08:54 AM EDT, 06/14/2024 (MT Newswires) -- RH (RH) will need demand growth to accelerate to roughly 20% by the fiscal fourth quarter to meet its full-year outlook, after results missed market estimates in the preceding three-month period, Wedbush Securities said Friday.

The home-furnishing retailer late Thursday maintained its fiscal 2024 guidance for revenue gains of 8% to 10% and demand to increase by 12% to 14%. In the first quarter ended May 4, the company's revenue slipped to nearly $727 million from $739.2 million the year before, while demand rose 3%, below the forecast it provided in March.

The reaffirmation of the company's outlook implies "very sharp" double-digit sales and demand trends to ramp up in the second half, despite a more negative-leaning macroeconomic environment and "limited concrete evidence" that new products are swaying customers, according to Wedbush in a note.

RH's shares dropped nearly 14% in recent premarket activity.

"RH believes that new products, expanded sourcebook circulation (100% year-on-year growth), assortment optimization, and better in-stocks will drive this sharp double-digit y/y demand improvement," analysts Seth Basham said in the note.

Demand trends decelerated in April as RH cited sharply rising mortgage rates, although competitor Arhaus (ARHS) disclosed more consistent demand comparable trends in the same month versus March and February, the brokerage said. While the company believes the current environment has stabilized around trough levels, it is not enough to offset the lift it expects from its own initiatives this year, according to Basham.

Wedbush now estimates the company to report revenue of $3.22 billion in fiscal 2024, down slightly from its previous forecast. The consensus on Capital IQ is for revenue of $3.23 billion. "We remain sidelined given the sharp [second half] ramp implied in guidance with limited visibility and execution risk on an unprecedented number of new products," Basham said.

Wedbush maintained its neutral rating on RH's stock and lowered the 12-month price target to $250 from $320.

Price: 238.63, Change: -38.42, Percent Change: -13.87