RH expects furniture demand to improve, after 'the most challenging housing market in three decades'

By Bill Peters

Furniture chain says severe weather and Red Sea shipping delays cost it $40 million in Q4 sales

Shares of RH rallied after hours on Wednesday, after the luxury furniture chain said it expected demand to pick up through this year, after contending with what it said was "the most challenging housing market in three decades."

The company said it expected sales growth of 8% to 10% this fiscal year when compared to a year earlier. That forecast was better than FactSet estimates for growth of around 7.6%.

"While we expect business conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout fiscal 2024," Chief Executive Gary Friedman said in RH's (RH) earnings release.

Shares of RH rose 8.4% after hours on Wednesday.

The forecast for the chain, known for its lavish physical stores and large print catalogs, follows what management in December called a "frozen" housing market, as demand stalled amid higher interest rates and rising home prices. At that time, the company, whose fortunes are tied to wealthier consumers' enthusiasm for buying and renovating a home, delayed catalog shipments following weaker demand.

Against that backdrop, RH is trying to overhaul its furniture assortments. The company said the rollout of new catalogs - selling new outdoor and indoor furniture collections - along with increasing print and digital advertising and the opening of a handful of new stores would help drive demand this year.

"We have positioned the RH brand to gain significant market share in 2024 and beyond while building the foundation for our global expansion across the United Kingdom, Europe, Australia and the Middle East over the next several years," Friedman said.

For its fiscal fourth quarter, RH reported net income of $11.4 million, or 57 cents a share, compared with $106.9 million, or $4.21 a share, in the same quarter last year.

Adjusted earnings per share came in at 72 cents during the quarter, below FactSet estimates for $1.67. Revenue of $738 million was also below analysts' forecasts for $777.5 million.

The company said "severe January weather and shipping delays related to the ongoing conflict in the Red Sea" cost it $40 million in sales. But it added: "We do expect the majority of the deferred revenue will be realized in 2024 when transit times normalize."

Shares of RH are up 23% over the past 12 months.

-Bill Peters

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-27-24 2001ET

Copyright (c) 2024 Dow Jones & Company, Inc.