RH shares decline after dialing down its FY guidance

Shares of high-end furniture chain RH took a downturn in Thursday’s pre-market trading after slashing its fiscal year outlook.

The American retail store company lost 4.85% or 11.52 points to $225.80 per share. The decline followed the slump of 2.65% during regular trading, closing at $237.32 apiece.

Accordingly, RH anticipated annual sales to skid between 2.00% and 5.00%. This guidance is below the prior estimate of a 2.00% gain. Nevertheless, it still retained its forecasted revenue in its fiscal second quarter to be between 1.00% and 3.00% lower from prior-year levels.

The disappointing outlook came as the firm expected the consumer demand to soften in the back half of the year.

RH CEO Gary Friedman explained that the current mortgage rates doubled from last year’s levels. In addition, he cited that the luxury home sales slipped by 18.00% in the first quarter.

Consequently, Friedman emphasized that the anticipated 175.00 basis point increase from the US Federal Reserve could further lower demand. He added that the next quarters would pose a short-term challenge for the company. Accordingly, RH laps a period of heightened demand in the earlier days of the COVID pandemic.

Earlier this month, the business warned that it sees softening demand, pressured by the Russian invasion of Ukraine. Nevertheless, Friedmann said at the time that 2022 could mark the beginning of a new growth chapter for the business.

RH’s first-quarter earnings results

For the first quarter, RH’s revenue increased by 11.00% to $957.00 million. The figure came in higher than the $861.00 million prior year. Similarly, its adjusted diluted earnings per share for the period were $7.78, a climb of 59.00% from the previous $4.89.

However, the retailer’s shares have fallen 55.91% year to date as of Wednesday’s market close. Furthermore, RH also stated that it had not repurchased any stock. This statement came after it announced the expansion of its common share repurchase plan last June 02.