Home Furnishing Company RH's Long- Term Growth On Product & Gallery Expansion Remains Intact, Analyst Says

William Blair analyst Phillip Blee reiterated an Outperform rating on the shares of home furnishing company RH RH.
RH reported slightly softer-than-expected sales and earnings for its Q4 ending January 2023 as the company continues to face headwinds related to declines in the housing market.
On an average-per-selling-square-foot basis, the analyst estimates that sales at RH’s core brand and outlets declined by roughly 18%, partially offset by 7% growth in the Waterworks brand.
Management expects fiscal 2023 sales of $2.9 billion - $3.1 billion with continued demand pressures on macro uncertainty and housing market pressures, particularly in the first half of the year.
The guidance assumes an inflection in the second half on incremental demand related to the launch of 70 new product and upholstery collections.
The analyst believes investors’ primary concerns are centered around the second-half sales inflection against a difficult macro backdrop.
While acknowledging the potential for near-term volatility over the next few months, the analyst believes the stock will continue to find support around current levels, minimizing the downside risk.
RH identified several opportunities for further growth, including 4 galleries across Europe and Australia, 12 galleries in North America, and 40 locations for design studios where an under-5,000-square-foot, services-focused format is well suited for smaller, affluent towns, similar to its existing locations in Los Gatos, California and East Hampton, New York, said the analyst.
Price Action: RH shares are trading lower by 3.54% at $237.27 on the last check Thursday.

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