What happened
RH (RH 0.19%), the luxury furnishings company formerly known as Restoration Hardware, just shocked investors by slashing its outlook for its current fiscal quarter as well as the full year. Investors poured out of the stock on the news. Shares were down 11% as of 10:45 a.m. ET.
So what
RH now sees revenue dropping year over year in its second quarter and the second half of the fiscal year. Net revenue soared 32% in fiscal 2021 compared to the prior-year period. And in its first-quarter report earlier this month, the company said it expected fiscal 2022 sales to continue to grow as much as another 2%. But now the company has adjusted that outlook and expects full-year net revenue to drop in a range of 2% to 5% compared to last year.
There was another item of note that likely caught investors' attention, too. The company had been repurchasing shares, and on June 2 it announced the authorization of another $2 billion for share buybacks. But in its updated outlook, it told investors that it has not repurchased any shares since announcing the expansion of the program.
Now what
RH CEO Gary Friedman said in a statement, "The deteriorating macro-economic environment has resulted in lower than expected demand since our prior forecast." He specifically noted higher mortgage rates leading to a decline in luxury home sales and believes the drop in demand from rising interest rates will continue.
It's not just sales being affected, either. The company now sees its adjusted operating margin in the range of 21% to 22% for the full fiscal year. That's down from the range of 23% to 24% it predicted on June 2.
Investors aren't hesitating to bail out of the stock. After soaring to nearly $750 per share last year, RH shares are now back down to a level not seen since June 2020.
