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Investing.com -- RH (NYSE:RH) shares shed more than a tenth of their value in early U.S. trading on Friday after the upscale home furnishings group unveiled sales forecasts for its fiscal third quarter that were below analysts' expectations.
The California-based company formerly known as Restoration Hardware said it now projects that revenue during the period will be between $740 million to $760 million. Bloomberg consensus estimates had seen the figure at $774M.
Chairman and Chief Executive Officer Gary Friedman warned in a letter to shareholders that the luxury housing market and broader economy will remain "challenging," citing elevated mortgage rates that are anticipated to stay unchanged until the second quarter of 2024.
U.S. home loans costs have doubled since the Federal Reserve embarked on a policy tightening campaign in March 2022, although the jump in interest rates has not led to a subsequent decline in home prices. As a result, U.S. homeowners, many of whom already own 30-year fixed mortgages at lower rates, are choosing to stay in their current properties instead of changing to a more expensive home loan option.
Despite the headwinds, RH still delivered higher-than-projected second-quarter adjusted earnings per share of $3.93 on net revenue of $800 million. However, analysts were largely unimpressed, with Citi noting that the print could be dubbed "not good enough" because of a nearly 30% jump in the stock year-to-date.