Why RH Stock Popped Today

Shares of RH (RH 17.26%), the home furnishings company formerly known as Restoration Hardware, were gaining today after the company reported disappointing results in its fourth-quarter earnings report, but gave better-than-expected guidance for 2024, indicating that the company was returning to growth.\n\nAs a result, the stock was up 15% as of 9:55 a.m. ET.\n\nRH is turning the corner\n\nLike much of the home furnishings industry, RH has struggled with a challenging housing market, which CEO Gary Friedman said was the worst in three decades.\n\nAs a result, RH\\'s revenue fell 4.4% in the quarter to $738.3 million, which was well below estimates at $777.5

million.\n\nMargins also fell as the company invested in an expected rebound in demand. Operating margin slipped from 14.5% in the quarter a year ago to 8.7%, and adjusted earnings per share fell from $2.88 to $0.72, which missed the consensus at $1.67.\n\nHowever, management\\'s optimism about 2024 helped stoke the gains in the stock as the company is stepping up investments in marketing and new products in preparation for a recovery in demand.\n\nRH has also been aggressively buying back shares to take advantage of its beaten-down stock price. It reduced shares outstanding by more than 20% over the last year and 35% over the last two years.\n\nHow 2024 is shaping up

for RH\n\nFriedman said the company was doubling its sourcebook circulation and stepping up advertising in preparation for a recovery in demand.\n\nFor 2024, it expects revenue growth of 8%-10% and demand growth of 12%-14% due to an order lag, and it sees adjusted operating margin of 13%-14%, which is slightly better than the the 13% it reported in 2023. RH should also benefit from the expected decline in interest rates later this year.\n\nThat top-line growth rate implies revenue of $3.27 billion-$3.33 billion, which was ahead of the consensus at $3.26 billion.\n\nThat, and the optimistic commentary from Friedman, has investors feeling good about the stock today.