RH fell nearly 20 percent last week as a result of its earnings and conference call warning of the struggle ahead:
He made an important point in the call, one that I think you could try beating into the heads of bulls with a 2x4, but would only end up with a pile of mush. He said he's very excited about the future, maybe the most excited he has been. There are many opportunities for the business. And yet, he also thinks this economic situation is similar to the scene in The Big Short when Bear Stearns stock suddenly implodes:Here are profit margins with a regression line. Notice the surge following the pandemic. Inflation always looks like a boom at first. Corporations appear more profitable because inflation hits them first, in a good way. The first impact is rising demand. Every producer benefits because supply is constrained in the short-term.
Here is profit margin versus the S&P 500 Index: The RH CEO tells us the benefit for the end stages of production is gone. Inflation is turning into a destroyer of value: There's already evidence the recession may already be underway in the distribution stage.ZH: Looming Freight Recession Sparks Plunge In Trucker Stocks, First Post-COVID Job-Losses
Here is a link to the Q4 2021 RH conference call. I do not know if that link will remain viable in the future. Below is the account that brought it to my attention. There are time stamped points worth giving a listen.
Retail is doomed if the RH CEO is alerting us to a sector trend. Investors seem to understand the risk for retail. XRT looks ready to plunge and IBUY, the online retail ETF, has already erased all of its gains since 2020.
The rest of the stock market is still oblivious. Also, consider the big Apple news last week in context of the RH CEO's comments: Apple Pay push is scarier for fintechs than banksApple (AAPL.O) is taking a bite out of the financial-technology sector. Digital upstarts like Affirm (AFRM.O) and Jack Dorsey’s Block (SQ.N) should be on high alert. Lenders like Goldman Sachs (GS.N), however, have less to fear.A move into consumer credit is the antithesis of growth and technology, but it does strike me as a-not-terrible decision in the face of collapsing margins.The $2.9 trillion iPhone maker led by Tim Cook is beefing up its in-house financial-services infrastructure and expanding further in consumer credit, Bloomberg reported on Wednesday.
$RH $Stonks @doombergt
— nyugrad (@nyugrad1) March 30, 2022
Part 1.
I just listened to the earnings call. Quite entertaining...
Restoration Hardware CEO Gary Friedman said during Q&A:
- Inflation much higher than led to believe
- demand getting destroyed with rising prices
- costs going up everywhere
Restoration Hardware earnings call CEO Gary Friedman said during Q&A:Give it a listen.- Inflation much higher than ppl think
- demand getting destroyed with rising prices
- costs going up everywhere
- consumer acting like they have no savings
- said it’s like the moment in the Big Short where ppl were in the room watching Bear Stearns fall
- believes consumers will get run over
- believes RH is a platform for curating wealthy tastes
Timestamps of note
17:20 inflation
34:00 supply chain
40:30 are record housing prices sustainable?
41:05 i dont think everyone understand how inflation will overrun the consumer. Has the fed called any businesses at all to ask them about inflation?
43:00 freight rates more than doubled
44:00 this is like the scene in the big short
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