By Senad Karaahmetovic
RH (NYSE:RH) reported better-than-expected earnings for the second quarter but slashed its full-year forecast amid a challenging macroeconomic environment.
RH delivered a very strong beat as its Q2 EPS came in at $8.08 to crush the analyst estimate of $6.63. Revenue was $992 million, again better than the estimate of $968.91 million.
For this quarter, RH sees net revenue down -15% to -18% while the adjusted operating margin is seen between 18.5% to 19%. For the full year, RH now expects revenue to fall between -3.5% to -5.5%, a bigger decline than the prior outlook of -2% to -5%.
“While we expect the next several quarters to pose a short-term challenge as we cycle the extraordinary growth from the Covid-driven spending shift and shed less valuable market share as we continue to raise our quality and navigate through the multiple macro headwinds, we believe our long-term investments will enable us to continue driving long term industry-leading performance,” the company said in a press release.
A Citi analyst sees “so many moving pieces” from Q2 results, although he remains Buy-rated with a $338 per share price target.
“The weak demand backdrop remains the same with CEO Friedman citing the potential for 12-18 more months of “difficulty” for the industry. In our view, the challenges are baked in at this valuation for RH and the delay of business catalysts (i.e., England opening) should not be surprising given macro uncertainty. We acknowledge conviction in near-term earnings upside and multiple re-rating is low right now, but the long-term reasons to own RH remain intact,” the analyst said in a client note.
A Morgan Stanley analyst cut the price target to $325 from $350 to reflect challenging near-term trends.
“RH still has among the most long-tailed upside in our coverage, but path risk is elevated due to category reversion/recession and higher expenses in 2H,” the MS analyst said about Equal Weight-rated RH shares.
RH stock price is nearly unchanged in Friday premarket trading.