RH (RH) Shares Down 5% on Revised 2022 Outlook

RH (NYSE: RH) shares were trading more than 5% lower after-hours Wednesday following the company’s 2022 outlook revision.

Given the deteriorating macro-economic environment that resulted in lower than expected demand since the company’s prior forecast, RH reduced its full 2022-year net revenue growth forecast to (2%)-(5%), with an adjusted operating margin of 21-22%. The company had seen net revenue growth in the range of 0% to 2% and adjusted operating margin in the range of 23.0% to 24.0%.

Q2 outlook of net revenue growth of (1%)-(3%), with an adjusted operating margin of 23-23.5%, remained unchanged due to faster backlog relief offsetting lower than expected demand.

According to Gary Friedman, Chairman and CEO of the company, demand is expected to continue to soften during the remainder of 2022 with mortgage rates double last year’s levels, luxury home sales down 18% in Q1, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end.

Friedman remains optimistic long-term.

“While we anticipate the next several quarters will pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift, shed less valuable market share as we continue to raise our quality, and choose not to promote our business while we navigate through the multiple macro headwinds, we continue to believe our long-term investments will enable us to drive industry-leading performance over a longer term horizon," Friedman commented.

By Davit Kirakosyan

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