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Luxury home retailer RH says the company experienced “softening demand” during the first quarter that coincided with Russia’s attack on the Ukraine in late February.
“I think the invasion of Ukraine by Russia just became a kind of a reckoning point, if you will, where people had to stop and pay attention to everything,” said Chief Executive Gary Friedman during an earnings Q&A with analysts late Tuesday.
“And we saw our business slow about 10 to 12 points, and it’s been relatively consistent during that period.”
Friedman highlighted a wide range of disruptions including market volatility, housing prices and Fed movement on interest rates among the issues that are now preoccupying shoppers.
“I don’t think it’s all Ukraine and Russia,” Friedman said. “I think it’s triggered a greater awareness.”
RH
RH,
reported fourth-quarter net income of $147.0 million, or $4.91 per share, up from $130.2 million, or $4.31 per share, last year. Adjusted EPS of $5.66 beat the FactSet consensus for $5.59.
Revenue of $902.7 million was up from $812.4 million last year and missed the FactSet consensus for $931.3 million.
RH is guiding for first quarter revenue growth in the range of 7% to 8% and fiscal 2022 revenue growth in the range of 5% to 7%.
The FactSet consensus is for first-quarter revenue of $927.5 million, implying 7.7% growth, and full-year revenue totaling $4.056 billion, suggesting an increase of 7.9%.
The company also announced plans for a 3-for-1 stock split.
RH stock plunged nearly 12% in Wednesday trading after the results, and shares are down 43.4% over the past year. The benchmark S&P 500 index
SPX,
has gained 16.5% over the last 12 months.
Despite the uncertainty, RH is proceeding with a number of ambitious plans for the year, including the debut of RH San Francisco; the opening of a hospitality concept, RH Guesthouse in New York; new restaurants; the launch of two charter planes, RH1 and RH2; and the start of a global expansion with RH England.
“Management pointed to all of the macro geopolitical uncertainty as probable culprits for the deceleration,” wrote UBS in a note.
“Still, it’s also just as likely that the core, affluent RH consumer is fatigued on purchasing big-ticket durables and is shifting spend to other categories like travel. If this is the case, the softness could last at least a couple of quarters.”
UBS rates RH stock neutral with a $470 price target, down from $550.
“The read-through to other big-ticket discretionary retailers —even those serving affluent customers with good pricing power—is negative,” wrote Wedbush in a note.
Wedbush rates RH outperform with a $375 price target, down from $480.
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“We think RH is still a dynamic and compelling long-term growth story, and with the decline in shares, patient investors are getting an entry point,” wrote KeyBanc Capital Markets in a note.
“In the near-term, though, we remain sector weight given slowing industry trends and macroeconomic uncertainty.”
