The stock market closed lower on Monday as investors braced for Election Day. The new elected President will determine the course of the US economy in the coming years.
Overall, S&P 500 and NASDAQ both fell 0.3% to 5,713 and 18,180, respectively.
Tweet of the Day
This is a good take… https://t.co/yZ95zJYIbc
— David Sharek (@GrowthStockGuy) October 29, 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 to be the “most challenging housing market in 30 years.” Last quarter, the company reported a positive revenue growth of 4%, which was the first increase in quarterly revenue in two years.
Demand showed monthly improvement, rising from 7% to 12% in August. Investments in product transformation in RH Interiors and RH Modern Sourcebooks, as well as market expansion, boosted its North American market share. This 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 (e.g., RH Interiors and RH Modern Sourcebooks) 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 into Paris and Milan in the next two years. RH believes Waterworks could become a billion-dollar brand, growing fivefold. Still, a recent cut in interest rates was expected to boost demand for more housing sales, but people were not impressed with more than 6% mortgages. Home sales are also still stagnant. In addition, mortgage rates have since grown back above 7%. Thus, David Sharek, Founder of School of Hard Stocks, does not really think that RH has turned the corner.
RH is on the radar for our Growth Portfolio.
