July 13, 2018 / 1:58 PM / in 8 months

Home furnishing chain RH to limit China sourcing as tariffs loom

(Reuters) - Upscale home furnishing chain RH (RH.N) said on Friday it expects to significantly reduce the amount of goods sourced from China by fiscal 2019 to mitigate the impact of the proposed new tariffs by the United States.

The company expects to cut its sourcing from China to as low as about 25 percent by the end of fiscal 2019 from the estimated 35 percent imports in 2018 and 40 percent in 2017.

The United States, on July 10, threatened to slap tariffs on Chinese goods worth $200 billion, including on furniture and lighting products, days after enforcing levies on goods worth $34 billion.

RH is one of the first U.S. companies to react to the new tariff proposal that includes day-to-day consumer goods such as pet food and handbags. Until now, tariffs had only focused on capital goods such as steel and aluminum.

RH’s said its plan to lower its share of imports from China would help it reduce the impact of tariffs on its fiscal 2018 and 2019 financial results.

Its scale in the luxury home furnishing market will help raise prices if needed, RH said, adding it would work with its vendors to evaluate sourcing alternatives.

The company’s stock rose nearly 5 percent to $139.31 in early trading, recovering from Wednesday’s losses after a Goldman Sachs note said the new tariffs would hurt gross margin of home furnishing retailers and force them to raise prices.

RH sourced about 77 percent of its products from Asia in 2017, of which the majority of it came from China, according to a filing.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Arun Koyyur

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