The stock market closed lower on Wednesday after economic data release today depicted a mixed picture of the economy. The ADP National Employment Report showed that private companies added 233,000 jobs in October. Meanwhile, GDP increased at an annualized rate of 2.6%, below economists’ forecast of 3.1%.
Overall, S&P 500 fell 0.3% to 5,814, while NASDAQ declined 0.6% to 18,608.
Tweet of the Day
I did not know this. $PLTR https://t.co/e2MborytpX
— David Sharek (@GrowthStockGuy) October 26, 2024
Chart of the Day
Here is the one-year chart of RH (RH) as of September 18, 2024, when the stock was at $335.
RH appeared to be slowly recovering from what it called the “most challenging housing market in 30 years.” It reported a -57% profit growth on 4% revenue growth. Demand showed monthly improvement, rising from 7% to 12% in August.
Investments in product transformation in its RH Interiors and RH Modern Sourcebooks and market expansion boosted its North American market share. It set the stage for growth in Europe, Australia, and the Middle East.
However, EPS fell to $1.69 from $3.93 last year, driven by higher costs from these investments. Adjusted operating margin also shrank, falling from 20.2% to 11.7%, as spending on upgrades weighed on profits.
While RH’s focus on new product lines contributed to revenue growth, the tough housing market and rising interest rates continued to pressure margins. RH’s long-term growth plan includes opening new stores and improving its online presence. It plans to launch a Waterworks Showroom in California by year-end and expand in Paris and Milan in the next two years. RH believes Waterworks could become a billion-dollar brand, growing fivefold. Still, RH believed its strong demand positioned it well to benefit from a housing market recovery once interest rates eased and home prices became more affordable.
RH is on the radar for our Growth Portfolio.
