Shares of RH tumbled 9% ahead of the opening bell Thursday after the luxury furniture store chain cut its sales expectations just weeks after issuing guidance to its investors, blaming worsening macro-economic conditions and rising mortgage rates.
After predicting earlier this month that 2022 sales would be flat to up 2%, the Corte Madera, California, company said that in now believes sales will fall between 2% and 5%.
“With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year end, our expectation is that demand will continue to slow throughout the year,” said CEO Gary Friedman.
Friedman pointed to a more pronounced slowdown in the second half of the year.
RH sales surged during the COVID-19 pandemic as people spent more time at home. Those spending patterns have shifted drastically with the rollout of vaccines and people traveling more. Now, with inflation and fears of a recession , Americans are pulling back further on spending to focus on necessities.
RH, previously known as Restoration Hardware, also announced earlier this month that it planned to buy back an additional $2 billion of its own shares. On Thursday, the company said it has not bought any of those shares.