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Restoration Hardware's customers are getting whipsawed by the stock market

Nicole Sinclair
Markets Correspondent
Source: Wikimedia

Restoration Hardware (RH) shares are down 60% from their recent highs, even after bouncing on Wednesday after the company reported fourth quarter results.

The company's quarterly report comes not long after CEO Gary Friedman warned that their customers, who tend to be high-end shoppers, were being affected by unfavorable swings in the financial markets.  

"Our sense is the increased volatility in the US stock markets, especially the extreme conditions in January, which is historically our biggest month of the quarter for furniture sales, contributed to our performance. Historically, our business has a correlation to large movements in stock prices as we believe asset valuations influence our customers’ buying patterns.

Restoration Hardware's fourth quarter revenue rose 11% to $647 million, lower than expectations before the pre-announcement to hit sales of $708 to $718 million.

The volatility of the stock market at the beginning of the year impacted other high-end names.

Toll Brothers (TOL), the luxury focused home builder, also cited the impact of the stock market volatility in its first quarter earnings report on Feb 23.  When explaining that deposits and contracts signed in the first three weeks of February were flat, CEO Douglas Yearly said, “This is understandable, given the recent stock market decline and global economic uncertainty.”

Jewelry retailer Tiffany’s (TIF) similarly expressed these concerns.

“Volatile economies, currencies and stock markets, certaintly affects short-term spending by customers of all nationalities,” management said on its fourth quarter earnings call.

So, even the well-to-do get affected when things go bad in the economy and the markets.