While first quarter sales and margin strand to remain healthy due to the ongoing relief of our backlog, we have experienced softening demand in the first quarter that coincided with Russia’s invasion of Ukraine in late February and the market volatility that followed. We believe it is prudent to remain conservative until demand trends return to normal and — we are providing the following outlook for the first quarter of 2022.”
This was shocking at the time as it was the first direct admission of tangible weakness in consumer end-demand, and was soundly mocked by all the ‘consumer is strong’ narrative-pushers as idiosyncratically focused on RH and not systemically-based.
Then five months later in September, Friedman dropped some more truth bombs slamming Yellen and Powell for being “like massively blind and wrong” on inflation
“…the interest rate is going to go higher. It’s going to hit the housing market first. And the housing market is the biggest part of the U.S. economy. And it’s going to drag down everything.
And if I’m wrong, that’s OK. But the data is there. Now like nobody should be surprised about what’s going to happen here…
…anybody who doesn’t think we’re in a recession is ‘crazy.'”
With credit card debt at record highs and the savings rate near record lows, it appears Friedman’s views on the consumer have been proved right…
…and during his latest earnings call today, the RH CEO let analysts know what he sees coming down the road… and it’s not good as he sees “a complete collapse of the luxury housing market.”
“For the housing point of view, there is no soft landing,” the luxury home furnishings CEO said on a conference call with analysts.
“It’s looking more like a crash landing in the housing market. It’s looking like 2008, 2009.”
Friedman warned that “we expect our business trends will continue to deteriorate as a result of accelerating weakness in the housing market over the next several quarters and possibly longer due to the Federal Reserve’s anticipated monetary policy and the cycling of record Covid-driven sales and backlog reductions.”
“Housing prices went up from 2020 to 2022 by 45%, that’s never happened, except in the 70s. The two year period housing going up 45%. And so…
I don’t want to sit here and have all kinds of debt and not have any clarity of, what it looks like out there…“
He says the luxury furnishings retailer is taking a cautious approach to share buybacks (unlike Bed, Bath, & Beyond which he calls out by name) even though they think the stock is undervalued because they don’t know how much further the housing market will fall.
“The housing industry is in a free fall,” he said, adding that “I don’t know how it comes all apart. Did anyone see in 2008? I mean, because the way the market reacted, it didn’t seem like it, right. And nobody sees the big implosions and we’re not greedy. Again, we’re not accomplish our goal here based on a buyback…“
Not exactly what the market is pricing in and Friedman’s words show the C-Suite (unlike stock investors) is not anticipating a Fed pivot/pause anytime soon.
Fri, 12/09/2022 – 14:25
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Author: Tyler Durden