Key takeaways
- RH shares rose more than 8% in extended trading Wednesday as optimism about the company's product transformation overshadowed quarterly results that missed analyst estimates.
- CEO Gary Friedman believes trading conditions will remain challenging until interest rates fall, but expects the retailer's new and updated RH Sourcebook collections to accelerate demand trends during fiscal 2024.
- RH share price may encounter resistance around $320 near the mid-December high, before possibly testing further resistance around the $403 region.
RH (RH) stock rose more than 8% after the closing bell on Wednesday as investors focused on the transformation of the home furnishings retailer's RH Sourcebook product range rather than its quarterly top and bottom results that were well below Wall Street expectations.
The premium home décor company said in its quarterly letter to shareholders that it plans to introduce its RH Modern Sourcebook collections between late April and early May, which it hopes will accelerate demand trends in the second quarter and throughout the second half. 2024. Additionally, RH anticipates an increase in sales thanks to its updated RH Contemporary Sourcebook collections that are expected to arrive in homes from late July to early August.
The company also said it had received exceptional customer response to its recently launched new RH Outdoor Sourcebook luxury furniture collections.
Turning to quarterly results for the three-month period ending February 3, the company posted adjusted earnings of 72 cents per share, well below analysts' forecast of $1.67 per share.The top line also fell short, with revenue in the period of $738.3 million missing Street expectations of $777.5 million.
Looking ahead, the company said it expects revenue to lag by 4 to 8 percentage points throughout 2024 due to the transformation of its product range, adding that it will project demand growth in each quarter of this year. year to better reflect your income. For the current quarter, RH forecasts positive mid-single-digit demand growth and negative low-single-digit revenue growth. 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 decline and the housing market begins to recover, we expect our demand trends to accelerate throughout fiscal 2024,” said the president and CEO of RH, Gary Friedman.
RH's share price has remained range-bound for the past 15 months, oscillating roughly within a $200 band. More recently, the stock crossed back above the 200-day moving average ahead of 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 high. A close above this level opens the door for a move towards around $403, where the price could find selling pressure near the August 2023 peak.
RH shares gained 8.5% to $322.30 in after-hours trading Wednesday.
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