RH stock (RH) surged more than 20% on Friday after the luxury home furnishings retailer said that customer demand was picking up steam.

RH said in its shareholder letter released Thursday that demand was up 7% in its fiscal second quarter ending Aug. 3 from the year-earlier period. Demand refers to the dollar value of customer orders placed in a given period. RH recognizes revenue from the orders when customers receive the merchandise.

The company added in the letter that "demand accelerated into the third quarter with August up 12% and product margins inflecting positive despite operating in the most challenging housing market in three decades."

RH has struggled as the housing market has stood at a relative standstill amid low inventory, record home prices, and high interest rates. The dynamic has kept buyers and sellers alike on the sidelines. That means homeowners are putting off buying new furniture and undertaking new renovations.

Recently, mortgage rates have drifted downward as investors bet on a rate cut from the Federal Reserve as inflation slows. The central bank will announce its next policy decision on Wednesday.

“Despite expectations for industry conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout 2024 and into 2025,” Gary Friedman, CEO of RH, told investors and analysts on the second quarter earnings call Thursday afternoon.

Still, the home furnishings retailer lowered its full-year forecast for both revenue and demand due to its "inflection ramping later than expected," illustrating how difficult the market remains. RH now expects demand in the range of 8% to 10% and revenue growth in the range of 5% to 7% for the year, down from ranges it previously gave of 12% to 14% and 8% to 10%, respectively.

Wedbush's managing director Seth Basham told Yahoo Finance in an email that "investor expectations were for an even bigger reduction to growth forecasts for the year. The updated guidance still implies an acceleration in [year-over-year] growth in 3Q and 4Q, while the company also spoke to continued acceleration into 1H25."

He added, "In addition, investors are excited about merchandise margins turning positive [year over year] in August, signaling that the new product introductions are not diluting margins further (and are likely accretive to product margins) and clearance-related margin pressure is dissipated."

RH posted adjusted earnings per share of $1.69 in Q2, beating Wall Street’s estimates of $1.60 a share. Revenue of $829.7 million also beat the consensus estimate of $825.1 million.