CEO Gary Friedman said the company expected a revenue decline of between 2 and 5 percent, down from previous projections of revenue growth between flat and up 2 percent. The company’s estimate of a second-quarter revenue decline of 1 to 3 percent did not change due to faster backlog relief offsetting lower demand.
Friedman pointed to interest rate increases and softening home goods demand for the adjustment.
“With mortgage rates double last year’s levels, luxury home sales down 18 percent in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year,” he said.
The company also reported an adjusted operating margin in the range of 21 to 22 percent for the year, and 23.0 to 23.5 percent for the second quarter.
RH shares fell nearly 8 percent in after-hours trading following the announcement Wednesday, and were down nearly 9 percent before the opening bell on June 30. However, its share price Tuesday afternoon was up more than 9 percent to $242.26. The company said it has not repurchased any shares since announcing the expansion of its common stock repurchase authorization on June 2. RH stock is down more than 64 percent year-to-date.
Friedman said the company anticipates short-term challenges as it continues to navigate from inflated COVID-driven consumer demand through disruptions due to the war in Ukraine, and economic shifts in inflation and interest rates.
“While we navigate through the multiple macro headwinds, we continue to believe our long-term investments will enable us to drive industry-leading performance over a longer term horizon,” he said.