RH stock sinks on earnings miss, Q2 guidance

Shares of RH (RH) are sinking after missing earnings expectations and forecasting second quarter guidance that fell below estimates.

Yahoo Finance's Julie Hyman and Josh Lipton analyze the challenges facing the luxury furniture retailer and how inflation is impacting its sales.

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This post was written and updated by Melanie Riehl

Video transcript

Also watching shares of our age, they are as Alicia Keys would say fallen in pre market and now as we've begun today's trading session down by a little more than 13% the furniture retailer did not meet Wall Street's expectations.

Rh reported a wider than expected first quarter loss and forecasted second quarter sales that were below estimates here.

So you're taking a look at that decline.

I think investors are also trying to wrap their heads around the strategy position right now too and that that's taking place in this long term strategy.

They're trying to build the world's first consumer facing architecture, interior design and landscape architecture services platform inside of their galleries as well.

This also means that they're going to try and conceptualize and sell spaces.

So beyond home furnishings, they're looking at and eyeing up this $1.7 trillion North American housing market with the launch of Rh residences.

So we're looking at some of these fully furnished luxury homes, condominiums, apartments with integrated services as well here.

So uh I I think investors are just trying to figure out exactly when that will start to show up in some of the margins for this business.

Yeah, I think that I also just think it's also just indicative of the broader macro environment right now, you take a look at the housing market.

It certainly has been choppy at best.

The macro housing environment is, is reason obviously to be concerned right now and could uh hinder and weigh on uh R H's business here in the short term.

When you take a look at the at the significance of this drop here off just about 15% if that does hold is actually the biggest drop that we've seen intraday drop since 2020 here for Rh.

And because of that, we have seen a number of analysts because of what we heard on the call last night.

And these earnings at Numbers Bank of America Wells Fargo among the analysts that have lowered their target on the stock.

And when it comes to the biggest issues here for Rh, it's a softening demands.

It especially in the latter part of the quarter that we are seeing here guidance really failing to impress Key Bank saying that they still see consensus estimates as too bullish due to the economic and competitive environment.

So given that set up, there is real reason, at least from an analyst perspective to be a bit bearish on this name right now or at least staying on the sidelines.

And again, you're looking at a drop of just around 14% today.