An analyst consensus estimate published by Yahoo Finance looked for earnings of 95 cents per adjusted diluted share and revenues of $756.7 million.
The company reported that net revenues were $751.2 million versus $869.1 million in the year-before quarter. Income from operations was $51.2 million versus $170.3 million in the year-previous period.
In a note to stakeholders, Gary Friedman, RH chairman and CEO, stated:
Net revenues of $751 million were at the midpoint of our guidance for the quarter, and adjusted operating margin of 7.3% was slightly below expectations due to higher than anticipated expenses, including international openings as well as costs related to our pending acquisition of the New York Guesthouse property and unsuccessful efforts to secure the iconic One Ocean Drive Miami Beach location.
While pleased with improved demand trends generated from the launch of our new RH Interiors and RH Contemporary collections, we experienced increased headwinds in early October when mortgage rates peaked above 8%, and the Hamas invasion of Israel triggered the war in the Middle East.
With 82% of homeowners having mortgages below 5%, and 62% below 4%, we continue to expect the existing housing market to remain frozen until interest rates and/or home prices fall meaningfully. Additionally, the home furnishings market has become increasingly promotional, and we believe that will create a mix shift towards clearance products, pressuring gross margins. In light of the current market, we are delaying the mailing of our RH Modern Sourcebook until the first quarter of fiscal 2024 when demand conditions will likely be more favorable.
RH anticipates that demand trends will accelerate through the first half of 2024 as the company advances a product transformation initiative and completes a gallery reset even as in-stocks improve and it introduces the new RH Modern and RH Outdoor Sourcebooks, Friedman maintained.
He pointed out that the RH international expansion continues with upcoming openings in Brussels, Madrid and Paris slated. In North America, the company has opened RH Indianapolis. With construction delays pushing the RH Cleveland debut into the 2024 first quarter, RH now plans to open five North American Design Galleries in 2024, including in Cleveland as well as in Palo Alto, CA, Raleigh, NC, Montecito, CA and Newport Beach CA. RH will also keep expanding its Design Studio concept, which will be developed to function in smaller markets, with the next opening planned for Palm Desert, CA.
