Thursday's Headlines: RH Slashes Its Outlook

Thursday's Headlines: RH Slashes Its Outlook

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

2U (TWOU) 17.4%

Monster Energy (MNST) 2.8%

IDEXX Laboratories (IDXX) 2.6%

Trip.com Group (TCOM) 2.5%

TrueCar (TRUE) 2.4%

Moving Down ⬇️

Upstart Holdings (UPST) -10.2%

Lemonade (LMND) -7.3%

Shopify (SHOP) -5.6%

Bumble (BMBL) -4.8%

Nordstrom (JWN) -4.7%

 

Here are the stories that you need to know ahead of market-open today, Thursday the 30th of June.

 

RH Stock Slumps Following Slashed Outlook 😰

Shares in luxury furniture retailer RH (RH) are down close to 6% in pre-market trading following the company’s decision to slash its revenue outlook for the rest of the year.

Annual sales are now expected to be down 2%-5% year-over-year in comparison to previous expectations that saw sales increasing by 2% at the high end. Steadily increasing mortgage rates and a decline in the sales of luxury homes were both cited as reasons behind the realignment of the firm’s outlook. According to CEO, Gary Friedman:

“With mortgage rates double last year’s levels, luxury home sales down 18% in the first quarter, and the Federal Reserve’s forecast for another 175 basis point increase to the Fed Funds Rate by year-end, our expectation is that demand will continue to slow throughout the year.”

What is perhaps most worrying for investors is the speed at which RH changed its outlook. Just four weeks ago, the company predicted an increase in revenue. While the macroeconomic climate is undoubtedly changing rapidly, such a swift shift in expectations has clearly drawn the ire of shareholders.

RH is now down over 55% year-to-date as discretionary spending narrows and high-end retailers feel the pinch. One small saving grace is that the outlook for the current quarter remains unchanged from previous figures, suggesting that some of these headwinds were already accounted for to some degree.

 

Snap Launches Premium Subscription Plan 👻

Social media company Snap Inc. has announced the launch of a premium version of its popular Snapchat platform. The paid version is called Snapchat+ and will cost subscribers $3.99 per month. The initial rollout will be in the U.S., Canada, Germany, France, the UK, UAE, Saudi Arabia, New Zealand, and Australia.

This development will see Snap attempt to move away from its current revenue model that relies heavily on advertising. Rising ad costs and weak consumer spending were two of the main reasons cited to be behind the company’s poor first-quarter performance, when Snap plummeted by over 40% in a single day.

Snapchat+ will attempt to generate an alternate source of recurring revenue for the firm — something desperately needed. It’s aimed at “the people who spend most of their time communicating with their closest friends on Snap” according to Jacob Andreou, the company’s senior vice-president of product. These power users will initially have the ability to change the icon of the app, see who rewatches their stories, and pin a friend to the top of their chats as a “BFF.”

Despite a widely-used product, Snap has often struggled to monetize its core offering outside of ads. It dabbled in the hardware market with the launch of Snap Spectacles and even a small drone, but found it difficult to generate meaningful revenue. If this subscription model works, it could be the boost Snap needs in the wake of a much more difficult advertising landscape.

 

More Bad News For Bed Bath & Beyond 🛁

Things appear to be going from bad to worse for Bed Bath & Beyond after the retailer reported on another disappointing quarter and announced the departure of its CEO. Company stock was down close to 25% in after-hours trading last night on the news.

In the last quarter, Bed Bath & Beyond posted a heavy loss of $2.83 per share on revenue of $1.46 billion, which was a decline from the sales posted in the same period last year. Adding more color to this, the company revealed that same-store sales — a key retail metric that tracks sales at stores open for more than a year — had declined by 24% in the quarter compared with a year ago.

Of course, the announcement of CEO Mark Tritton’s departure is also spooking investors. Tritton had been poached from retail rival Target back in 2019 to try and replicate his success in growing private label brands. However, after just three years, Tritton appears to be all out of answers, which makes investors question what exactly it is that needs to be done.

Bed Bath & Beyond was founded in New Jersey in 1971 as a store specializing in homewares, which was somewhat of a novelty at the time. Quickly becoming a staple of the U.S. retail and cultural landscape, the chain reached its first $1 billion in annual sales by 1999 and, by 2011, had 1,142 stores in total.

The death of the big-box retailer at the hands of e-commerce hit Bed Bath, & Beyond hard though. In 2019, the company drew the attention of activist investor firms, who ousted the CEO and closed 15 locations. The next year, a further 200 of its stores were closed — about 21% of its total locations.

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