RH stock increases as customer demand accelerates

RH ( RH ) stock rose more than 20% on Friday after the luxury home furnishings retailer said customer demand had picked up.

RH said in its shareholder letter published Thursday that demand rose 7 percent in the fiscal second quarter ended Aug. 3 from the year-earlier period. Demand refers to the dollar value of customer orders placed during a given period. RH recognizes order revenue when customers receive merchandise.

The company added in the letter that “demand accelerated in the third quarter in August by 12% and product margins tilted positively, despite operating in the most difficult real estate market in three decades.”

RH has struggled as the housing market has been at a relative standstill amid low inventories, record home prices and high interest rates. The dynamic kept buyers and sellers alike on edge. That means homeowners are putting off buying new furniture and undertaking new renovations.

Recently, mortgage rates have fallen as investors bet on a rate cut from the Federal Reserve as inflation slows. The central bank will announce its next policy decision on Wednesday.

“Despite expectations that industry conditions will remain challenging until interest rates ease and the housing market begins to recover, we expect our demand trends to accelerate in 2024 and into 2025,” Gary Friedman, CEO of RH, told investors and analysts in the second quarter. call for winnings Thursday afternoon.

However, the home furnishings retailer cut its full-year forecasts for both revenue and demand due to its “later-than-expected inflection”, illustrating how difficult the market remains. RH now expects demand in the range of 8% to 10% and revenue growth in the range of 5% to 7% for the year, down from the ranges it previously gave of 12% to 14% and 8% to 10% respectively.

Wedbush CEO Seth Basham told Yahoo Finance in an email that “investor expectations were for a further cut in growth forecasts for the year. The updated guidance implies further acceleration in growth (year-over-year) in Q3 and Q4, while the company also talked about continued acceleration in 1H25.”

He added: “Furthermore, investors are pleased that commodity margins turned positive (year-over-year) in August, signaling that new product introductions are not further diluting margins (and are likely rising for product margins) and margin pressure related to liquidation is dissipated.”

RH posted adjusted earnings per share of $1.69 in Q2, beating Wall Street estimates of $1.60 per share. Revenue of $829.7 million also beat the consensus estimate of $825.1 million.

The story continues

Since Friday, the stock is up 8% year to date. The S&P (^GSPC) rose 18% by comparison. Shares of RH closed up 25% at $321.90 on Friday.

Dani Romero is a reporter for Yahoo Finance. Follow X @daniromerotv.

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