RH post huge earnings beat, guidance weighs on stock

Yahoo Finance's Ines Ferre looks at RH's after hours Q1 earnings report.

Video Transcript

DAVE BRIGGS: RH earnings are now rolling in. Ines Ferre has the breakdown. Ines, what are we seeing?

INES FERRE: Yeah, Dave, it's a big beat on the top and the bottom line for the first quarter, with adjusted earnings per share coming in at $7.78. That came in above expectations. And net revenue also coming in above expectations. But it's the guidance that may be putting some pressure on the stock in after hours, with the company seeing an adjusted operating margin of 23% to 23.5%, and net revenue in the second quarter down 1% to 3%.

Now, some interesting points that Gary Friedman, CEO of the company, said in a shareholder letter, saying that while there's been widespread return to discounting across the industry, and there may be short-term risk of market share loss by choosing not to promote, we believe there is a certain long-term risk of brand erosion and model destruction once you go down that path.

So the company touting that in the first quarter, adjusted operating margin reached 24.7% versus 22.6% a year ago. But then, later in the letter, the CEO also stating that despite our record financial performance in the first quarter, we have experienced softening demand trends, which began at the time of the Russian invasion of Ukraine and have further slowed during the market disruption over the past several months.

The company had given indication of this, and now reiterating this again. That's maybe why you're seeing a little bit of pressure on the stock in after hours.

SEANA SMITH: Stock off just about 4%. Ines Ferre, thanks so much.