The California-based home furnishings retailer posted $8.48 in adjusted diluted EPS alongside $992M in revenue for the second quarter. Gross margins also expanded 350 basis points from the prior year despite inflationary pressures. Analysts had anticipated $6.70 and $969.20M for EPS and revenue respectively, after significantly reeling in estimates after multiple earnings revisions this year.
“As noted in our updated Outlook provided on June 29, 2022, our expectation is for continued softening in our business trends during the remainder of fiscal 2022 as a result of ongoing weakness in the housing market over the next several quarters and possibly longer due to the Federal Reserve’s anticipated interest rate increases and the cycling of record COVID-driven sales levels in 2021,” a shareholder letter explained.
For the third quarter, net revenue is expected to decline by 15% to 18% with adjusted operating margin in the range of 18.5% to 19.0%.
For the full year, net revenue growth is expected to decline between 3.5% and 5.5% with adjusted operating margin in the range of 21.0% to 21.5%.
Elsewhere, merchandise inventories rose to $859.1M at the close of July as compared to $645.9M in 2021.
“While we expect the next several quarters to pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift and shed less valuable market share as we continue to raise our quality and navigate through the multiple macro headwinds, we believe our long-term investments will enable us to continue driving long term industry-leading performance,” CEO Gary Friedman wrote in his shareholder letter.
Shares of RH (RH) traded in a volatile manner during Thursday’s extended session and was up 1.55% at last check.