RH up on strong sales outlook despite rocky housing market
Shares of RH (RH) — formerly Restoration Hardware — are jumping in Thursday's pre-market trading all the way into the close as the company posted a fourth-quarter net income of $11.4 million. The home furnishings chain emphasized these earnings results as it claims it faced the "most challenging housing market in 3 decades."
Yahoo Finance Anchors Brad Smith and Seana Smith break down the latest developments for RH as it navigates a tricky housing market.
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
SEANA SMITH: All right. Let's take a look at another trending ticker. Speaking of homes, let's stick with that theme here. RH, Restoration Hardware shares climbing higher this morning. After saying that they faced, quote, "the most challenging housing market in three decades," but now they expect revenue growth of 8% to 10% in fiscal 2024. Clearly, The Street excited by that guidance with shares really moving to the upside here ahead of the open. Revenue coming in 738 million. That was actually slightly below what The Street was looking for.
So this move in the pre market is all about that guidance. And in terms of the initial reaction before we get to the shareholder letter, which is always very entertaining from RH's CEO, the analyst reaction is a bit mixed because city is basically making the argument that investors are chasing this expected recovery in housing demand right now. And when you take that into account with the margin outlook, which is a bit weaker than what The Street was expecting, that points to lags in revenue compared to demand trends and also international expansion.
So yes, there is a lot to be optimistic about if they are able to reach that 8% to 10% revenue growth that they are modeling for at this point.
BRAD SMITH: I mean, you and I were talking about this one at our desk. Such a colorful always shareholder letter that we got here. I mean, you got a Picasso reference with in this one, trash the flailing home furniture competitors. It was really giving kind of like the Mike Jones' "back then they didn't want me, now I'm hot, they all own me," which I know all the words to as well.
It was giving those vibes for sure here. The company was also talking about the plan to expand the RH ecosystem globally, multiplying the market opportunity to $10 trillion, one of the most valuable and largest addressed by any brand in the world today, they say. And so 1% share of that global market represents about 70% to $100 opportunity here.
I mean, they do certainly lean towards the high value, high cost customer that's out there, which is important to remember because who is still buying homes even in a weakened environment for that? It is some of the wealthiest and most cash rich households out there.
SEANA SMITH: Yeah, certainly. And they also announced a loyalty program several quarters ago, a couple of years ago actually at this point, which has proven to be very beneficial here for the company. You buy in. You pay an annual fee. And then you're able to unlock savings across deals. And that wouldn't be accessible to others out there.
So certainly, that has been a proven model here. Whether or not they're able, though, and that's going to help them get to that 8% to 10% growth in this current housing market, I think a lot of people are questioning that at this point. But again, shares up just about 11%.
