Restoration Hardware (RH) Stock Rallies on Revenue Beat

Shares of Restoration Hardware Holding Inc. (RH) were trading up +3.80 or +10.77 percent to $39.09 per share in Friday’s premarket after the company released its second quarter earnings yesterday after the market close. Restoration Hardware stock closed at $35.29, up +0.41 or +1.18 percent in Thursday’s regular trading session.

Stock Analysis

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.

For the company’s second fiscal quarter ended on July 30, 2016, Restoration Hardware reported GAAP net income of $6.9 million compared to $29.9 million in the same period one year ago.
Restoration Hardware (RH) Stock Rallies on Revenue Beat
Image by ErikaWittlieb / Pixabay
On an adjusted basis, net income came to $17.9 million versus $36.0 million in 2015’s second quarter.

GAAP diluted earnings were $0.17 per share versus $0.71 last year. On an adjusted basis, diluted earnings came to $0.44 per share versus $0.85 per share in the same quarter last year. Nevertheless, due to the company’s acquisition of Waterworks, a bath and fixture company, second quarter revenue increased +7 percent to $543.4 million.

While the company beat its forecast of an adjusted profit of $0.28 to $0.33 per share on $505 million to $520 million in revenue, comparable brand sales — an important metric in the company’s business — declined three percent. Comparable brand sales are sales at stores open at least 14 months excluding company outlet stores.

Gary Friedman, Restoration Hardware’s Chairman and Chief Executive Officer said in the company’s press release that, “As previously communicated, we are making several strategic investments and changes to our business model in fiscal 2016 that are temporarily depressing financial results in the short term, which we believe will strengthen our brand and position the business for accelerated revenue and earnings growth in 2017 and beyond.”

Friedman concluded saying that, “While the degree and pace of innovation at RH might seem ambitious comparatively, it is the result of years building a culture engineered to be, as Charles Darwin believed, the one most responsive to change. In a world moving exponentially faster, we are building one of the only true sustainable competitive advantages - a culture of imagination and innovation. A culture that is proving itself capable of imagining the future, and an organization that is demonstrating it can build it.”

The company affirmed its guidance for the third quarter of $0.13 to $0.18 per share in adjusted profit on $520 million to $530 million in sales. The analyst consensus was for guidance of $0.40 per share on sales of $539.7 million. Third quarter guidance includes an impact of approximately $0.15 per share due to certain short term operational items including costs related to RH Modern production delays and investments to improve customer experience as it transitions from a promotional to a membership model. For the full year, the company expects net revenue growth between +1 percent to +3 percent with adjusted diluted earnings per share of $1.60 to $1.80.

Other News About RH

RH Unveils RH Leawood, The Gallery at Town Center Plaza

Company opened a 56,000 square foot design gallery.

Restoration Hardware: The Power of a Goldman Sachs Upgrade

Goldman upgraded the stock from a “neutral” to a “buy” last month.

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Published on Sep 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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