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Restoration Hardware (RH) Up 1.9% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Restoration Hardware (RH - Free Report) . Shares have added about 1.9% 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 its most recent earnings report in order to get a better handle on the important drivers.
RH Q4 Earnings Beat, Revenues Miss Estimates
RH 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.
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 its 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%.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Restoration Hardware has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Restoration Hardware has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Restoration Hardware (RH) Up 1.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Restoration Hardware (RH - Free Report) . Shares have added about 1.9% 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 its most recent earnings report in order to get a better handle on the important drivers.
RH Q4 Earnings Beat, Revenues Miss Estimates
RH 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.
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 its 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%.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Restoration Hardware has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Restoration Hardware has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.