RH comments on products sourced from China
RH provided clarification in response to inaccurate reports regarding the percentage of the company's product sourced from China. The company expects to source approximately 35% of its product from China in FY18, and that imports from China will be approximately 25% to 30% in FY19. In FY17, approximately 40% of RH product was sourced from China. The Office of US Trade Representative announced on July 10th a proposed 10% ad valorem duty on a subset of products imported from China, inclusive of various furniture and lighting product categories. The company has evaluated the supplemental list issued by the US Trade Representative on July 10th and believes that a significant subset of the company's furniture and lighting sourced from China would be impacted by the proposed tariff. The company believes that it can mitigate the impact of the proposed 10% tariff on its business to the point that there would be an immaterial impact on its FY18 and FY19 financial results. RH is a significant source of volume for its vendor partners and believes that its vendor partners would work collaboratively with the company in an attempt to neutralize the potential tariff as well as potentially evaluate sourcing alternatives. In addition, due to the company's differentiated product offering and scale in the luxury home furnishing market, RH is "well positioned" to make pricing adjustments if necessary. The company is providing this commentary solely to provide clarification regarding its product sourcing as well as provide its initial assessment of the proposal and recognizes that the US Trade Representative's latest Chinese tariff proposal is highly preliminary and likely subject to significant alteration over the coming months.