Shares of RH dropped 8% in the extended session Thursday as the home furnishings company formerly known as Restoration Hardware reported a surprising quarterly loss. The company also stated that promotions will further impact its bottom line amidst a “frozen” housing market.
Quarterly Performance
RH reported a loss of $2 million, or 12 cents per share, in the third quarter, a significant decline from earnings of $99 million, or $3.78 per share, in the same period last year. Adjusted for one-time items, the company’s loss was 42 cents per share. Analysts were expecting an adjusted EPS of 94 cents per share.
Furthermore, revenue fell to $751 million, down from $869 million in the previous year. Analysts had projected revenue of $757 million for this quarter.
Delays in Catalog Mailing
In addition to the quarterly loss, RH notified customers that the delivery of their hefty catalog would be delayed until the first quarter of fiscal 2024. This delay is due to the company’s anticipation of more favorable demand conditions during that time.
Market Challenges
RH attributed its financial difficulties to increased headwinds experienced in early October when mortgage rates exceeded 8% and the Israel-Hamas war commenced. According to a letter addressed to shareholders, the company expects the existing housing market to remain stagnant until there is a significant decrease in interest rates and/or home prices.
Despite these challenges, RH remains committed to overcoming market fluctuations and delivering high-quality home furnishings to its customers.
The home furnishings market is undergoing significant changes, with increased promotionals driving a shift towards clearance products. This trend is expected to put pressure on gross margins, according to industry experts.
The financial performance of companies in this sector has also been affected by various factors. Operating margins, for example, fell short of expectations due to higher-than-anticipated expenses. These expenses include costs associated with international store openings and the pending acquisition of the New York Guesthouse property.
One notable setback was the unsuccessful attempt to secure the iconic One Ocean Drive Miami Beach location, which impacted the company’s financial results.
Over the past 23 years, RH has defied naysayers and embraced a bold approach to innovation. Their refusal to listen to those who declared certain things “impossible” has fueled their success. As Chief Executive Gary Friedman confidently asserted in the letter, the company is on the cusp of reaching unprecedented heights.
In conclusion, while facing various hurdles, RH remains committed to their mission of reshaping the home furnishings market. Their steadfast dedication to excellence and innovation sets them apart as they continue to build a world thoughtfully curated by RH, inspiring customers to dream, design, dine, travel, and live in unparalleled fashion.