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RH (RH - Free Report) , once known as Restoration Hardware, posted a surprise quarterly loss on December 7 and provided downbeat guidance.
The high-end home furniture retailer pointed to higher mortgage rates and other headwinds as reasons for RH’s rough near-term outlook.
RH’s Story
RH is a luxury-centered furniture and home décor powerhouse that has thrived in a changing retail landscape by keeping it old-school. The company still sends out massive catalogs and it has opened large, high-end stores, many with accompanying bars and restaurants in cities from Chicago to New York.
RH is even slowly attempting to push its way into the world of hotels, homes, architecture, and more. RH grew its revenue at a rather impressive rate between its 2012 IPO and 2021, including blowout results in FY21, driven by the booming housing market.
RH’s revenue then slipped about 4.5% last year as the housing market cooled and consumers focused on experiences after they spent a prolonged period buying tables, couches, and more.
Image Source: Zacks Investment Research
RH’s third quarter FY23 revenue fell by nearly 14%. The company’s adjusted operating margin also came in below expectations “due to higher than anticipated expenses, including international openings as well as costs related to our pending acquisition of the New York Guesthouse property and unsuccessful efforts to secure the iconic One Ocean Drive Miami Beach location.”
RH posted an adjusted loss of -$0.42 per share in Q3 vs. our +$0.91 a share Zacks estimate. The firm’s downbeat earnings guidance has seen its consensus estimate slide by 36% for the fourth quarter and 18% for both FY23 and FY24.
RH’s most accurate EPS estimates came in below consensus. All of RH’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. The nearby chart shows that RH’s earnings outlook has been fading for well over a year now.
Bottom Line
RH’s adjusted earnings are expected to slide by 60% YoY on 15% lower revenue. RH’s downbeat outlook is due in part to the slowing housing market. The company also said that the “home furnishings market has become increasingly promotional, and we believe that will create a mix shift towards clearance products, pressuring gross margins.”
RH shares are trading over 55% below their peaks. The stock also currently trades under its 200-week moving average.
RH is rather heavily shorted at about 17% of the float. All in, it might be best to avoid RH stock for now and look for other firms not tied directly to the housing market or big-ticket retail items.
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Bear of the Day: RH (RH)
RH (RH - Free Report) , once known as Restoration Hardware, posted a surprise quarterly loss on December 7 and provided downbeat guidance.
The high-end home furniture retailer pointed to higher mortgage rates and other headwinds as reasons for RH’s rough near-term outlook.
RH’s Story
RH is a luxury-centered furniture and home décor powerhouse that has thrived in a changing retail landscape by keeping it old-school. The company still sends out massive catalogs and it has opened large, high-end stores, many with accompanying bars and restaurants in cities from Chicago to New York.
RH is even slowly attempting to push its way into the world of hotels, homes, architecture, and more. RH grew its revenue at a rather impressive rate between its 2012 IPO and 2021, including blowout results in FY21, driven by the booming housing market.
RH’s revenue then slipped about 4.5% last year as the housing market cooled and consumers focused on experiences after they spent a prolonged period buying tables, couches, and more.
Image Source: Zacks Investment Research
RH’s third quarter FY23 revenue fell by nearly 14%. The company’s adjusted operating margin also came in below expectations “due to higher than anticipated expenses, including international openings as well as costs related to our pending acquisition of the New York Guesthouse property and unsuccessful efforts to secure the iconic One Ocean Drive Miami Beach location.”
RH posted an adjusted loss of -$0.42 per share in Q3 vs. our +$0.91 a share Zacks estimate. The firm’s downbeat earnings guidance has seen its consensus estimate slide by 36% for the fourth quarter and 18% for both FY23 and FY24.
RH’s most accurate EPS estimates came in below consensus. All of RH’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. The nearby chart shows that RH’s earnings outlook has been fading for well over a year now.
Bottom Line
RH’s adjusted earnings are expected to slide by 60% YoY on 15% lower revenue. RH’s downbeat outlook is due in part to the slowing housing market. The company also said that the “home furnishings market has become increasingly promotional, and we believe that will create a mix shift towards clearance products, pressuring gross margins.”
RH shares are trading over 55% below their peaks. The stock also currently trades under its 200-week moving average.
RH is rather heavily shorted at about 17% of the float. All in, it might be best to avoid RH stock for now and look for other firms not tied directly to the housing market or big-ticket retail items.