RH (RH) stock tanked as much as 15% on Friday after the high-end furnishings retailer warned the housing market continues to pose challenges and likely won’t stabilize until next year.
“We continue to expect the luxury housing market and broader economy to remain challenging throughout fiscal 2023 and into next year as mortgage rates continue to trend at 20-year highs and the current outlook for rates to remain unchanged until the second quarter of 2024,” CEO Gary Friedman said during the company’s second quarter earnings call on Thursday.
The furniture space is tied to the housing market, which has remained essentially frozen as mortgage rates continue to hover above 7% for four straight weeks. Sales of existing homes dropped 2.2% in July from the prior month, the National Association of Realtors said in late August.
"We expect stabilization we think next year," Friedman said in response to an analyst question on the housing market. "We don't think there's going to be acceleration until there's interest rate cuts or pricing comes down."
RH's second quarter earnings of $3.93 came in above estimates of $2.48. Net revenue of $800 million was also above expectations of $777.7 million.
Third quarter revenue forecast of $740 million to $760 million came in below Wall Street’s consensus estimate of $774 million.
RH, formally known as Restoration Hardware, has been warning about a slowdown for the last several quarters. Last June the stock took a hit after the California-based company warned it saw signs of softening demand.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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