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Restoration Hardware (RH) Up 23.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Restoration Hardware (RH - Free Report) . Shares have added about 23.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Restoration Hardware due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RH's Q4 Earnings & Revenues Beat Expectations
RH ended fiscal 2020 on a solid note. This leading luxury retailer in the home furnishing space reported better-than-expected fourth-quarter fiscal 2020 results (ended Jan 30, 2021) on the back of strong demand and solid margins. Both adjusted earnings and revenues handily beat the Zacks Consensus Estimate and grew on a year-over-year basis.
RH witnessed a 36% increase in core demand for the fiscal fourth quarter. For February and the first two weeks of March, the same was up 73% and 96%, respectively, year over year. the company’s total demand was up 29% in the quarter.
Earnings, Revenue & Margin Discussion
Adjusted earnings of $5.07 per share surpassed the consensus mark of $4.78 by 6.1% and increased 36% from the year-ago level.
Adjusted net revenues of $812.6 million grew 22% year over year. The figure also surpassed the consensus mark of $797 million by 2%.
Adjusted gross margin expanded 480 basis points (bps) to 47.4% for the quarter owing to investments to elevate the RH brand. Adjusted SG&A margin contracted 140 bps.
Adjusted operating margin increased a notable 630 bps year over year to a record 23.7%. Adjusted EBITDA also surged 54.8% year over year to $224.4 million for the quarter. Adjusted EBITDA margin improved 580 bps year over year to 27.6%.
Store Update & Balance Sheet
As of Jan 30, 2021, it operated 68 RH Galleries and 38 RH outlet stores in 31 states, the District of Columbia and Canada, as well as 14 Waterworks showrooms throughout the United States and U.K., and had sourcing operations in Shanghai as well as Hong Kong.
RH’s cash and cash equivalents were $100.4 million as of Jan 30, 2021 compared with $47.7 million on Feb 1, 2020. The company ended fiscal 2020 with merchandise inventories worth $544.2 million compared with $438.7 million as of Feb 1, 2020.
Net cash provided by operating activities was $500.8 million for fiscal 2020 compared with $339.2 million in the comparable year-ago period. Free cash flow totaled $405 million at fiscal 2020-end, up 23% from $330 million at fiscal 2019.
Fiscal 2020 Highlights
Adjusted earnings came in at $17.83 per share, increasing 53% from fiscal 2019. Net revenues of $2.85 billion grew 8% from $2.64 billion a year ago. Gross and operating margin expanded 540 bps and 750 bps year over year, respectively.
Fiscal 2021 View
Solid housing market momentum, a record stock market, low interest rates, the expectation of a rebound in the economy and jobs market, combined with the recent further acceleration in RH demand trends are expected to contribute to the company’s results.
RH expects first- quarter fiscal 2021 revenues to grow by at least 50% and adjusted operating margin in the 20% range.
Given the solid momentum in the business, RH expects revenue growth in the range of 15% to 20% with adjusted operating margin expanding 100 to 200 bps and ROIC in excess of 60% for fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 47.17% due to these changes.
VGM Scores
At this time, Restoration Hardware has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Restoration Hardware has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Restoration Hardware (RH) Up 23.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Restoration Hardware (RH - Free Report) . Shares have added about 23.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Restoration Hardware due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
RH's Q4 Earnings & Revenues Beat Expectations
RH ended fiscal 2020 on a solid note. This leading luxury retailer in the home furnishing space reported better-than-expected fourth-quarter fiscal 2020 results (ended Jan 30, 2021) on the back of strong demand and solid margins. Both adjusted earnings and revenues handily beat the Zacks Consensus Estimate and grew on a year-over-year basis.
RH witnessed a 36% increase in core demand for the fiscal fourth quarter. For February and the first two weeks of March, the same was up 73% and 96%, respectively, year over year. the company’s total demand was up 29% in the quarter.
Earnings, Revenue & Margin Discussion
Adjusted earnings of $5.07 per share surpassed the consensus mark of $4.78 by 6.1% and increased 36% from the year-ago level.
Adjusted net revenues of $812.6 million grew 22% year over year. The figure also surpassed the consensus mark of $797 million by 2%.
Adjusted gross margin expanded 480 basis points (bps) to 47.4% for the quarter owing to investments to elevate the RH brand. Adjusted SG&A margin contracted 140 bps.
Adjusted operating margin increased a notable 630 bps year over year to a record 23.7%. Adjusted EBITDA also surged 54.8% year over year to $224.4 million for the quarter. Adjusted EBITDA margin improved 580 bps year over year to 27.6%.
Store Update & Balance Sheet
As of Jan 30, 2021, it operated 68 RH Galleries and 38 RH outlet stores in 31 states, the District of Columbia and Canada, as well as 14 Waterworks showrooms throughout the United States and U.K., and had sourcing operations in Shanghai as well as Hong Kong.
RH’s cash and cash equivalents were $100.4 million as of Jan 30, 2021 compared with $47.7 million on Feb 1, 2020. The company ended fiscal 2020 with merchandise inventories worth $544.2 million compared with $438.7 million as of Feb 1, 2020.
Net cash provided by operating activities was $500.8 million for fiscal 2020 compared with $339.2 million in the comparable year-ago period. Free cash flow totaled $405 million at fiscal 2020-end, up 23% from $330 million at fiscal 2019.
Fiscal 2020 Highlights
Adjusted earnings came in at $17.83 per share, increasing 53% from fiscal 2019. Net revenues of $2.85 billion grew 8% from $2.64 billion a year ago. Gross and operating margin expanded 540 bps and 750 bps year over year, respectively.
Fiscal 2021 View
Solid housing market momentum, a record stock market, low interest rates, the expectation of a rebound in the economy and jobs market, combined with the recent further acceleration in RH demand trends are expected to contribute to the company’s results.
RH expects first- quarter fiscal 2021 revenues to grow by at least 50% and adjusted operating margin in the 20% range.
Given the solid momentum in the business, RH expects revenue growth in the range of 15% to 20% with adjusted operating margin expanding 100 to 200 bps and ROIC in excess of 60% for fiscal 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 47.17% due to these changes.
VGM Scores
At this time, Restoration Hardware has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Restoration Hardware has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.