Company Expects Demand Trends to Accelerate Throughout Fiscal 2024

RH shares jumped more than 8% in extended trading Wednesday as optimism about the company’s product transformation overshadowed quarterly results that missed analysts’ estimates. CEO Gary Friedman sees business conditions remaining challenging until interest rates fall, but expects the retailer’s new and updated RH Sourcebook collections to accelerate demand trends throughout fiscal 2024. The RH share price may find resistance around $320 near the mid-December high, before possibly testing higher resistance at the $403 region.

Key Takeaways

• RH shares popped more than 8% after Wednesday’s closing bell as investors focused on the home furnishing retailer’s RH Sourcebook product range transformation rather than its quarterly top and bottom-line results that came in well below Wall Street’s expectations.
• CEO Gary Friedman expects the retailer’s new and updated RH Sourcebook collections to accelerate demand trends throughout fiscal 2024.
• The RH share price may find resistance around $320 near the mid-December high, before possibly testing higher resistance at the $403 region.

RH shares gained 8.5% to $322.30 in after-hours trading Wednesday.

Product Transformation Driving Optimism

RH shares surged after hours following the company’s announcement of its plans to unveil the RH Modern Sourcebook collections between late April and early May. This move is expected to accelerate demand trends in the second quarter and throughout the back half of 2024. Additionally, RH anticipates a sales boost from its updated RH Contemporary Sourcebook collections expected to reach homes in late July through early August.

The company also received an exceptional customer response to its recently launched new RH Outdoor Sourcebook collections of luxury furniture. These positive developments in product offerings have fueled investor optimism and contributed to the surge in RH’s share price.

Quarterly Results and Future Outlook

Despite missing analysts’ expectations with adjusted earnings of 72 cents per share and revenue of $738.3 million for the three-month period ending Feb. 3, RH remains confident in its ability to drive demand growth throughout fiscal 2024. The company foresees a revenue lag of 4 to 8 percentage points due to its product range transformation but projects demand growth in each quarter to better reflect its top line.

For the current quarter, RH expects demand growth of positive mid-single digits and revenues of negative low-single digits. Looking ahead to fiscal 2024, the company anticipates demand growth of between 12% and 14% and revenue growth of 8% to 10%. CEO Gary Friedman expressed confidence in the company’s ability to navigate challenging business conditions and accelerate demand trends in the coming year.

Technical Analysis and Price Forecast

The RH share price has remained rangebound over the past 15 months, hovering within a $200-point band. Recent movements have seen the stock cross back above the 200-day moving average, indicating potential bullish momentum leading into the company’s earnings release.

Investors should monitor how the price responds to the $320 level, where it may encounter resistance from the mid-December swing high. A breakout above this level could pave the way for further upside towards $403, where selling pressure may emerge near the August 2023 peak. Technical analysis suggests potential price targets and key levels to watch as RH shares continue their upward trajectory.

Conclusion

Despite falling short of analysts’ expectations in its recent quarterly results, RH remains optimistic about its future prospects. The company’s focus on product transformation and the upcoming launch of new Sourcebook collections are expected to drive demand trends throughout fiscal 2024. With CEO Gary Friedman’s confidence in the company’s ability to navigate challenges and accelerate growth, investors are hopeful for continued positive momentum in RH’s share price.

As RH continues to innovate and expand its product offerings, shareholders can look forward to potential opportunities for growth and value creation in the coming year.

The comments, opinions, and analyses expressed are for informational purposes only. As of the date this article was written, the author does not own any of the above securities.

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