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Why Shares of RH Are Dropping Today

By John Rosevear - Mar 12, 2020 at 2:23PM

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Retail foot traffic is already falling on virus fears.

What's happening

Shares of RH (RH -2.65%) were down sharply on Thursday afternoon, as a broad-based market sell-off stoked by virus fears hit retail stocks especially hard. 

As of 1:30 p.m. EDT, RH's shares were down about 10.7% from Wednesday's closing price. 

So what

RH is the company formerly known as Restoration Hardware, a retailer of luxury home furnishings. While RH does have an online store, it's primarily a brick-and-mortar operation with over 100 stores worldwide, mostly in the U.S. and Canada. 

The interior of a RH store, with samples hanging on the wall and a large gray desk.

Image source: RH.

Like shares of other brick-and-mortar retailers, RH's stock is being hit hard by concerns that "social distancing" actions taken to slow the spread of COVID-19 will sharply reduce retail foot traffic for at least several weeks. 

There are already signs that virus concerns are keeping some U.S. consumers out of retail spaces. In a note on Wednesday, a Morgan Stanley analyst team led by Kimberly Greenberger said that U.S. luxury retail traffic fell 14.7% last week, as news organizations put more focus on the virus outbreak. Overall retail traffic fell 9.1%, they said. 

Now what

RH investors will get an update before long. The company hasn't yet announced a date for its fourth-quarter and fiscal-year 2019 earnings report, but it's likely to happen in the last week of March. Investors should pay attention to the company's earnings call: CEO Gary Friedman is likely to face tough questions from analysts about the company's outlook over the next few months. 

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