We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Restoration Hardware (RH) Incurs Loss in Q1, Stock Plunges
Read MoreHide Full Article
Shares of Restoration Hardware Holdings, Inc. (RH - Free Report) plunged nearly 19% in after-hour trading session following the company’s announcement of dismal first-quarter fiscal 2016 quarterly numbers and lackluster guidance. The company reported adjusted loss per share of 5 cents. The Zacks Consensus Estimate was of a profit of 5 cents per share. Also, the company slipped to loss from the year-ago quarter earnings of 23 cents per share.
GAAP loss in the reported quarter came in at 33 cents per share. Restoration Hardware had posted earnings of 17 cents per share in the prior-year quarter.
The company’s quarterly result was negatively impacted by energy and foreign currency headwinds and also due to slow down in the luxury consumer market.
Earlier, the company launched two businesses – RH Modern and RH Teen. While the RH Modern division focuses on manufacturing luxury furniture with a modern twist, RH Teen makes superior quality furniture, linens, lightning and decor for teens.
This apart, the company has adopted various initiatives like product category expansion, store transformations and multi-channel platform as well as infrastructure enhancement to drive growth.
Quarter in Detail
Though revenues increased 7.8% to $455.5 million, the figure lagged the Zacks Consensus Estimate of $459 million. This is the third consecutive revenue miss for the company.
Restoration Hardware’s comparable brand revenues, including direct revenues, went up 4% year over year compared with 15% increase last year. The company’s direct revenues dipped 4% to $199.4 million whereas stores revenues jumped 19% to $256.1 million.
Meanwhile, adjusted operating income in the reported quarter declined sharply from the prior-year figure of $18.6 million to $0.7 million. Adjusted operating margin contracted 420 basis points to 0.2%.
Store Update
At the end of the fiscal first quarter, Restoration Hardware operated 69 retail outlets. These included 53 legacy galleries, six large format galleries, four next generation design galleries, one RH Modern Gallery and five Baby & Child galleries. The company also has 19 outlets across the U.S. and Canada.
Balance Sheet
Restoration Hardware, which shares space with Williams-Sonoma Inc. (WSM - Free Report) , ended the quarter with cash and cash equivalents of $237.2 million, merchandise inventories of $763.1 million, and total shareholders’ equity of $879.5 million. The company also had convertible senior notes (net) worth $301.3 million due in 2019 and $223.9 million due in 2020 at the end of the quarter.
Outlook
The company’s fiscal 2016 results will be negatively impacted by short-term operational items that include costs allied with RH Modern production interruptions. The company will also invest to enhance customer experience. However, this will reduce the company’s revenues by nearly $16–$17 million and adjusted earnings per share (EPS) by 90–$1.00 in fiscal 2016.
For fiscal 2016, management projects net revenue growth in the range of 1% to 3%. The company expects adjusted EPS to be between $1.60 and $1.80 per share. Capital expenditures are projected in the range of $180 million to $210 million. The Zacks Consensus Estimate for fiscal 2016 currently stands at $2.65 but is likely to witness a sharp downward revision in the coming days.
For the fiscal second quarter, the company expects net revenue in the range of $505–$520 million compared with $507 million in the prior fiscal. Adjusted EPS is likely to be between 28 cents and 33 cents as against 85 cents in the second quarter of fiscal 2015. The Zacks Consensus Estimate for the fiscal second quarter is currently pegged at 80 cents per share but is likely to witness a sharp downward revision in the days ahead.
Zacks Rank & Stocks to Consider
Restoration Hardware currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the retail sector include Ethan Allen Interiors Inc. and Haverty Furniture Companies Inc. (HVT - Free Report) . Both the stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Restoration Hardware (RH) Incurs Loss in Q1, Stock Plunges
Shares of Restoration Hardware Holdings, Inc. (RH - Free Report) plunged nearly 19% in after-hour trading session following the company’s announcement of dismal first-quarter fiscal 2016 quarterly numbers and lackluster guidance. The company reported adjusted loss per share of 5 cents. The Zacks Consensus Estimate was of a profit of 5 cents per share. Also, the company slipped to loss from the year-ago quarter earnings of 23 cents per share.
GAAP loss in the reported quarter came in at 33 cents per share. Restoration Hardware had posted earnings of 17 cents per share in the prior-year quarter.
The company’s quarterly result was negatively impacted by energy and foreign currency headwinds and also due to slow down in the luxury consumer market.
Earlier, the company launched two businesses – RH Modern and RH Teen. While the RH Modern division focuses on manufacturing luxury furniture with a modern twist, RH Teen makes superior quality furniture, linens, lightning and decor for teens.
This apart, the company has adopted various initiatives like product category expansion, store transformations and multi-channel platform as well as infrastructure enhancement to drive growth.
Quarter in Detail
Though revenues increased 7.8% to $455.5 million, the figure lagged the Zacks Consensus Estimate of $459 million. This is the third consecutive revenue miss for the company.
Restoration Hardware’s comparable brand revenues, including direct revenues, went up 4% year over year compared with 15% increase last year. The company’s direct revenues dipped 4% to $199.4 million whereas stores revenues jumped 19% to $256.1 million.
Meanwhile, adjusted operating income in the reported quarter declined sharply from the prior-year figure of $18.6 million to $0.7 million. Adjusted operating margin contracted 420 basis points to 0.2%.
Store Update
At the end of the fiscal first quarter, Restoration Hardware operated 69 retail outlets. These included 53 legacy galleries, six large format galleries, four next generation design galleries, one RH Modern Gallery and five Baby & Child galleries. The company also has 19 outlets across the U.S. and Canada.
Balance Sheet
Restoration Hardware, which shares space with Williams-Sonoma Inc. (WSM - Free Report) , ended the quarter with cash and cash equivalents of $237.2 million, merchandise inventories of $763.1 million, and total shareholders’ equity of $879.5 million. The company also had convertible senior notes (net) worth $301.3 million due in 2019 and $223.9 million due in 2020 at the end of the quarter.
Outlook
The company’s fiscal 2016 results will be negatively impacted by short-term operational items that include costs allied with RH Modern production interruptions. The company will also invest to enhance customer experience. However, this will reduce the company’s revenues by nearly $16–$17 million and adjusted earnings per share (EPS) by 90–$1.00 in fiscal 2016.
For fiscal 2016, management projects net revenue growth in the range of 1% to 3%. The company expects adjusted EPS to be between $1.60 and $1.80 per share. Capital expenditures are projected in the range of $180 million to $210 million. The Zacks Consensus Estimate for fiscal 2016 currently stands at $2.65 but is likely to witness a sharp downward revision in the coming days.
For the fiscal second quarter, the company expects net revenue in the range of $505–$520 million compared with $507 million in the prior fiscal. Adjusted EPS is likely to be between 28 cents and 33 cents as against 85 cents in the second quarter of fiscal 2015. The Zacks Consensus Estimate for the fiscal second quarter is currently pegged at 80 cents per share but is likely to witness a sharp downward revision in the days ahead.
Zacks Rank & Stocks to Consider
Restoration Hardware currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the retail sector include Ethan Allen Interiors Inc. and Haverty Furniture Companies Inc. (HVT - Free Report) . Both the stocks hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>