Home goods retailers have had a rough time in a post-pandemic environment. That’s because consumers’ discretionary spending has moved from goods to experiences, and housing activity has ground to a halt by high prices, high interest rates, and low existing inventory. And that holds true even in the luxury market, where RH operates. 😬
The luxury home goods company reported adjusted EPS of $3.93 on revenues of $800 million. That topped estimates of $2.60 per share on $786 million in revenues. Operating margins of 20.2% also exceeded guidance, primarily due to faster-than-expected deliveries and a shift of $40 million in advertising costs to the next quarter. 🔺
Looking ahead, executives remain cautiously optimistic. “We continue to expect the luxury housing market and the 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 is for rates to remain unchanged until the second quarter of 2024.”
Their longer-term strategy of moving beyond curating and selling products to conceptualizing and selling spaces remains an attractive proposition for investors. It would move the company beyond the $170 billion home furnishings market and into the $1.7 trillion North American housing market.
However, the company still has many steps ahead of it to execute that vision successfully. And for now, the growth slowdown and cautious outlook into 2024 remain the focus of investors.
$RH shares fell about 9% on the news, trading roughly 55% below their all-time highs. 📉