Restoration Hardware (RH) Stock Pummeled After Lower Earnings, Guidance

Shares of Restoration Hardware Holdings Inc. (RH) were trading down -7.21 or -19.99 percent to $28.86 per share in Thursday’s premarket after the company reported lower than expected results for the company’s first quarter after the market close yesterday. In addition to the lower earnings, Restoration also slashed its guidance for full year results. Restoration Hardware Holdings stock closed at $36.07, up +0.69 or +1.95 percent in Wednesday’s regular trading session.

Founded in Eureka, California in 1979 by Stephen Gordon, Corte Madera, California based Restoration Hardware Holdings Inc. is a “curator of design, taste and style in the luxury lifestyle market” according to the company.
Restoration Hardware began as specialty home furnishings and supplies company focusing on high quality hardware and fixtures for restoring Victorian and other period buildings. Restoration Hardware now offers a wide variety of high quality home furnishings through its galleries, outlet stores and online through the company’s website.

Restoration Hardware Holdings reported a net GAAP loss for the first quarter of -$13.5 million compared to net income of +$7.2 million in the same period one year ago. Adjusted net loss for the quarter came in at a loss of -$2.1 million compared to net income of $9.8 million in 2015’s first quarter.

Unadjusted earnings per share came to a loss of -$0.33 compared to GAAP diluted earnings per share of +$0.17 for the same period one year ago. Adjusted diluted loss for the company’s first quarter came to –$0.05 compared to earnings per share of +$0.23 in last year’s first quarter. Analysts expected the company to report earnings of +0.05 per share.

Revenue for the quarter came to $455.5 million compared to $422.4 million last year, an increase of +8 percent. Comparable brand revenue growth including direct sales was +4 percent compared to +15 percent growth last year. Store revenues increased 19 percent to $256.1 million, however direct revenues, which make up 44 percent of total revenues, declined -4 percent in the first quarter. The analyst consensus was for $459 million in revenue.

Gary Friedman, Chairman and Chief Executive Officer of Restoration Hardware noted in the company’s press release that, “Our near term business performance is being pressured by the continued headwinds in the markets impacted by energy and currency, as well as a general slowdown in the luxury consumer market. In addition, the costs associated with RH Modern production delays and investments to elevate the customer experience, the timing of recognizing membership revenues related to the transition from a promotional to a membership model”.

Friedman concluded saying, “Despite our recent difficulties, we remain the leading luxury home brand in the world, with a clear path to $4 billion to $5 billion in North American revenues with mid-teens operating margins. The two fundamental strategies that get us there - the expansion of our product offer and the transformation of our real estate - remain well on track.”

For the company’s second quarter, Restoration expects earnings per share to range from $0.28 to $0.33 with revenue ranging between $505 million to $520 million. Analysts expected guidance of $0.79 per share on revenue of $545 million.

For the full year, Restoration expects earnings to range from $1.60 to $1.80 per share with expected income to be flat to slightly down, which compares to last year’s adjusted income of $2.72 per share Analysts expected full-year guidance of $2.66 per share.

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Published on Jun 9, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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