Shares of RH (RH 2.75%) were drifting lower this week as the company gave back its gains following last week's earnings report that featured disappointing fourth-quarter results but bullish commentary about the year ahead from CEO Gary Friedman.
The home furnishings specialist's guidance also indicated that it would return to growth this year after seeing declining sales in 2023.
As of Thursday at 1:25 p.m. ET, the stock was down 12.6% for the week, according to S&P Global Market Intelligence.
RH gives up the gains
There was no major news out on RH, but increasing doubts that the Fed would lower interest rates weighed on stocks this week, and that seems likely to have affected the high-end home furnishings company formerly known as Restoration Hardware.
The retailer is highly sensitive to the housing market, and Friedman has bemoaned the impact of high mortgage rates on demand several times before.
Additionally, this week's slide could be a correction to the outsize gains following the earnings report last week, because the company still faces challenges in returning to growth.
Wall Street analysts generally raised their price targets on the stock but maintained hold ratings, indicating some skepticism about its recovery plans. Loop Capital noted that Q4 results were much worse than anticipated, and Barclays said the pace of the turnaround is keeping it on the sidelines.
What's next for RH
RH is clearly betting on a recovery this year, with plans to double its sourcebook circulation and increase advertising, but a full rebound without some help from the housing market will be difficult because spending on furniture is correlated with housing transactions.
RH should bounce back, but the timing still seems like an open question. Keep your eye on the housing market and interest rates, which should offer a clue into the company's performance.
