RH stock plunges on weak sales forecast

5:37 PM June 30, 2022

RH (RH.US) stock tumbled more than 10.0% on Thursday after the home goods and furniture retailer lowered its full-year financial outlook due to deteriorating economy and a slowdown in home sales.

  • The company formerly known as Restoration Hardware expects that full-year sales will drop in the region between 2% and 5% from 2021 levels. This stands in contrast with the previous forecast released in early June when the company expected 2% gain. 
  • RH forecasts that profit margins will drop partially due to rising input and labor costs, with operating margins now seen in the range of 21% to 22%.
  • “With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year,” said CEO Gary Friedman.
  • Following the news several analysts including Wedbush, Cowen and JP Morgan lowered their price targets to around $300.00. 

RH (RH.US) stock launched today’s session with a bearish price gap and is currently testing key support at $211.10, which is marked with 78.6% Fibonacci retracement of the upward wave launched in March 2020. Should a break lower occur, the lower limit of the descending channel should act as the first line of resistance. It seems that only a decisive break above the upper limit of the formation could lead to a shift in sentiment. Source: xStation5

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