06:32 AM EDT, 09/13/2024 (MT Newswires) -- RH (RH) shares spiked early Friday as the home furnishing retailer recorded better-than-expected fiscal second-quarter results, amid higher demand that is projected to accelerate throughout the ongoing full year and into the next one. Enhanze

The company reported adjusted earnings of $1.69 a share for the quarter ended Aug. 3, down from $3.93 the year before, it said late Thursday, while the consensus on Capital IQ was for $1.61. Revenue advanced to $829.7 million from $800.5 million, topping the Street's view for $824.5 million. The stock jumped 20% in premarket activity.

"Demand was up 7% in the second quarter and has continued to inflect positive, gaining momentum each month with July finishing up 10%," Chief Executive Gary Friedman said in an earnings letter to shareholders. "Demand accelerated into the third quarter with August up 12% and product margins inflecting positive despite operating in the most challenging housing market in three decades."

Adjusted operating margin declined to 11.7% from 20.2% in the prior-year quarter. Selling, general and administrative expenses widened to $278.6 million from $228.7 million, according to the company.

"While aggressively investing into a downturn has put pressure on short-term results, it has also positioned RH to capitalize on the long-term opportunities that present themselves during times of disruption and dislocation," Friedman said.

For the ongoing three-month period, RH anticipates revenue to grow in the range of 7% to 9% and demand to increase 12% to 14%. The Street is looking for revenue of $832.9 million. Adjusted operating margin is set to be in a range of 15% to 16%.

The company now expects revenue to rise 5% to 7% for fiscal 2024, compared with the previous guidance it issued in May for an 8% to 10% gain. Demand growth is set to be in between 8% and 10% versus the prior forecast for a 12% to 14% increase.

"Despite expectations for industry conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout fiscal 2024 and into 2025," according to Friedman. The company expects to end the 2024 period with an increased backlog of $80 million to $100 million, as a result of revenue lagging demand by about 4 points to 8 points, potentially impacting its adjusted operating margin by roughly 100 basis points.

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