04:31 PM EDT, 03/12/2024 (MT Newswires) -- RH's (RH) fiscal Q4 results probably won't resolve a debate on the outlook among investors, UBS Securities said Tuesday in a report.

"On the positive, the company will have made progress on several important factors including clearing out excess inventory, developing its new locations, and managing its profitability," UBS said. "On the other hand, it probably still won't be clear that demand has fully bottomed and there won't be clarity on the company's long-term margin potential."

"We think the most likely case is that RH continued to be more competitive on price in 4Q," and this likely will drive demand and reduce inventory as a merchandise transformation progresses, UBS said. Consequently, the firm expects a sequential improvement in revenue growth trends but predicts continued pressure on gross margins.

RH is expected to forecast low to mid-single-digit sales growth for FY 2024 in its initial outlook, UBS said. On gross margins, RH probably expects less impact from clearing older inventory as the year progresses, and positive sales growth may provide leverage on occupancy expenses, the report said..

UBS has a neutral rating on RH with a 12-month price target of $300.

Shares of the home-furnishings retailer rose 0.3% in after-hours trading. They gained 1.9% in the regular session. Fiscal Q4 results are expected around the end of March.

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