As of June 10, RH (RH) was trading at $92.40—a fall of 30% since the announcement of its fourth-quarter earnings on March 28. The company was trading at a discount of 43.8% from its 52-week high of $164.49 and at a premium of 9.9% from its 52-week low of $84.11.
In the fourth quarter, RH reported an adjusted EPS of $3.00, which beat analysts’ estimate of $2.86. However, the company’s revenues of $671.82 million fell short of analysts’ expectation of $686.30 million. The weakness in RH’s core business, due to volatility in the market, was blamed for the lower-than-expected sales. The company’s management expects weakness in the high-end housing market to continue. RH lowered its revenue and EPS guidance for this year. Lower-than-expected sales in the fourth quarter and management’s lower guidance led to a fall in the stock price. The renewed trade war between the US and China contributed to the decline in the company’s stock price.
RH has underperformed the broader equity markets this year. RH stock has fallen 22.9% YTD (year-to-date), while the S&P 500 Index has returned 15.1%. Williams-Sonoma (WSM) and Bed Bath & Beyond (BBBY) have returned 11.6% and 7.6%, YTD, respectively.
The decline in RH’s stock price since the announcement of its fourth-quarter earnings has lowered its valuation multiple. As of June 10, the company was trading at a forward PE ratio of 10.5x compared to 13.0x before the announcement of its first-quarter earnings. Williams Sonoma and Bed Bath & Beyond were trading at forward PE ratios of 11.9x and 6.0x on June 10, respectively.