnaround candidate if these headwinds begin to clear up. That's why the stock made such a big move today, on the mere delay of expected tariff increases.

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy.