Wedbush analyst Seth Basham downgraded RH to Neutral from Outperform with a price target of $270, down from $274. RH has been steadfast in protecting its brand without discounting, but this has contributed to mounting market share losses, Basham tells investors in a research note. The analyst sees mounting evidence of a course-correction to its strategy of “climbing the luxury mountain.” A key tenet of this strategy has been to cede “low-value” share as it elevates its brand, raises prices and improves quality to levels appealing to a narrower set of high-net-worth customers, says the analyst. Basham, however, “surprisingly found” that RH reduced prices by 2%-9% since March on half of the products in a price study. This “potential course-correction” in the company’s strategy and deteriorating macro outlook drive the downgrade the Neutral.
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