Another earnings cycle brings another blunt call-out by outspoken furniture-hawking CEO Gary Friedman.

After basically saying the housing market was crumbling under the weight of higher interest rates in a late March earnings call, RH’s top exec said late Thursday he and his team overcharged rich people for already expensive furniture during the good times.

“I think the world took prices up, and we all know that because inflation went to 40-year highs, right? And that is going to affect things. And I think we’re probably somewhat too arrogant in our ability to raise pricing in an easy-demand environment,” Friedman acknowledged. “And as the easy demand environment has waned, and it’s required us to kind of really challenge, is our value equation going to create the level of demand that we believe is right for the business?”

Judging by the latest results from RH, formerly known as Restoration Hardware, consumers don’t see the value in putting a $2,300 wood dining room table on a charge card with a much higher interest rate attached to it. That’s especially as the housing market continues to be under pressure.

The California-based furnishings retailer’s first quarter sales tanked 23% year over year to $739.2 million, it reported Thursday. Gross profit margins dropped to 47% from 52.1% a year earlier.

Friedman said RH will now move aggressively to pare down excess inventory this year by offering discounts, which will take a bite out of margins.

Full-year adjusted operating margins are pegged in a range of 14.5% to 15.5%, down from 15% to 17%. Sales for the year were guided to $3 billion to $3.1 billion, up from $2.9 billion to $3.1 billion as Friedman bets consumers will bite at his promotions.

“$1.5 billion in cash and $1.5 billion remaining in share repurchases create a floor for the stock, though we see limited upside given our view that 20% operating margins may not be on the table until 2025. We believe new product launches under the RH Contemporary line at more amenable price points will spur demand in the second half, but not enough to push above the midpoint of guidance,” warned Jefferies analyst Jonathan Matuszewski in a research note.

RH’s struggles in part reflect poor execution by Friedman, but also the realities of the changing housing markets. The dynamics have tripped up everyone from a high-end furniture seller in RH in the past year to appliance maker Whirlpool to home improvement sellers Home Depot and Lowe’s.

Existing home sales in April fell 3.4% from a year earlier, according to the National Association of Realtors. Home prices declined for the third consecutive month.

A new Redfin report this week revealed that nationwide home prices in April notched their steepest decline in more than a decade, declining by $18,000. Median home prices fell in 45 out of more than 90 metro markets, the report found.

“We’re launching it [our new product line] into maybe the worst home environment at the high end that I’ve ever seen in my career. I’ve never seen luxury housing down at the levels we’ve seen from recent reports and we’re at 20-year high interest rates,” Friedman added on the call.

The stage is set for a similar tone from Friedman three months from now.

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com

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Source: finance.yahoo.com