RH (RH 0.74%) stock fell 22% in April, according to data provided by S&P Global Market Intelligence. It announced earnings, including a major miss on earnings per share (EPS), on the day of President Donald Trump’s new tariff program announcement, and the combined blow led to a massive plunge in the stock price.
Progress and setbacks
RH has been hit hard in the high interest rate environment and inflationary climate, like most retailers. It sells upscale home furnishings through a network of physical stores, or galleries, and robust digital channels. Although it targets an affluent clientele, which shielded it to some degree when inflation first started to balloon, it ultimately sells discretionary merchandise that people will cut back on when they’re spending less.
Visionary CEO Gary Friedman has been staunch in his approach to keep the company’s premium branding and curtail promotional activity, but the company has been balancing both of these sides to get inventory moving without diluting its image. It continues to open new galleries, expanding into new regions, including European cities like Paris, London, and Milan. It also operates several high-end restaurants, guesthouses, jets, and yachts, and it’s angling to become a global luxury brand.
In the 2024 fiscal fourth quarter (ended Feb. 1), comparable revenue increased 18% year over year, and adjusted operating income was up 57%. Demand, which it defines as dollar value of orders placed, increased 21% for the RH brand, implying that its strategy is working.
The main problem the market had with RH’s report, which was overall quite positive, was a miss on earnings per share (EPS). It came in at $1.58, when Wall Street was expecting $1.91. Since earnings were reported on April 2, Trump’s “Liberation Day,” the market focused on the negative for this retailer, and the stock plunged.
Not as bad as you think
RH stock actually plummeted 40% on the day of its earnings release, so a 22% drop for the month is actually much better than you might think — it has climbed 24% since bottoming out after the announcement.
RH has a strong brand and lots of opportunity. It’s generating higher sales in this challenging environment, which is no small feat. The market seemed to recognize that the stock drop was excessive considering the total picture, and even at the current price, RH stock trades at a forward one-year P/E ratio of less than 13. If you have a long time horizon and some appetite for risk, RH stock looks like a bargain today.
