Luxury furniture company RH (RH 2.28%) announced earnings on Thursday afternoon. Its financial results continue to highlight a challenging environment for the company. Sales fell about 19% year over year, and the company's operating margin narrowed, leading to a big year-over-year drop in net income.

Of course, challenges were expected. The company's revenue actually beat management's guidance for fiscal second-quarter revenue to be between $765 million and $775 million. 

But management continues to rein in investor expectations, warning in its fiscal Q2 update that the company continues

to expect the luxury housing market and broader economy to remain challenging throughout fiscal 2023 and into next year as mortgage rates continue to trend at 20-year highs and the current outlook is for rates to remain unchanged until the second quarter of 2024.

With sales falling sharply year over year and management highlighting a gloomy view for its business environment, the mood certainly isn't upbeat.

But there was one particular figure in the report that may win over some investors: The company continued buying back its stock aggressively.

Here's a closer look at RH's impressive stock buybacks.

RH thinks its shares are undervalued

One thing is clear. RH seems to think its shares are trading at a bargain price. In fiscal 2022, RH repurchased $1 billion worth of its own shares at an average price of $269. Now, in its most recent quarter, the company just bought back 17% of its shares outstanding for an average price of about $326. 

Clearly, RH has an appetite for its own stock.

Helping investors understand the company's approach to capital allocation when it comes to share repurchases, RH CEO Gary Friedman said in the company's fiscal 2022 Q4 earnings call that the company approaches share repurchase opportunistically, ramping it up when doing so is likely to benefit long-term shareholders. This means RH would only aggressively buy back its stock if it believed shares were significantly undervalued. Additionally, Friedman confirmed this sentiment in the company's earnings call this week, saying, "we're trying to be opportunistic investors ... So we think this was a great time to deploy capital and buy back a meaningful position in our company."

Of course, the stock has risen from the average purchase price RH achieved during Q2, and the stock is up substantially from the prices the company was paying for its shares in fiscal 2022. But given the aggressiveness of its repurchases, management clearly thinks the stock is likely to perform well over the long haul.

Investors shouldn't get too excited

Though RH's share repurchases have been well timed and would be difficult to criticize, investors shouldn't rush in to buy shares just because management is doing so. While RH is betting an eventual recovery in the housing market will help reaccelerate its sales growth, there's no light at the end of the tunnel yet. Indeed, management guided for quarterly revenue to fall sequentially to between $740 million and $760 million in fiscal Q3.

Keep in mind, RH expects its operating environment to remain challenging not just this year but into next year. Furthermore, there's no guarantee sales growth will reaccelerate the way management expects it to. Investors, therefore, would be wise to appreciate RH's share repurchases but exercise caution when it comes to mimicking the move. While RH increasingly looks like it will become one of the enduring luxury companies of this century, it may make sense to only buy shares in small amounts at the stock's current valuation. There are many unknowns and risks as the economy navigates a world with mortgage rates at a 20-year high. Estimating the impact of this high interest rate environment on the overall economy and the luxury furniture market is no easy task, so investors in the space should tread carefully.