The Complaint arises from misstatements the Company made regarding its new product line, RH Modern. Specifically, the Company and its executives publicly touted RH Modern as its “finest work ever,” a “game-changer” that was poised to double the Company’s revenue, and “the most important and significant new home furnishings business to be launched in the last 15 or 20 years.”

Bolstering these statements, the Company repeatedly issued revenue guidance that led investors to expect substantial increases in revenue due in significant part to the supposed new revenue to be generated by RH Modern. The truth began to be revealed on December 10, 2015, when the Company announced that it had missed its earnings projections due, in part, to the fact that RH Modern furniture was not fully in-stock. As a result of these disclosures, shares of RH declined by approximately $9 per share, closing at $78.65 per share on December 14. To stem the decline, the Company made a number of reassuring statements, including touting the launch of RH Modern as “phenomenal” and falsely attributing the low inventory of RH Modern products to a purported strategy of conservatively managing purchases for the new product line.

Then on June 8, 2016, the Company significantly reduced its earnings guidance for fiscal 2016, which the Company attributed to “accommodations largely due to RH Modern production delays.” These disclosures caused RH stock to further decline by $7.66 per share.