Shares of RH (NYSE:RH)–a curator of design, taste, and style in the luxury lifestyle market–slid in pre-market trading after its third-quarter results fell short of estimates. Earnings came in at -$0.42 per share compared to adjusted earnings of $4.26 per share in the same period last year. Analysts expected the company to report earnings of $0.93 per share. In addition, net revenues declined by 13.6% year-over-year to $751 million, missing Street estimates by $6.7 million.
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Moreover, RH also lowered its FY24 guidance, stating, “With 82% of homeowners having mortgages below 5%, and 62% below 4%, we continue to expect the existing housing market to remain frozen until interest rates and/or home prices fall meaningfully.”
The company added that the “home furnishings market has become increasingly promotional, and we believe that will create a mix shift towards clearance products, pressuring gross margins.” Looking ahead, RH guided for revenues in the range of $3.06 billion to $3.08 billion compared to consensus estimates of $3.08 billion. This was a narrower outlook than the company’s prior estimates in the range of $3.04 billion to $3.1 billion.
In addition, the company sees its adjusted operating margin landing between 13.6% and 14% compared to its prior outlook in the range of 14.5% to 15.5%.
What is the Future of RH Stock?
Analysts remain cautiously optimistic about RH stock with a Moderate Buy consensus rating based on three Buys and five Holds. Year-to-date, RH has risen by more than 10%, and the average RH price target of $308.75 implies an upside potential of 9.7% at current levels.
