Shares of HR (NYSE: HR)the company formerly known as Restoration Hardware, plunged in March as the high-end home furnishings retailer released a disappointing fourth-quarter report and tumbled earlier this month due to a broader stock sell-off of growth.
According to data from S&P Global Market Intelligence, the stock ended the month down 19%. As you can see from the chart below, the stock plunged in the first week of March and then again at the end of the month after its earnings report was released.
RH slumped in the first week of March due to a broader sell-off in the market. Although there was no direct news from the company, a combination of rising oil prices, inflation, rising interest rates and the war in Ukraine contributed to lower the title. As a luxury retailer, RH depends on consumers having discretionary income, and conditions such as higher interest rates and inflation affect this.
This feeling seemed to be summed up by Wells Fargo analyst Zachary Fadem, who lowered his price target from $750 to $500 on March 9 after channel checks revealed a downturn in the furniture industry in the fourth quarter. Fadem has always maintained an overweight rating on HR.
RH’s fourth-quarter earnings report confirmed those suspicions as revenue rose 11% to $903 million, missing estimates of $931.8 million. Ultimately, adjusted earnings per share rose 12% to $5.66, beating expectations of $5.58.
The company’s outlook was also disappointing, as it forecast revenue growth of just 5% to 7% in 2022 compared to analyst consensus of 10%.
Comments from HR CEO Gary Friedman also added to uncertainty about the macro environment. Friedman noted uncertainty with inflation, interest rates, housing and the war in Ukraine, among other factors, weighing on the company’s growth and performance in 2022.
Despite these headwinds, RH is still making significant investments in its future with plans to open new hotels, restaurants, and even a streaming content business focused on architecture and design.
In other words, RH aims to expand beyond a home furnishings brand to become a full-fledged luxury lifestyle brand supporting travel and entertainment as well as home furnishings and decor.
It’s a bold vision, but Friedman has a proven track record in guiding the company’s transition to a membership model, which has helped drive business growth and customer loyalty.
While 2022 may be a year of slow growth, RH still looks like a long-term winner.
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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman owns RH and Wells Fargo. The Motley Fool owns and recommends RH. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.