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RH Q4 Earnings Beat, Revenues Miss Estimates, Shares Tank

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RH (RH - Free Report) reported mixed results for fourth-quarter fiscal 2021 (ended Jan 29, 2022), with adjusted earnings handily beating the Zacks Consensus Estimate but net revenues missing the same. Yet, both the metrics grew on a year-over-year basis.

It is to be noted that shares of this leading luxury retailer in the home furnishing space lost 4.1% in the after-hours trading session on Mar 29, post the earnings release.

Management stated that the company’s financial performance reflects those of the luxury sector, as adjusted operating margin reached 25.6% in 2021, up 1,130 basis points (bps) from 2019, reflecting the strongest two-year growth in the sector.

For fiscal 2022, RH remains optimistic about various actions taken by the company during the period. These include the opening of RH San Francisco, the launch of RH Contemporary, the elevation and expansion of RH Interiors and RH Modern as well as unveiling of RH’s first RH Guesthouse in New York.

Earnings, Revenue & Margin Discussion

Adjusted earnings of $5.66 per share surpassed the consensus mark of $5.64 by 0.4% and increased 12% from the year-ago figure of $5.07.

Adjusted net revenues of $901.5 million improved 10.9% year over year but missed the consensus mark of $929 million by 2.9%.

Adjusted gross margin expanded 300 bps to 50.4% for the quarter. Yet, adjusted selling, general & administrative expenses grew 140 bps to 25.2%.

Nonetheless, adjusted operating margin expanded a notable 150 bps year over year to 25.2%. Adjusted EBITDA spiked 15% year over year to $258 million for the quarter. Adjusted EBITDA margin also expanded 100 bps year over year to 28.6%.

RH Price, Consensus and EPS Surprise

RH Price, Consensus and EPS Surprise

RH price-consensus-eps-surprise-chart | RH Quote

Fiscal 2021 Highlights

Adjusted net revenues grew 32% from fiscal 2020 to $3.76 billion. This marks one of the highest two-year growth rates in the industry, excluding money-losing online businesses. Adjusted EPS increased 46% from a year ago to $26.12.

Store Update & Balance Sheet

As of Jan 29, RH operated 67 RH Galleries and 38 RH outlet stores as well as 14 Waterworks showrooms.

RH’s cash and cash equivalents were $2,177.9 million at fiscal 2021-end compared with $100.4 million on Jan 30, 2021. The company ended the fiscal year with merchandise inventories worth $734.3 million compared with $544.2 million at fiscal 2020-end.

Net cash provided by operating activities was $662.1 million for fiscal 2021 compared with $500.8 million in the comparable year-ago period.

Free cash flow totaled $96.8 million at fiscal fourth quarter-end versus $114.1 million a year ago. For fiscal 2021, the metric increased to $476.7 million from the year-ago level of $389.6 million.

Fiscal 2022 View

RH expects net revenue growth in the range of 5-7%, indicating a decline from 32% in fiscal 2021. RH further expects adjusted operating margin within 25-26%. The metric was 25.6% in fiscal 2021.

For fiscal first-quarter 2022, net revenue growth is expected in the range of 7-8%, suggesting a sharp fall from 78% in the prior-year period. Adjusted operating margin is projected in the range of 23-23.5%, implying growth from 22.6% a year ago.

Zacks Rank

RH currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Williams-Sonoma Inc. (WSM - Free Report) — which currently carries a Zacks Rank #1 — reported impressive earnings for fourth-quarter fiscal 2021 (ended Jan 30, 2022). The company’s earnings beat the Zacks Consensus Estimate and improved on a year-over-year basis, courtesy of strength across all brands along with accelerated e-commerce growth.

Williams-Sonoma remains optimistic about business strength, continued success of new initiatives and competitive advantages that are rooted in key differentiators like in-house design, digital-first channel strategy, and values.

Builders FirstSource (BLDR - Free Report) — which currently carries a Zacks Rank #1 — ended 2021 on a solid note. The company reported solid results for fourth-quarter 2021, wherein earnings and net sales surpassed the Zacks Consensus Estimate as well as increased significantly year over year.

Builders FirstSource ‘s results were driven by an increase in net sales and gross margin amid persistent raw material supply woes.

Beacon Roofing Supply, Inc. (BECN - Free Report) — a Zacks Rank #3 stock — reported solid results for calendar fourth-quarter 2021 or the transition period (Oct 1 to Dec 31, 2021).

Beacon Roofing’s fourth-quarter top and bottom lines surpassed their respective Zacks Consensus Estimate as well as improved significantly on a year-over-year basis. The solid results were mainly backed by strong net sales, gross margin expansion and operational improvement.