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RH Q4 Earnings & Revenues Miss Estimates, Down on Tepid View
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RH (RH - Free Report) shares dropped 5.4% in the after-hours trading session on Mar 29 after it reported lower-than-expected results for the fourth quarter of fiscal 2022 (ended Jan 28, 2023). The top and bottom lines missed the Zacks Consensus Estimate. The company’s earnings lagged the consensus mark after beating the same in the last 20 consecutive quarters.
RH expects continued softness in business trends due to weakness in the housing market, which is likely to persist over the next several quarters, the Federal Reserve’s anticipated interest rate hikes, uncertainties related to the recent banking crisis and the cycling of record pandemic-driven sales and backlog reductions.
Earnings, Revenue & Margin Discussion
Adjusted earnings of $2.88 per share lagged the consensus mark of $3.35 by 14% and decreased 49.1% from the year-ago figure of $5.66.
Adjusted net revenues of $772.5 million missed the consensus mark of $777 million by 5% and fell 13% on a year-over-year basis.
The adjusted gross margin contracted 260 basis points (bps) to 47.8% for the quarter. The decline was due to fixed occupancy deleverage.
Adjusted SG&A expenses rose 600 bps to 31.2% of total revenues. The adjusted operating margin contracted 860 bps year over year to 16.6%. Adjusted EBITDA declined 36.1% year over year to $164.9 million for the quarter. The adjusted EBITDA margin also contracted 730 bps year over year to 21.3%.
As of Jan 28, 2023, there were 67 RH Galleries, 39 outlet stores, one Guesthouse and 14 Waterworks showrooms operational.
In the fiscal 2022-end (ended Jan 28, 2023), RH’s cash and cash equivalents were $1,511.7 million compared with $2,177.9 million in the fiscal 2021-end (ended Jan 29, 2022). The company ended fiscal 2022 with merchandise inventories worth $801.8 million compared with $734.3 million at the end of fiscal 2021. RH ended the quarter with total net debt of $1,010.7 million.
Net cash provided by operating activities was $403.7 million in fiscal 2022 compared with $662.1 million in the comparable year-ago period. Adjusted free cash flow totaled $3.7 million (versus $96.8 million a year ago) in the fiscal fourth quarter and $235.3 million in fiscal 2022 (versus $476.7 million in fiscal 2021).
For the trailing 12-month period, total net debt to adjusted EBITDA was 1.1. Capital expenditures for the reported quarter were $64 million (up from $31.6 million a year ago) and in fiscal 2022 were $173.6 million (down $185.4 million in fiscal 2021).
Fiscal 2022 Highlights
Adjusted earnings came in at $20.66 per share, down from $26.12 a year ago. Net revenues were $3,590.5 million, down 4.5% from a year ago. The adjusted operating margin was 22% in the year, down from $25.6% a year ago.
Tepid View
For the first quarter of fiscal 2023, RH expects revenues of $720 to $735 million and an adjusted operating margin in the range of 13-14%.
For fiscal 2023, based on the current market conditions, RH now expects net revenues between $2.9 billion and $3.1 billion, down from the $3.6 billion reported in fiscal 2022.
For the entire year, RH expects an adjusted operating margin within 15-17% (compared with the 22% reported in fiscal 2022). This guidance includes a 150 bps drag due to the ramp-up of global expansion. It also expects that the 53rd week will result in revenues of about $60 million.
Some better-ranked stocks in the Zacks Retail-Wholesale sector are as follows:
Chuy's Holdings, Inc. (CHUY - Free Report) currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of the company have increased 30.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently sports a Zacks Rank #1. ARCO has a long-term earnings growth rate of 7.8%. Shares of the company have declined 6.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s levels.
Bloomin' Brands, Inc. (BLMN - Free Report) currently sports a Zacks Rank #1. BLMN has a long-term earnings growth rate of 12.3%. The stock has risen 15.2% in the past year.
The Zacks Consensus Estimate for Bloomin' Brands 2023 sales and EPS suggests growth of 7.1% and 16.3%, respectively, from the year-ago period’s reported levels.
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RH Q4 Earnings & Revenues Miss Estimates, Down on Tepid View
RH (RH - Free Report) shares dropped 5.4% in the after-hours trading session on Mar 29 after it reported lower-than-expected results for the fourth quarter of fiscal 2022 (ended Jan 28, 2023). The top and bottom lines missed the Zacks Consensus Estimate. The company’s earnings lagged the consensus mark after beating the same in the last 20 consecutive quarters.
RH expects continued softness in business trends due to weakness in the housing market, which is likely to persist over the next several quarters, the Federal Reserve’s anticipated interest rate hikes, uncertainties related to the recent banking crisis and the cycling of record pandemic-driven sales and backlog reductions.
Earnings, Revenue & Margin Discussion
Adjusted earnings of $2.88 per share lagged the consensus mark of $3.35 by 14% and decreased 49.1% from the year-ago figure of $5.66.
Adjusted net revenues of $772.5 million missed the consensus mark of $777 million by 5% and fell 13% on a year-over-year basis.
The adjusted gross margin contracted 260 basis points (bps) to 47.8% for the quarter. The decline was due to fixed occupancy deleverage.
Adjusted SG&A expenses rose 600 bps to 31.2% of total revenues. The adjusted operating margin contracted 860 bps year over year to 16.6%. Adjusted EBITDA declined 36.1% year over year to $164.9 million for the quarter. The adjusted EBITDA margin also contracted 730 bps year over year to 21.3%.
RH Price, Consensus and EPS Surprise
RH price-consensus-eps-surprise-chart | RH Quote
Store Update & Balance Sheet
As of Jan 28, 2023, there were 67 RH Galleries, 39 outlet stores, one Guesthouse and 14 Waterworks showrooms operational.
In the fiscal 2022-end (ended Jan 28, 2023), RH’s cash and cash equivalents were $1,511.7 million compared with $2,177.9 million in the fiscal 2021-end (ended Jan 29, 2022). The company ended fiscal 2022 with merchandise inventories worth $801.8 million compared with $734.3 million at the end of fiscal 2021. RH ended the quarter with total net debt of $1,010.7 million.
Net cash provided by operating activities was $403.7 million in fiscal 2022 compared with $662.1 million in the comparable year-ago period. Adjusted free cash flow totaled $3.7 million (versus $96.8 million a year ago) in the fiscal fourth quarter and $235.3 million in fiscal 2022 (versus $476.7 million in fiscal 2021).
For the trailing 12-month period, total net debt to adjusted EBITDA was 1.1. Capital expenditures for the reported quarter were $64 million (up from $31.6 million a year ago) and in fiscal 2022 were $173.6 million (down $185.4 million in fiscal 2021).
Fiscal 2022 Highlights
Adjusted earnings came in at $20.66 per share, down from $26.12 a year ago. Net revenues were $3,590.5 million, down 4.5% from a year ago. The adjusted operating margin was 22% in the year, down from $25.6% a year ago.
Tepid View
For the first quarter of fiscal 2023, RH expects revenues of $720 to $735 million and an adjusted operating margin in the range of 13-14%.
For fiscal 2023, based on the current market conditions, RH now expects net revenues between $2.9 billion and $3.1 billion, down from the $3.6 billion reported in fiscal 2022.
For the entire year, RH expects an adjusted operating margin within 15-17% (compared with the 22% reported in fiscal 2022). This guidance includes a 150 bps drag due to the ramp-up of global expansion. It also expects that the 53rd week will result in revenues of about $60 million.
Zacks Rank & Key Picks
RH currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail-Wholesale sector are as follows:
Chuy's Holdings, Inc. (CHUY - Free Report) currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of the company have increased 30.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently sports a Zacks Rank #1. ARCO has a long-term earnings growth rate of 7.8%. Shares of the company have declined 6.3% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s levels.
Bloomin' Brands, Inc. (BLMN - Free Report) currently sports a Zacks Rank #1. BLMN has a long-term earnings growth rate of 12.3%. The stock has risen 15.2% in the past year.
The Zacks Consensus Estimate for Bloomin' Brands 2023 sales and EPS suggests growth of 7.1% and 16.3%, respectively, from the year-ago period’s reported levels.