Key Takeaways

  • RH shares jumped more than 8% in extended trading Wednesday as optimism about the company’s product transformation overshadowed quarterly results that missed analysts’ estimates.
  • CEO Gary Friedman sees business conditions remaining challenging until interest rates fall, but expects the retailer’s new and updated RH Sourcebook collections to accelerate demand trends throughout fiscal 2024.
  • The RH share price may find resistance around $320 near the mid December high, before possibly testing higher resistance at the $403 region.

RH (RH) shares popped more than 8% after Wednesday’s closing bell as investors focused on the home furnishing retailer’s RH Sourcebook product range transformation rather than its quarterly top and bottom-line results that came in well below Wall Street’s expectations.

The premium home décor company said in its quarterly shareholder letter that it plans to unveil its RH Modern Sourcebook collections between late April and early May, which it expects to accelerate demand trends in the second quarter and throughout the back half of 2024. In addition, RH anticipates a sales boost from its updated RH Contemporary Sourcebook collections expected to reach homes in late July through early August.

The company also said it had received an exceptional customer response to its recently launched new RH Outdoor Sourcebook collections of luxury furniture.

Turning to the quarterly results for the three-month period ending Feb. 3, the company posted adjusted earnings of 72 cents per shares, significantly missing analysts’ forecast of $1.67 a share.The top line also came up short, with revenue in the period of $738.3 million below the $777.5 million Street expectation.

Looking ahead, the company said it sees a revenue lag of 4 to 8 percentage points throughout 2024 due to its product range transformation, adding that it will project demand growth in each quarter this year to better reflect its top line. For the current quarter, RH sees demand growth of positive mid-single digits and revenues of negative low-single digits. For fiscal 2024, the company guided demand growth of between 12% and 14% and revenue growth of 8% to 10%.

“While we expect business conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout fiscal 2024,” said RH Chairman and CEO Gary Friedman.

The RH share price has remained rangebound over the past 15 months, oscillating roughly within a $200-point band. More recently, the stock has crossed back above the 200-day moving average leading into the company’s earnings release. Amid an expected news-driven rally on Thursday, investors should monitor how the price responds to the $320 level—an area on the chart where it may find overhead resistance from the mid December swing high. A close above this level opens the door for a move up to around $403, where the price could encounter selling pressure near the August 2023 peak.

RH shares gained 8.5% to $322.30 in afterhours trading Wednesday.

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As of the date this article was written, the author does not own any of the above securities.

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