S&P snips Restoration Hardware

S&P said it trimmed its ratings on Restoration Hardware Inc. and its secured debt to BB- from BB. The debt’s 3 recovery rating is unchanged and indicates meaningful (50%-70%; 50% rounded estimate) recovery in default.

“The downgrade reflects persistent operating challenges anticipated through 2023, leading to deterioration in RH's credit measures. We expect weaker performance in 2023 as the company continues to face muted consumer demand amid a difficult macroeconomic environment with higher interest rates and a weak housing economy,” the agency said in a press release.

S&P said it sees EBITDA margins narrowing by about 400 basis points in fiscal 2023 after a similar decline in 2022. It expects a 19% drop in revenue. “The revenue decline is largely attributed to the current economic climate, and we believe a weak housing market and a decline in luxury home sales will continue to weigh on demand.”

The outlook is negative.

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