While the upscale chain expects demand to pick up, a slow housing market remains a major headwind
Shares of RH fell after hours Thursday after the upscale furniture chain reported a bigger-than-expected first-quarter loss and forecast second-quarter sales that were below expectations.
While RH said it expects demand to pick up over its fiscal year, the company continues to grapple with a slowdown in the housing market as higher mortgage rates and tight supply have pressured home sales. RH also forecast improved demand in March, helped by new luxury furniture selections, and some analysts have needed more convincing.
Shares slid 18% on Friday.
RH, formerly known as Restoration Hardware, said it expects sales growth of 3% to 4% for the second quarter, compared with FactSet analysts’ forecasts for a 7.5% gain. The company stuck with its full-year sales-growth forecast of 8% to 10%.
For its first quarter, the company reported a net loss of $3.6 million, or 20 cents a share, contrasting with a profit of $41.9 million, or $1.76 a share, in the same quarter last year. RH’s adjusted loss per share was 40 cents.
Revenue came in at $726.9 million, down from $739.2 million a year ago.
Analysts polled by FactSet expected RH to report an adjusted loss of 13 cents a share, on $725 million in revenue.
“While we expect business conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout fiscal 2024,” Chief Executive Gary Friedman said in a letter to shareholders.
The company said it has been dealing with “the most challenging housing market in three decades.” Still, it has been investing in a big rollout of new indoor and outdoor furniture. The retailer also wants to open new stores in the U.S. and move more deeply into Europe, Australia and the Middle East in the years ahead.
Still, the company has said it expects sales to lag demand this year. On Thursday, RH said it expected to end the year with a bigger product backlog, worth $110 million to $130 million, as a result.
Much of the furniture industry’s fortunes depend on housing turnover. Some analysts say that a recovery could start small, with more purchases of home decor, or be led by wealthier shoppers, like the ones that gravitate toward stores like RH.
