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Here’s Why Restoration Hardware Shares Are in Freefall

One-time Wall Street favorite Restoration Hardware (RH) saw shares plunge as much as 23% on Wednesday after announcing preliminary fourth-quarter financial results that fell well short of investor expectations.

The company’s charismatic CEO Gary Friedman blamed everything from the oil bust to the crazy stock market for the high end furniture retailer’s shortfall.

“We are clearly operating in different market conditions than a year ago,” Friedman wrote in a press release. The CEO also noted that customers proved to be less receptive to promotions during the holiday quarter, something he suggested reflected a pull back by high end shoppers.

Restoration Hardware reported fourth quarter adjusted earnings of 99 cents per share on $647 million in revenue, while analysts expected earnings of about $1.39 on $711 million in revenue, according to Thomson Reuters.

Depressed oil prices curbed demand in key markets. Restoration Hardware noted that with each successive quarter last year, weak sales in Canada and Texas, two big oil markets, were a growing weight on the overall business. Still though, companywide comparable sales were up 9%.

And Restoration Hardware blamed the crazy stock market in one of the busiest times of the year for its problems.

“Our sense is the increased volatility in the U.S. stock markets, especially the extreme conditions in January, which is historically our biggest month of the quarter for furniture sales, contributed to our performance,” Friedman said.

Restoration Hardware has been developing new product lines and opening large, lavish showrooms in lieu of mall-based stores. But Friedman noted that consumers’ appetite for discounts continues long after the 2008-09 slowdown.

“Much of how we behave promotionally is left over from the Great Recession,” Friedman noted. So Restoration Hardware will shift to a new promotional model based on membership that will include a set discount and an annual fee, “much like the high-end interior design trade.”