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Luxury home furnishings retailer, Restoration Hardware Holdings, Inc. (RH - Snapshot Report), continued with its strong performance and posted impressive second-quarter fiscal 2013 results. The company’s adjusted quarterly earnings of 49 cents a share handily surpassed the Zacks Consensus Estimate of 42 cents and jumped 48% year over year.

However, including one-time items, Restoration Hardware reported a loss of 46 cents per share. 

Increased product demand led to a 30% jump in total sales to $382.1 million that surpassed the Zacks Consensus Estimate of $375 million. Comparable-store-sales surged 26%, while Direct revenues increased 33% during the quarter.

Gross profit rose 22% to $139.2 million, while gross margin contracted 260 basis points to 36.4%. Adjusted EBITDA soared 42% to $40.8 million, whereas adjusted operating income jumped 56% to $34.2 million.

Encouraged by the strong quarterly results, Restoration Hardware raised its fiscal-2013 guidance for the second time. The company now expects top-line improvement in the range of 31% to 32% to $1.56 billion – $1.58 billion, up from its earlier guidance range of a 23% to 27% increase. Moreover, earnings are forecast in the range of $1.65 to $1.70 per share, significantly rising from its previous guidance range of $1.41 to $1.47.

For the third quarter, total sales are expected in the range of $385 million to $395 million, while earnings are projected to range from 27 cents to 29 cents per share. Moreover, for the fourth quarter, the top line is expected to be in the range of $490 million to $500 million, while earnings are expected in the range of 81 cents to 84 cents.

The Zacks Consensus Estimate currently stands at 16 cents and $1.48 for the third quarter and fiscal 2013, respectively. However, given management’s upbeat guidance, the Zacks Consensus Estimate could witness an upward revision in the coming days.

Restoration Hardware ended the quarter with cash and cash equivalents of $15 million. Inventories totaled $406.7 million, up 48% year over year. Stockholders’ equity was $499.4 million. Restoration Hardware incurred capital expenditures of $20.9 million during the quarter and expects capital expenditures in the range of $95 million to $100 million in fiscal 2013.

Beyond Numbers

We remain upbeat on the company’s strong performance during the reported quarter, despite the challenging macroeconomic environment. Restoration Hardware’s focus on strategic initiatives to drive growth and profitability in the luxury home furnishings market is quite encouraging.

Several initiatives on the company’s part like product expansion, innovation, enhancement of customers’ shopping experience and its planned foray in the Kitchen and Antiquities segment are expected to accelerate sales growth in the long run.

Restoration Hardware’s real estate transformation strategy also counts as a positive. The company is receiving favorable lease offers from landlords to become an anchor tenant at high end malls. The move promises long-term growth opportunities for the company to increase sales, lower costs and expand margins.

Considering the strengths of the stock, Restoration Hardware carries a favorable Zacks Rank #2 (Buy).

Other Stocks to Consider

Besides Restoration Hardware, other stocks worth considering in the home furnishings & fixtures sector include Fortune Brands Home & Security, Inc. (FBHS - Snapshot Report), Haverty Furniture Companies Inc. (HVT - Snapshot Report) and Kirkland's Inc. (KIRK - Analyst Report), all of which hold a Zacks Rank #1 (Strong Buy) and are expected to continue with their upbeat performance.

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