RH stock rallies 19% after retailer gives update about demand for its home wares

By Claudia Assis

'We expect our demand trends to accelerate throughout fiscal 2024 and into 2025,' RH tells investors

Shares of RH, formerly known as Restoration Hardware, jumped about 19% in the extended session Thursday, after the retailer said it continues to see healthy demand for its furniture and home furnishings, and reported a quarterly earnings beat.

Demand for its products was up 7% in the second quarter, RH (RH) said, and has continued to climb ever since, "gaining momentum" each month with July up 10%, Chief Executive Gary Friedman said in a letter to shareholders.

Demand sped up into the third quarter, with August up 12% and with RH enjoying positive margins "despite operating in the most challenging housing market in three decades," Friedman wrote.

In the letter, Friedman said while "aggressively investing into a downturn" put pressure on short-term results, it has set up the company "to capitalize on the long-term opportunities that present themselves during times of disruption and dislocation."

RH's rising demand shows that it is the best-positioned brand in the industry to benefit from a housing-market rebound once interest rates fall and home prices "reset lower," the famously prolific CEO said.

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RH earned $29 million, or $1.45 a share, in the second quarter, compared with $76.5 million, or $3.36 a share, in the year-ago period. Adjusted for one-time items, it earned $1.69 a share.

Sales rose to $829.7 million, from $800.5 million a year ago.

Analysts polled by FactSet expected the company to report adjusted earnings of $1.56 a share on sales of $825 million.

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RH tweaked its outlook lower for the year, however. Market conditions are likely to "remain challenging" until interest rates ease and the housing market begins to rebound.

Demand trends are likely to accelerate throughout fiscal 2024 and into 2025, but revenue is expected to lag that demand during the year, the company said.

It guided for fiscal 2024 demand in the range of 8% to 10%, and revenue growth in the range of 5% to 7%. When RH reported first-quarter results in June, it called for demand growth in the range of 12% to 14% and revenue growth of 8% to 10% for the year.

For the fiscal third quarter, it forecast demand growth in the range of 12% to 14% and revenue growth in the range of 7% to 9%.

Shares of RH have dropped 12% this year, contrasting with an advance of around 17% for the S&P 500 index SPX.

-Claudia Assis

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09-12-24 2011ET

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