Consumers may be struggling on some levels, but it looks like they're not cutting back on luxury furniture. RH (RH 5.15%), formerly known as Restoration Hardware, just reported its fiscal second-quarter results that indicated demand is strong and accelerating.
That report has the stock soaring Friday morning. Shares were up by 22.8% as of 11:15 a.m. ET, and that brought the stock's return positive for the year.
NYSE: RH
Key Data Points
RH gaining momentum
RH management has been saying that sales of its luxury brand furnishings were approaching an inflection point with consumers. The company, and investors, now see that inflection point becoming a reality.
RH said demand -- defined by the company as the value of orders placed -- jumped 7% in the second quarter and said that may double in the third quarter. In its letter to shareholders, the company stated:
Despite expectations for industry conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout fiscal 2024 and into 2025.
The report had some analysts gaining confidence in RH stock. TD Cowen analysts Max Rakhlenko and Bradley Jamison boosted that firm's price target from $325 to $350 per share. The new price target would represent another 10% gain even after today's stock price jump. The analysts explained that "we appreciate the acceleration in demand and market share growth as newness is resonating despite the tough macro."
Investors are buying into the narrative that RH's latest product assortment is driving the growth. After all, the company is gaining sales despite an environment of high interest rates and a challenging housing market.
If interest rates decline as expected, that's one more tailwind that could provide momentum for RH and its stock price.
