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Restoration Hardware (RH) Stock Surges 15% on Promising Guidance
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Shares of Luxury home furnishing giant RH (RH - Free Report) , formerly known as Restoration Hardware, continue to soar Wednesday, one day after the company announced a fourth quarter 2016 earnings beat and strong 2017 guidance.
RH stock is up 15.02% to $43.71 per share in early afternoon trading Wednesday. RH is a Zacks Rank #3 (HOLD). The company has a market cap of $1.76 billion. The company’s stock skyrocketed 16% in after-hours trading Tuesday.
The company posted earnings of $0.68 per share, beating the Zacks Consensus Estimate of $0.65 per share. RH posted revenues of $586.7 million, slightly below the Zacks Consensus Estimate of $589 million. The decline in revenue marked a 9.3% decrease year-over-year.
In July 2015, RH stock clocked in at its all-time high of $104.13 per share. Since then, the California-based luxury brand’s stock plummeted nearly 62%. RH stock neared its all-time low of $25.32 per share in early February 2017. But the company has made a drastic turnaround over the last two months.
RH management stated that fiscal 2016 results were hurt by a ton of strategic investments that the company expects will begin to pay off in 2017. RH expects revenues in the range of $530 to $545 million for the first quarter of 2017, which would mark an increase of 16% to 20% year-over-year.
The luxury home décor company called 2016 a year of “transformation and transition.” Much of the 2017 positivity comes from a series of new RH initiatives and changes to some major operating practices.
Big Changes
“Execution, architecture and cash” is the new RH slogan. RH introduced or heavily expanded four new businesses in 2016. RH Modern, the company’s new modern line of furniture and home décor, features a slew of famous designers. Gary Friedman, RH Chairman and CEO, thinks RH Modern has the potential to quickly become a billion dollar brand.
In April 2016, RH announced it partnered with luxury bath and kitchen brand Waterworks. When the company added the new line, RH became the “only luxury brand addressing every room of the home,” Friedman said in a statement.
The luxury home company also pushed heavily into the hospitality space. RH began to introduce its RH Hospitality brand in 2015. The company now attracts customers to its swanky restaurants and hotels in big cities such as Chicago and New York. RH also made a move to boost sales by adding a new youth line, RH Teen. The new offering puts RH in the position to compete directly against rival Pottery Barn, owned by Williams-Sonoma (WSM - Free Report) , and its PBTeen.
RH also made the shift from a promotional model to a new membership-based one. The change marked a major move for the luxury company and its business model. RH management predicts that the change will help drive higher profit margins.
The new membership model is simple and offers customers relatively large savings opportunities. The $100 annual fee provides RH members 25% savings on “all full-priced merchandise” and an additional 20% on sale items. These big savings deals can amount to hundreds or thousands of dollars. Members also gain access to complimentary interior design services.
RH plans to develop a brand-new back-end operating platform. The company also stated its hopes to update its supply chain by reducing the number of warehouse facilities RH uses.
As of the fourth quarter 2016, RH operated 85 retail galleries and outlets throughout the U.S. and Canada. The company plans to open only 3 to 5 new stores a year going forward to lower risk. RH projected its net 2017 revenues to be between $2.3 billion to $2.4 billion, which would mark a growth rate of 8% to 12%.
"They're going to have a good year in 2017," Jim Cramer said recently. RH currently projects big things this year, and the company seems focused on making this happen through a superior customer service experience, sparked from the very top.
Friedman, RH’s fiery CEO, tried to inspire his employees with a heated mostly-caps 2016 memo about how RH customers should be treated after the company’s stock fell off a cliff in 2015. "We need a MASSIVE CHANGE IN OUR CULTURE AND ATTITUDE RIGHT NOW," Friedman wrote in the memo.
"THE GOAL IS DELIGHT… YOU WILL NEVER GET IN TROUBLE FOR MAKING A DECISION TO DELIGHT OUR CUSTOMERS… YOU WILL, HOWEVER, LOSE YOUR JOB IF YOU DON'T."
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
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Restoration Hardware (RH) Stock Surges 15% on Promising Guidance
Shares of Luxury home furnishing giant RH (RH - Free Report) , formerly known as Restoration Hardware, continue to soar Wednesday, one day after the company announced a fourth quarter 2016 earnings beat and strong 2017 guidance.
RH stock is up 15.02% to $43.71 per share in early afternoon trading Wednesday. RH is a Zacks Rank #3 (HOLD). The company has a market cap of $1.76 billion. The company’s stock skyrocketed 16% in after-hours trading Tuesday.
The company posted earnings of $0.68 per share, beating the Zacks Consensus Estimate of $0.65 per share. RH posted revenues of $586.7 million, slightly below the Zacks Consensus Estimate of $589 million. The decline in revenue marked a 9.3% decrease year-over-year.
In July 2015, RH stock clocked in at its all-time high of $104.13 per share. Since then, the California-based luxury brand’s stock plummeted nearly 62%. RH stock neared its all-time low of $25.32 per share in early February 2017. But the company has made a drastic turnaround over the last two months.
RH management stated that fiscal 2016 results were hurt by a ton of strategic investments that the company expects will begin to pay off in 2017. RH expects revenues in the range of $530 to $545 million for the first quarter of 2017, which would mark an increase of 16% to 20% year-over-year.
The luxury home décor company called 2016 a year of “transformation and transition.” Much of the 2017 positivity comes from a series of new RH initiatives and changes to some major operating practices.
Big Changes
“Execution, architecture and cash” is the new RH slogan. RH introduced or heavily expanded four new businesses in 2016. RH Modern, the company’s new modern line of furniture and home décor, features a slew of famous designers. Gary Friedman, RH Chairman and CEO, thinks RH Modern has the potential to quickly become a billion dollar brand.
In April 2016, RH announced it partnered with luxury bath and kitchen brand Waterworks. When the company added the new line, RH became the “only luxury brand addressing every room of the home,” Friedman said in a statement.
The luxury home company also pushed heavily into the hospitality space. RH began to introduce its RH Hospitality brand in 2015. The company now attracts customers to its swanky restaurants and hotels in big cities such as Chicago and New York. RH also made a move to boost sales by adding a new youth line, RH Teen. The new offering puts RH in the position to compete directly against rival Pottery Barn, owned by Williams-Sonoma (WSM - Free Report) , and its PBTeen.
RH also made the shift from a promotional model to a new membership-based one. The change marked a major move for the luxury company and its business model. RH management predicts that the change will help drive higher profit margins.
The new membership model is simple and offers customers relatively large savings opportunities. The $100 annual fee provides RH members 25% savings on “all full-priced merchandise” and an additional 20% on sale items. These big savings deals can amount to hundreds or thousands of dollars. Members also gain access to complimentary interior design services.
RH plans to develop a brand-new back-end operating platform. The company also stated its hopes to update its supply chain by reducing the number of warehouse facilities RH uses.
As of the fourth quarter 2016, RH operated 85 retail galleries and outlets throughout the U.S. and Canada. The company plans to open only 3 to 5 new stores a year going forward to lower risk. RH projected its net 2017 revenues to be between $2.3 billion to $2.4 billion, which would mark a growth rate of 8% to 12%.
"They're going to have a good year in 2017," Jim Cramer said recently. RH currently projects big things this year, and the company seems focused on making this happen through a superior customer service experience, sparked from the very top.
Friedman, RH’s fiery CEO, tried to inspire his employees with a heated mostly-caps 2016 memo about how RH customers should be treated after the company’s stock fell off a cliff in 2015. "We need a MASSIVE CHANGE IN OUR CULTURE AND ATTITUDE RIGHT NOW," Friedman wrote in the memo.
"THE GOAL IS DELIGHT… YOU WILL NEVER GET IN TROUBLE FOR MAKING A DECISION TO DELIGHT OUR CUSTOMERS… YOU WILL, HOWEVER, LOSE YOUR JOB IF YOU DON'T."
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>