What Happened?
Shares of luxury furniture retailer RH (NYSE: RH) fell 4.6% in the afternoon session after the company reported disappointing second-quarter results and provided a weak outlook for the upcoming quarter.
While the company's revenue of $899.2 million was up 8.4% year-over-year and nearly in line with expectations, its profitability fell short. Adjusted earnings per share of $2.93 missed Wall Street's consensus estimate of $3.22. Furthermore, investors were concerned by the company's guidance for the third quarter. RH forecasted revenue of $884.8 million, which was roughly 2% below analysts' expectations, signaling slowing momentum ahead. The combination of the earnings miss and a softer-than-expected forecast drove the negative investor reaction.
The shares closed the day at $217.41, down 5% from previous close.
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What Is The Market Telling Us
RH’s shares are extremely volatile and have had 39 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 4.2% on the news that a mixed analyst report from Wells Fargo had investors focusing on lowered earnings estimates due to tariff impacts. While Wells Fargo actually raised its price target on the luxury furniture retailer to $295 from $275 and maintained an 'Overweight' rating, it also cut its earnings per share forecasts for fiscal 2025 and 2026. The firm cited tariff impacts for the reduced earnings outlook. The market's negative reaction suggests that concerns over the near-term pressure on profitability from tariffs are currently outweighing the analyst's more optimistic long-term valuation, which was justified by easing interest rates.
RH is down 45% since the beginning of the year, and at $217.32 per share, it is trading 52.2% below its 52-week high of $454.52 from January 2025. Investors who bought $1,000 worth of RH’s shares 5 years ago would now be looking at an investment worth $571.10.
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