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In the last reported quarter, this leading luxury home furnishings retailer’s earnings and revenues missed the Zacks Consensus Estimate by 14% and 0.6%, respectively. The company beat earnings expectations in three of the last four quarters and missed on one occasion, with the average being 16.8%.
The reported figures, however, decreased 49.1% and 13% from the year-ago level, respectively.
Trend in Estimate Revisions
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share moved downward to $2.08 from $4.04 over the last 60 days. The estimated figure indicates a decrease of 73.3% from $7.78 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $725.3 million, suggesting a 24.2% decline from the year-ago reported figure of $957.3 million.
Factors to Note
RH’s home furnishing business activities have been adversely affected by soft housing trends, thanks to higher mortgage rates. A weakening macroeconomic environment, comprising rising interest rates and softness in luxury housing markets, is expected to have impacted results in the quarter to be reported. Also, supply-chain headwinds are creating short-term and long-term delays. Incremental distribution center-related expenses, as well as higher product and freight costs, are expected to have dented profitability.
RH expects above-mentioned headwinds to persist over the next few quarters. This apart, RH has been witnessing fixed occupancy deleverage over the past several quarters and this is expected to have weighed on first-quarter fiscal 2023 results.
Nonetheless, the company has been working on various strategies to elevate and enhance the RH brand image, which is expected to have impacted the to-be-reported quarter. Also, transformation of the entire business into a digital platform via The World of RH — a portal presenting the company’s products, places, services and spaces — is commendable.
RH has been working on cost-saving initiatives such as redesigning the supply chain, reducing inventory, improving product margins, etc. Also, greater pricing power is expected to have aided gross margins to some extent, while SG&A expenses are likely to have remained under control as the company limited advertising due to supply-chain constraints.
Overall, 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%. In first-quarter fiscal 2023, RH generated revenues of $957 million and an adjusted operating margin of 24.7%.
What the Zacks Model Unveils
Our proven model does not predict an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: RH currently carries a Zacks Rank #5 (Strong Sell).
Builders FirstSource, Inc. (BLDR - Free Report) reported first-quarter 2023 earnings and net sales surpassed the Zacks Consensus Estimate. However, on a year-over-year basis, the results were hampered by declining single-family starts and commodity deflation.
Nonetheless, BLDR continues to witness gains from its transformed business and remains confident about its long-term normalized gross margin percentage of 28% or higher versus its prior projection of 27% or higher. The company believes that it can sustain a double-digit adjusted EBITDA margin this year.
Beacon Roofing Supply, Inc. (BECN - Free Report) reported mixed results for first-quarter 2023 wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, revenues increased but earnings declined.
For the second quarter of 2023, BECN expects net sales to decrease approximately 2% on a year-over-year basis. The gross margin is expected to be in the mid-to-high 25%.
Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for first-quarter fiscal 2023 (ended Apr 30, 2023). Earnings surpassed the Zacks Consensus Estimate but revenues missed the same. However, earnings and revenues declined on a year-over-year basis.
WSM expects fiscal 2023 net revenues to range between a decline of 3% and a growth of 3%. It also expects operating margin to be 14-15%. Further, WSM projects mid-to-high single-digit annual net revenue growth and an operating margin above 15% in the long term (by fiscal 2024).
Image: Bigstock
RH Queued for Q1 Earnings: Key Factors to Take Into Account
RH (RH - Free Report) is scheduled to report first-quarter fiscal 2023 (ended Apr 29, 2023) results on May 25, after market close.
In the last reported quarter, this leading luxury home furnishings retailer’s earnings and revenues missed the Zacks Consensus Estimate by 14% and 0.6%, respectively. The company beat earnings expectations in three of the last four quarters and missed on one occasion, with the average being 16.8%.
The reported figures, however, decreased 49.1% and 13% from the year-ago level, respectively.
Trend in Estimate Revisions
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share moved downward to $2.08 from $4.04 over the last 60 days. The estimated figure indicates a decrease of 73.3% from $7.78 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $725.3 million, suggesting a 24.2% decline from the year-ago reported figure of $957.3 million.
Factors to Note
RH’s home furnishing business activities have been adversely affected by soft housing trends, thanks to higher mortgage rates. A weakening macroeconomic environment, comprising rising interest rates and softness in luxury housing markets, is expected to have impacted results in the quarter to be reported. Also, supply-chain headwinds are creating short-term and long-term delays. Incremental distribution center-related expenses, as well as higher product and freight costs, are expected to have dented profitability.
RH Price and EPS Surprise
RH price-eps-surprise | RH Quote
RH expects above-mentioned headwinds to persist over the next few quarters. This apart, RH has been witnessing fixed occupancy deleverage over the past several quarters and this is expected to have weighed on first-quarter fiscal 2023 results.
Nonetheless, the company has been working on various strategies to elevate and enhance the RH brand image, which is expected to have impacted the to-be-reported quarter. Also, transformation of the entire business into a digital platform via The World of RH — a portal presenting the company’s products, places, services and spaces — is commendable.
RH has been working on cost-saving initiatives such as redesigning the supply chain, reducing inventory, improving product margins, etc. Also, greater pricing power is expected to have aided gross margins to some extent, while SG&A expenses are likely to have remained under control as the company limited advertising due to supply-chain constraints.
Overall, 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%. In first-quarter fiscal 2023, RH generated revenues of $957 million and an adjusted operating margin of 24.7%.
What the Zacks Model Unveils
Our proven model does not predict an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: RH currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Peer Releases
Builders FirstSource, Inc. (BLDR - Free Report) reported first-quarter 2023 earnings and net sales surpassed the Zacks Consensus Estimate. However, on a year-over-year basis, the results were hampered by declining single-family starts and commodity deflation.
Nonetheless, BLDR continues to witness gains from its transformed business and remains confident about its long-term normalized gross margin percentage of 28% or higher versus its prior projection of 27% or higher. The company believes that it can sustain a double-digit adjusted EBITDA margin this year.
Beacon Roofing Supply, Inc. (BECN - Free Report) reported mixed results for first-quarter 2023 wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, revenues increased but earnings declined.
For the second quarter of 2023, BECN expects net sales to decrease approximately 2% on a year-over-year basis. The gross margin is expected to be in the mid-to-high 25%.
Williams-Sonoma Inc. (WSM - Free Report) reported mixed results for first-quarter fiscal 2023 (ended Apr 30, 2023). Earnings surpassed the Zacks Consensus Estimate but revenues missed the same. However, earnings and revenues declined on a year-over-year basis.
WSM expects fiscal 2023 net revenues to range between a decline of 3% and a growth of 3%. It also expects operating margin to be 14-15%. Further, WSM projects mid-to-high single-digit annual net revenue growth and an operating margin above 15% in the long term (by fiscal 2024).
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.