Restoration Hardware Needs Some Resuscitation
The 10-year note hit its lowest level since late 2017 in recent days. Lower mortgage rates have given the housing market a boost, but the macro view is still showing signs of bearishness. For example, February's housing starts dropped a more-than-expected 9% and home price growth slowed in January to the slowest pace in 6 1/2 years...which brings me to the post at hand.
Restoration Hardware (RH), together with its subsidiaries, operates as a retailer in the home furnishings. It offers products in various categories, including furniture, lighting, textiles, bath ware, décor, outdoor and garden, tableware, and child and teen furnishings. The company provides its products through its retail galleries; and Source Books, a series of catalogs, as well as online.
RH fell more than 17% on Friday morning after announcing their quarterly earnings that didn't meet expectations and gave a dismal forecast.
RH said it expects full-year earnings of $8.41 to $9.09 per share, shy of the analyst consensus of $10.13 per share, on revenue of $2.58 billion to $2.635 billion. Wall Street had been expecting full-year sales of $2.76 billion.
As the year transpires, one of the wise things to do is to watch what the "well-off" or rich people are doing. RH's high end luxury products cater to customer that are in higher tax bracket.
So as the Markets declined most of the fourth quarter of 2018, RH's upscale customer's were cautious about making big-ticket purchases. Thus,the weakness in the high-end housing market, along with the company’s decision to evaluate their nonstrategic businesses, prompted dismal 2019 revenue guidance. And what quickly followed were downgrades.
Deutsche Bank ’s Mike Baker lowered his rating on RH to Hold from Buy and cut his price target to $124 from $185.
Loop Capital’s Anthony Chukumba has a Buy rating, as he believes that RH is doing well in focusing on the long run, but sliced his price target by $60, to $140. Stifel’s John Baugh kept a Buy rating on RH, citing his confidence in the brand and its attractive valuation, but cut $35 from his price target, to $145.
Loop Capital’s Anthony Chukumba has a Buy rating, as he believes that RH is doing well in focusing on the long run, but sliced his price target by $60, to $140. Stifel’s John Baugh kept a Buy rating on RH, citing his confidence in the brand and its attractive valuation, but cut $35 from his price target, to $145.
The weekly chart suggest if the weekly demand at $100 is breached, price will drop another $30 to the weekly demand at $70.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Housing is almost always one of the first cyclical sectors that starts to turn when a slowdown looms. The open question is how much would it be?
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Housing has seen a slight rebound due to interest rates cooling off and it's Springtime, but I think it's setting up for an opportunity to short as consumers become more cash strapped.