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Forget Restoration Hardware, Buy These 3 Home Furnishing Stocks
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Shares of Restoration Hardware Holdings, Inc. (RH - Free Report) plummeted around 19% during afterhours trading on Jun 8, after it reported dismal first quarter fiscal 2016 results and lowered its full-year sales and earnings outlook.
Dismal Q1 Results & Lowered Outlook
The luxury home furnishing company reported first quarter 2016 adjusted loss per share of 5 cents, falling short of the Zacks Consensus Estimate of earnings of 5 cents by a massive 200%. The company had reported earnings per share of 23 cents in the year-ago quarter.
Even its top line results were bleak, as revenues of $455.5 million missed the consensus mark of $459 million by 0.75%. Comparable brand revenue increased 4% during the quarter, again falling short of 15% increase in the prior year quarter.
To top it all, the company lowered its outlook for fiscal 2016.
What Went Wrong with Restoration Hardware?
The disappointing first quarter 2016 results are largely due to short-term operational problems but nonetheless have resulted in the company losing over 53% in share price year-to-date.
Restoration Hardware launched a new line of modern furniture last fall which is undergoing production delays resulting in increased cost and lower revenues and profits. The company’s new paid membership program, which marks a shift from the discount offering promotional model, is also hurting revenues. In addition, market headwinds such as volatility in the energy market, unfavorable currency translations and an overall slowdown in the luxury consumer market are also hurting the company’s revenues and profits. These issues are unlikely to get sorted any time soon. In fact, management does not expect any improvement before the fourth quarter of 2016 or early 2017.
So What Now?
There is no point in dwelling on what’s not right at the moment, when there are other stocks in the home furnishings space that are gaining momentum from an improving housing construction market. The increase in construction activity not only benefits homebuilders but also spurs demand for homebuilding materials, home decoration products and other related businesses.
3 Home Furnishings Stocks for Your Portfolio
With the overall construction sector going from strength to strength, it makes sense to pick stocks from the home furnishings space.
Ethan Allen Interiors Inc.
Ethan Allen operates as an interior design company that manufactures and retails home furnishing products.
Ethan Allen has a Zacks Rank #2 (Buy) and a VGM Score of B. The company’s expected earnings growth is 33.3% for the current year. Its earnings estimate for the current year has risen 2% over the last 60 days.
The company has surpassed the Zacks Consensus Estimate for both earnings per share and revenues for the past two consecutive quarters. The stock’s price is up 26.6% year-to-date.
Haverty Furniture is a home furnishing retailer offering products in middle to upper-middle price ranges.
Haverty Furniture has a Zacks Rank #2 and a VGM Score of A. The company’s expected earnings growth is 0.82% for the current year. Its earnings estimate for the current year has risen 2.5% over the last 60 days.
Fortune Brands Home & Security, Inc.
Headquartered in Deerfield, IL, Fortune Brands Home & Security is a manufacturer of home and security products.
Fortune Brands Home & Security also carries a Zacks Rank #2. The company’s expected earnings growth is 24.15% for the current year. Its earnings estimate for the current year has risen 4.5% over the last 60 days.
Conclusion
With the rise in demand for homes in 2016, home furnishing companies such as the ones discussed above are expected to witness strong demand for their products. Despite the obvious headwinds, there is a strong possibility that these companies will continue to perform well in the near term.
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Forget Restoration Hardware, Buy These 3 Home Furnishing Stocks
Shares of Restoration Hardware Holdings, Inc. (RH - Free Report) plummeted around 19% during afterhours trading on Jun 8, after it reported dismal first quarter fiscal 2016 results and lowered its full-year sales and earnings outlook.
Dismal Q1 Results & Lowered Outlook
The luxury home furnishing company reported first quarter 2016 adjusted loss per share of 5 cents, falling short of the Zacks Consensus Estimate of earnings of 5 cents by a massive 200%. The company had reported earnings per share of 23 cents in the year-ago quarter.
Even its top line results were bleak, as revenues of $455.5 million missed the consensus mark of $459 million by 0.75%. Comparable brand revenue increased 4% during the quarter, again falling short of 15% increase in the prior year quarter.
To top it all, the company lowered its outlook for fiscal 2016.
What Went Wrong with Restoration Hardware?
The disappointing first quarter 2016 results are largely due to short-term operational problems but nonetheless have resulted in the company losing over 53% in share price year-to-date.
Restoration Hardware launched a new line of modern furniture last fall which is undergoing production delays resulting in increased cost and lower revenues and profits. The company’s new paid membership program, which marks a shift from the discount offering promotional model, is also hurting revenues. In addition, market headwinds such as volatility in the energy market, unfavorable currency translations and an overall slowdown in the luxury consumer market are also hurting the company’s revenues and profits. These issues are unlikely to get sorted any time soon. In fact, management does not expect any improvement before the fourth quarter of 2016 or early 2017.
So What Now?
There is no point in dwelling on what’s not right at the moment, when there are other stocks in the home furnishings space that are gaining momentum from an improving housing construction market. The increase in construction activity not only benefits homebuilders but also spurs demand for homebuilding materials, home decoration products and other related businesses.
3 Home Furnishings Stocks for Your Portfolio
With the overall construction sector going from strength to strength, it makes sense to pick stocks from the home furnishings space.
Ethan Allen Interiors Inc.
Ethan Allen operates as an interior design company that manufactures and retails home furnishing products.
Ethan Allen has a Zacks Rank #2 (Buy) and a VGM Score of B. The company’s expected earnings growth is 33.3% for the current year. Its earnings estimate for the current year has risen 2% over the last 60 days.
The company has surpassed the Zacks Consensus Estimate for both earnings per share and revenues for the past two consecutive quarters. The stock’s price is up 26.6% year-to-date.
Haverty Furniture Companies Inc. (HVT - Free Report)
Haverty Furniture is a home furnishing retailer offering products in middle to upper-middle price ranges.
Haverty Furniture has a Zacks Rank #2 and a VGM Score of A. The company’s expected earnings growth is 0.82% for the current year. Its earnings estimate for the current year has risen 2.5% over the last 60 days.
Fortune Brands Home & Security, Inc.
Headquartered in Deerfield, IL, Fortune Brands Home & Security is a manufacturer of home and security products.
Fortune Brands Home & Security also carries a Zacks Rank #2. The company’s expected earnings growth is 24.15% for the current year. Its earnings estimate for the current year has risen 4.5% over the last 60 days.
Conclusion
With the rise in demand for homes in 2016, home furnishing companies such as the ones discussed above are expected to witness strong demand for their products. Despite the obvious headwinds, there is a strong possibility that these companies will continue to perform well in the near term.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>