What happened
Shares of RH (RH 1.37%) were sliding today after the high-end home furnishings retailer turned in disappointing results in its fourth-quarter earnings report. The company, formerly known as Restoration Hardware, also offered weaker-than-expected guidance for 2022.
As of 12:56 p.m. ET, the stock was down 12.5%.
Image source: Getty Images.
So what
Home furnishings retailers boomed during the pandemic as Americans spent to adapt to work-from-home and learn-from-home conditions. Retailers also benefited from a spike in home values. RH's fourth-quarter report is the latest data point to show that those tailwinds are fading.
For the fourth quarter, the company posted 11% revenue growth to $902.7 million, which was well below estimates at $931.8 million. The company noted challenges from supply chain constraints and the omicron variant in the second half of the quarter.
Despite those headwinds on the top line, the company delivered strong bottom-line growth with adjusted operating margin up from 23.7% in the quarter a year ago to 25.2%. Adjusted earnings per share came in at $5.66, up 12% from a year ago and better than expectations at $5.58.
CEO Gary Friedman touted the company's full-year performance, which included 32% revenue growth over 2020, and said, "Our performance demonstrates the desirability of our elevated and exclusive product range, the connective power of our evolving ecosystem, the profitability of our fully integrated business model and the significant strategic separation created by our inspiring physical spaces."
Now what
After a blowout 2021, RH's guidance for 2022 was rather middling. For the full year, management expects revenue growth of just 5%-7% and operating margin to be roughly even with 2021 levels. The analyst consensus, on the other hand, called for 10.4% revenue growth this year.
For the first quarter, RH's forecast was slightly better, calling for revenue growth of 7%-8%. Friedman expressed cautiousness over record inflation, rising interest rates, and global unrest, and said it was prudent to be conservative until demand trends return to normal.
RH is transitioning from a home furnishings company to luxury lifestyle brand with hotels, restaurants, and even a streaming content platform focused on architecture and design. While home goods will always be the core of the brand, the company is focused on tackling multiple corners of the luxury market.
It's a bold vision, but Friedman has already proven himself as a visionary to long-term investors -- the stock is up nearly 1,000% since its 2012 IPO. In other words, one disappointing quarter shouldn't cause investors to bail.
