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RH (RH - Free Report) posted better-than-expected results for first-quarter fiscal 2023 (ended Apr 29, 2023). The top and bottom lines surpassed the Zacks Consensus Estimate. The company’s earnings beat estimates in 21 of the last 22 quarters. Despite a continued decline in the overall macro environment, especially for home-related businesses, revenues and adjusted operating margin exceeded its guided range.
RH’s shares lost 3.39% in the after-hours trading session on May 25.
However, on a year-over-year basis, earnings and revenues declined. RH expects continued softness in the luxury housing market and the broader economy in fiscal 2023 and next year, mainly due to 20-year high mortgage rates, Fed’s back-to-back interest rate hikes to curb inflation and the recent regional banking crisis.
Earnings, Revenues & Margin Discussion
Adjusted earnings of $2.21 per share topped the consensus mark of $2.08 by 6.3% but decreased 66.7% from the year-ago figure of $6.63.
Adjusted net revenues of $739 million surpassed the consensus mark of $725 million by 1.9% but fell 22.8% on a year-over-year basis.
Adjusted gross margin contracted 510 basis points (bps) to 47% in the reported quarter. Adjusted selling, general & administrative expenses rose 290 bps to 33.6% of total revenues. Adjusted operating margin contracted 980 bps year over year to 14.9%.
Adjusted EBITDA declined 45.6% year over year to $146.7 million for the quarter. Adjusted EBITDA margin also contracted 840 bps year over year to 19.8%.
Store Update & Balance Sheet
As of Apr 29, there were 67 RH Galleries, 39 outlet stores, one Guesthouse and 14 Waterworks showrooms operational.
In the fiscal first-quarter end, RH’s cash and cash equivalents were $1.52 billion compared with $1.51 billion in the fiscal 2022 end (ended Jan 28, 2023). The company ended the fiscal first quarter with merchandise inventories worth $799.3 million compared with $801.8 million at the end of fiscal 2022.
RH ended fiscal first quarter with net debt of $994.7 million and net debt to adjusted EBITDA of 1.2.
Net cash provided by operating activities was $86.7 million in the first three months of fiscal 2023 compared with $135.9 million in the comparable year-ago period. Free cash flow totaled $52.5 million in the first quarter of fiscal 2023 versus $106.6 million a year ago.
Adjusted capital expenditures for the reported period were $43.8 million compared with $41.5 million a year ago.
Guidance
For the second quarter of fiscal 2023, RH expects revenues of $765-$775 million and an adjusted operating margin in the range of 14-14.5%. In second-quarter fiscal 2022, the company reported revenues of $992 million and an adjusted operating margin of 24.7%.
For fiscal 2023, based on the current market conditions, RH now expects net revenues between $3 billion and $3.1 billion versus $2.9-$3.1 billion projected earlier. The guided range is down from the $3.6 billion reported in fiscal 2022.
RH lowered an adjusted operating margin expectation to 14.5-15.5% from 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.
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RH Q1 Earnings & Revenues Beat Estimates, Q2 View Tepid
RH (RH - Free Report) posted better-than-expected results for first-quarter fiscal 2023 (ended Apr 29, 2023). The top and bottom lines surpassed the Zacks Consensus Estimate. The company’s earnings beat estimates in 21 of the last 22 quarters. Despite a continued decline in the overall macro environment, especially for home-related businesses, revenues and adjusted operating margin exceeded its guided range.
RH’s shares lost 3.39% in the after-hours trading session on May 25.
However, on a year-over-year basis, earnings and revenues declined. RH expects continued softness in the luxury housing market and the broader economy in fiscal 2023 and next year, mainly due to 20-year high mortgage rates, Fed’s back-to-back interest rate hikes to curb inflation and the recent regional banking crisis.
Earnings, Revenues & Margin Discussion
Adjusted earnings of $2.21 per share topped the consensus mark of $2.08 by 6.3% but decreased 66.7% from the year-ago figure of $6.63.
RH Price, Consensus and EPS Surprise
RH price-consensus-eps-surprise-chart | RH Quote
Adjusted net revenues of $739 million surpassed the consensus mark of $725 million by 1.9% but fell 22.8% on a year-over-year basis.
Adjusted gross margin contracted 510 basis points (bps) to 47% in the reported quarter. Adjusted selling, general & administrative expenses rose 290 bps to 33.6% of total revenues. Adjusted operating margin contracted 980 bps year over year to 14.9%.
Adjusted EBITDA declined 45.6% year over year to $146.7 million for the quarter. Adjusted EBITDA margin also contracted 840 bps year over year to 19.8%.
Store Update & Balance Sheet
As of Apr 29, there were 67 RH Galleries, 39 outlet stores, one Guesthouse and 14 Waterworks showrooms operational.
In the fiscal first-quarter end, RH’s cash and cash equivalents were $1.52 billion compared with $1.51 billion in the fiscal 2022 end (ended Jan 28, 2023). The company ended the fiscal first quarter with merchandise inventories worth $799.3 million compared with $801.8 million at the end of fiscal 2022.
RH ended fiscal first quarter with net debt of $994.7 million and net debt to adjusted EBITDA of 1.2.
Net cash provided by operating activities was $86.7 million in the first three months of fiscal 2023 compared with $135.9 million in the comparable year-ago period. Free cash flow totaled $52.5 million in the first quarter of fiscal 2023 versus $106.6 million a year ago.
Adjusted capital expenditures for the reported period were $43.8 million compared with $41.5 million a year ago.
Guidance
For the second quarter of fiscal 2023, RH expects revenues of $765-$775 million and an adjusted operating margin in the range of 14-14.5%. In second-quarter fiscal 2022, the company reported revenues of $992 million and an adjusted operating margin of 24.7%.
For fiscal 2023, based on the current market conditions, RH now expects net revenues between $3 billion and $3.1 billion versus $2.9-$3.1 billion projected earlier. The guided range is down from the $3.6 billion reported in fiscal 2022.
RH lowered an adjusted operating margin expectation to 14.5-15.5% from 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
RH currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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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.
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