CNBC’s Jim Cramer looked at the stock of luxury home goods retailer RH on Friday and said the company could succeed if the housing market strengthens.
“RH is high risk, high reward, but it really comes down to how you feel about housing,” Kramer says.
Kramer said the past few years have been a “roller coaster” for the company’s stock as CEO Gary Friedman sought to expand in the face of an economic downturn and a tough housing market.
RH began to decline about a year ago, he continued, after the Federal Reserve stopped cutting interest rates and the Trump administration’s tariffs hit the countries where RH does most of its manufacturing. In the months that followed, Wall Street was too worried about the health of consumers to focus on luxury chains, Kramer added.
But Cramer said stocks have risen over the past few weeks as investors expected further interest rate cuts and became more positive about consumer spending. RH managed to emerge this week after a mixed quarter, with higher sales but lower earnings and weaker guidance.
The stock closed up 5.67% on Friday.
Kramer noted that RH CEO Gary Friedman seemed optimistic in his quarterly letter to shareholders, saying RH was gaining market share and achieving industry-leading revenue growth despite macroeconomic challenges. But Friedman also acknowledged the risks the company faces, including an uncertain housing market, tariffs and rising construction costs.
Cramer emphasized that RH stock remains “a very leveraged vehicle for a potential housing recovery,” and said the stock could soar in the coming years if the Fed continues to cut rates and the housing market recovers.
“But what if the housing market doesn’t improve materially, the company continues to be reeling from tariffs, and Gary Friedman continues to boldly pursue an expansion strategy even though market conditions don’t really justify it?” Kramer asked. “Well, there could be very bad, self-inflicted consequences on the table.”
RH did not immediately respond to a request for comment.
