RH Growth Faces Headwinds As Macro Concerns Weigh: Analyst Cautions On Lower Near-Term Margins

Bank of America Securities analyst Curtis Nagle reiterated the Buy rating on RH RH, lowering the price forecast from $510 to $410.

RH will report financial results for the fourth quarter and fiscal year 2024, which ended Feb. 1, on Wednesday, April 2, after the market closes.

Nagle projects RH to report slightly better-than-expected Q4 sales, EBIT, and EPS, with growth driven by product innovation, marketing, and gallery openings.

However, the analyst notes that macroeconomic concerns and discretionary spending could impact future growth, and higher rates may affect near-term margins, as competitors have indicated.

Nagle notes that while spending on high-end furnishings declined by 3% year-over-year in 4Q, it slowed further in February, with trends likely continuing into March.

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However, competitors’ revenue guidance for FY25 was in line or slightly better than expected, and high-end home volumes are still outperforming the broader market.

The analyst highlights that RH, with its product innovation, still has room to grow faster than the industry in 1Q despite a softer macroeconomic environment.

Nagle mentions that while their 4Q projections remain unchanged, the analyst haa lowered their 1Q sales and EPS forecasts by 0.6% and 32% respectively, due to weaker macro data.

Additionally, 2025 sales and EPS projections have been reduced by 2.0% and 20%, reflecting softer data and lower flowthrough. The analyst’s new EPS estimate of $20.26 is 16% lower than before but still slightly above the Street’s estimate of $20.11.

Price Action: RH shares are trading lower by 5.80% to $240.77 at last check Wednesday.

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