Oh the irony that on the day Hedgeye's Macro Team laid out 3Q Key Macro Themes, RH came out and lowered revenue forecasts for the remainder of the year by ~500BP to -2%-5%. Ironically we were in the process of taking our revised Macro forecasts and bearish US/Europe outlook for a number of companies into account in our model when the 8K hit. We taking $125mm incrementally out of Core and Modern for the year and tempering the 2022 ramp of Contemporary and England, which pegs a decline in 2H to the tune of approximately 8% after the contribution from the launch of Contemporary and the opening up of RH England, both of which we think are completely on track in terms of timing. The company has yet to buy back a single share in its $2.45bn authorization, as we think that it's simply waiting for demand to stabilize -- or a stock price starting with a $1 (we're only ~10% away from that happening). As for the broader thesis that we outlined in our deck on June 8th (LINK: CLICK HERE), we think that the Street is egregiously underestimating the revenue build from new markets in the US and Europe over a TAIL duration. Our revenue build is below, and our EPS estimates (which assumes that the company exercises the full authorization by 1Q23) remain nearly double the consensus in the out years. That will fall on deaf ears with this revenue revision. And we'd be disingenuous to pound the table to load up on the name today when we're likely heading into a recession, and at a minimum a lot more of Quad 4 ahead of us. But we don't think this will be 'death by a thousand cuts' and that sentiment and estimates are nearing the end of a bottoming process. As outlined in our presentation, with the stock at current levels, it offers up the greatest upside over a TAIL duration out of any name in retail today.
