What Happened:

Shares of luxury furniture retailer RH (NYSE:RH) jumped 17.3% in the morning session after the company reported fourth-quarter results and provided optimistic guidance with revenue projections for the full year ahead of Wall Street's expectations. The company stated that they "expect demand trends to accelerate throughout fiscal 2024" despite a challenging backdrop due to a weak US housing market. On the other hand, revenue and EPS fell short of analysts' estimates during the quarter. Overall, the results could have been better, but the outlook is encouraging.

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What is the market telling us:

RH's shares are very volatile and over the last year have had 19 moves greater than 5%. But moves this big are very rare even for RH and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 8.6% on the news that the company reported third quarter results with revenue, adjusted operating margin, and EPS all falling below analysts' expectations. 

Management cited higher than anticipated expenses from international openings, the pending acquisition of the New York Guesthouse property (expected to close in Q4 for approximately $58 million), and its unsuccessful efforts to buy the One Ocean Drive Miami Beach property. Furthermore, the company faced macroeconomic headwinds as mortgage rates peaked above 8% in early October. It added, "With 82% of homeowners having mortgages below 5%, and 62% below 4%, we expect the existing housing market to remain frozen until interest rates and/or home prices fall meaningfully. Additionally, the home furnishings market has become increasingly promotional, and we believe that it will create a mix shift towards clearance products, pressuring gross margins." In summary, the overall performance fell short of expectations, with a combination of internal and external factors contributing to the challenges faced by the company in the quarter.

RH is up 21.3% since the beginning of the year, but at $346.61 per share it is still trading 13.7% below its 52-week high of $401.84 from August 2023. Investors who bought $1,000 worth of RH's shares 5 years ago would now be looking at an investment worth $2,628.

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