After a rather wild earnings call three months ago — during which he blamed a "collapsing" luxury housing market for poor quarterly results — RH CEO Gary Friedman is back at it.
"Inflation that was thought to be transitory is now deemed persistent by the Federal Reserve, resulting in a record rise in interest rates, triggering a dramatic decline of the housing market, with luxury homes sales down 45% in the most recent quarter versus a year ago," Friedman said on a late Wednesday earnings call. "Add to that an underperforming stock market, and a banking crisis no one saw coming and the data points to business in our sector likely getting worse before it gets better."
The high-end home furnishings player's chief executive didn't stop there.
"All one has to do is Google the history of the federal funds rate and zoom in on the 1970s to 1980 and look how many times, the Federal Reserve brought inflation under control, lowered the federal funds rate only to have to raise it twice as high all the way to, I think 21%, but if you look at those moves and zoom into that chart, you realize that we're in uncharted waters today from an economic environment perspective," he added later on in the call.
Friedman went on to rail against heightened industry discounting and then once again characterized the housing market as collapsing.
RH's limp quarter and soft outlook — in part fueled by the decisions of Friedman and his management team amid the current macroeconomic environment — add subtext to the fiery earnings call.
The company's fourth quarter sales plunged 14.4% year over year to $772.5 million. Operating profits plunged 48% from a year earlier to $112.2 million. Inventory ballooned about $70 million from a year ago as sales hit the skids.
For the first quarter, RH guided to sales of $720 million to $735 million while the Street has estimated $828.3 million. Operating margins are pegged in a range of 13% to 14%, well below analyst forecasts for 18.6%.
Full-year sales are seen in the $2.9 billion to $3.48 billion range. Analysts predicted $3.48 billion.
RH stock (RH) fell 6% in pre-market trading on Thursday.
"With 'challenging business conditions' anticipated for at least the next several quarters, we do not see a promising buying opportunity at current trading levels," Jefferies analyst Jonathan Matuszewski wrote in a client note on RH.
Recent industry research out of Matuszewski indicated why sales of RH products have slowed markedly.
The findings showed the median price for a luxury home in 15 key markets — specifically homes that sold for more than $2.5 million — was up 6% year-over-year in January, a "steep" deceleration from December's 20% gain.
In January, the median home price sold in luxury markets was at a 23% discount to listing, wider than November and December. Luxury homes priced above $2.5 million are at a new multi-year peak in terms of days on the market at 61 versus 37 in January 2022.
Besides much higher interest rates, Jefferies thinks broader economic shifts like growing tech layoffs are also putting pressuring on the luxury home market.
"March 2023 data shows investment bank bonuses fell 30-50%," Matuszewski explained. "Mid-level private equity professionals down ~33%."
On the earnings call, Friedman added that "I can tell you, the unsettling feeling as being a person on a Saturday afternoon watching Warriors basketball game and the news cut to line formed around your local bank while the bank was sending hourly e-mails trying to tell you that they committed to serving you. It's very unsettling feeling, okay? And those of you maybe on the East Coast that didn't experience what happened here in the West Coast, maybe aren't as close to it, but I as a person that was close to it, have never seen anything like it."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Related Quotes
This former high-flyer has a lot of peddling to do before it gets back into decent shape. When looking for the best stocks to buy and watch, one factor to watch closely is relative price strength. This unique rating identifies technical performance by showing how a stock's price movement over the last 52 weeks measures up against that of other stocks on the major indexes.
(Bloomberg) — Canada’s biggest banks have shed almost C$49 billion ($36 billion) in market value in March, making a loser of the country’s benchmark stock index while US equities are rising.Most Read from BloombergTrump Weighs Bid to Shift NY Criminal Case to Staten IslandVeteran Money Managers Bail on Stock Rally With Fed Hawks FlyingParents Are Paying Consultants $750,000 to Get Kids Into Ivy League SchoolsGlobal Food Supply Risks Rise as Key Traders Leave RussiaPutin Signs New Russia Foreign
A banking crisis and worries of a recession have dampened the outlook for initial public offerings (IPOs) this year, prompting companies to slow down their plans to go public in what is likely to result in lower fees for investment banks. Despite a rebound in fundraising and block trading activity, year-to-date IPO volumes came in at their lowest level since 2019. Stock market flotations worldwide have raised close to $26 billion so far, according to data from Dealogic.
One thing is certain in the stock markets lately: their inherent uncertainty is taking charge, and high volatility is here to stay. For months, investors and economists have worried about the recessionary effects of the Federal Reserve’s anti-inflationary interest rate hikes – but the recent bank crisis has added another layer of concern to an already tumultuous situation. Now, we’re dealing with the fallout from that crisis, and inflation and interest rates both remain high. It’s a textbook cas
(Bloomberg) — Charles Schwab Corp.’s worst month in more than 35 years has sparked a debate among analysts as to whether the brokerage giant has been unfairly punished by investors amid growing fears about the US banking sector.Most Read from BloombergTrump Weighs Bid to Shift NY Criminal Case to Staten IslandVeteran Money Managers Bail on Stock Rally With Fed Hawks FlyingParents Are Paying Consultants $750,000 to Get Kids Into Ivy League SchoolsGlobal Food Supply Risks Rise as Key Traders Leav
Bob Michele, the chief investment officer of JPMorgan Asset Management, has warned of an economic downturn, saying that markets are headed for a rally before an inevitable slowdown. In an interview with Bloomberg on Friday, Michele says risk assets will rise in the next quarter as they did during the Great Recession. "In the next quarter, we could see risk assets rally. You could have a feel-good period, and then the reality catches up," Michele said. "If we've been taught anything this month, y
Treasuries aren't the only refuge in a slowdown. Dividend names also "can provide a margin of safety," says UBS.
Regardless of what stage of the market cycle we're in, some folks never tire of searching for cheap stocks to buy. If it has thin trading volume, the fund manager will have an awfully tough time accumulating shares — without making a big impact on the stock price. IBD research also finds that dozens, if not hundreds, of great stocks each year do not start out as penny shares.
(Bloomberg) — Lincoln Power LLC, the owner of two Illinois power plants, filed for bankruptcy after its financial strain was exacerbated by nearly $39 million in penalties levied by the biggest US electric-grid operator. Most Read from BloombergTrump Weighs Bid to Shift NY Criminal Case to Staten IslandVeteran Money Managers Bail on Stock Rally With Fed Hawks FlyingParents Are Paying Consultants $750,000 to Get Kids Into Ivy League SchoolsGlobal Food Supply Risks Rise as Key Traders Leave Russi
People are rushing into money-market funds. Total assets held in money-market funds, which are investment vehicles that buy cash-like securities such as short-term Treasury bills, recently reached close to $5.5 trillion, according to RBC. Earlier this year, money-market fund assets stood at roughly $4.5 trillion, a level at which people stopped pouring more money into those funds a few times in the past few years, opting instead to buy other assets like stocks.
The average U.S. home sales price hit $535,800 in 2022. We asked experts how much you need to earn to afford a home around that price point.
Investors enjoyed a small S&P 500 rally in March. But there were much more lucrative places to put money in the month.
With a yield of 9.62%, the recently expired Series I bond was understandably popular. With interest rates rising, bond funds are down this year and banks continue to offer miserly rates on deposit accounts. So it's no wonder that a … Continue reading → The post It Pays to Procrastinate: The New 6.89% I bonds Will Beat the Old 9.62% Bonds in Just 4 Years appeared first on SmartAsset Blog.
The market rally is building momentum with more stocks flashing buy signals. Tesla deliveries are due as EV rivals report Q1 sales.
The Dow Jones rose Friday after key inflation data, with the release of the PCE price index, the Fed's preferred measure of inflation.
Wall Street "currently undervalues" the likelihood that regulators will allow the merger to be completed, according to New Street Research.
March deliveries from the three Chinese EV makers fell within the companies' guided ranges. Combined deliveries were up month over month and year over year.
An annuity can be an appealing option to build your retirement nest egg. Adding guaranteed retirement income to your retirement can give you financial stability. But the exact amount that you'll get from an annuity each month will vary. Let's … Continue reading → The post How Much Does a $200,000 Annuity Pay Per Month? appeared first on SmartAsset Blog.
The Charles Schwab Corporation (SCHW) closed the most recent trading day at $52.38, moving -0.17% from the previous trading session.
These five semiconductor growth stocks have low P/E ratios and sound fundamentals and have gained between 19% and 50% this year so far.
