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RH Q4 Earnings & Revenues Miss Estimates, FY24 View Solid
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RH (RH - Free Report) shares rose 8.5% in the after-hours trading session on Mar 27, despite posting tepid results for fourth-quarter fiscal 2023 (ended Feb 3, 2024).
The top and bottom lines missed the Zacks Consensus Estimate and declined on a year-over-year basis. Nonetheless, its strong fiscal 2024 guidance for revenues and margins is encouraging investors.
While RH expects business conditions to remain challenging until interest rates ease and the housing market begins to rebound, it expects demand trends to accelerate throughout fiscal 2024.
Earnings, Revenue & Margin Discussion
Adjusted earnings of 72 cents per share lagged the consensus mark of $1.71 by 57.9% and decreased from the year-ago figure of $2.88.
Adjusted net revenues of $738 million missed the consensus mark of $777 million by 5% and fell 4.4% on a year-over-year basis. Revenues declined $40 million due to the severe weather in January and shipping delays related to the ongoing conflict in the Red Sea.
Adjusted gross margin contracted 430 basis points (bps) to 43.5% in the reported quarter. Adjusted selling, general & administrative expenses decreased 320 bps to 34.4% of total revenues.
Adjusted operating margin contracted 750 bps year over year to 9.1%. Adjusted EBITDA declined 31.6% year over year to $112.8 million for the quarter. Adjusted EBITDA margin also contracted 600 bps year over year to 15.3%. Deleverage from lower revenues, increased markdowns to support the product transformation and investments in international expansion ailed the bottom line.
Fiscal 2023 (Ended Feb 3, 2024) Highlights
Adjusted earnings came in at $6.87 per share, significantly down from $20.06 a year ago. Net revenues were $3.03 billion, down 15.6% from a year ago.
Adjusted gross margin contracted 490 bps to 45.9% in the year. The adjusted operating margin was 13% in the year, down 900 bps from 22% a year ago. Adjusted EBITDA margin contracted 770 bps year over year to 18.2%.
Store Update & Balance Sheet
In fiscal 2023-end, RH’s Cash, cash equivalents and restricted cash were $123.7 million compared with $1.51 billion at the end of fiscal 2022 (ended Jan 28, 2023). The company ended fiscal 2023 with merchandise inventories worth $754.1 million compared with $801.8 million at the end of fiscal 2022.
RH ended the year with a net debt of $2.37 billion and a net debt to adjusted EBITDA of 4.3.
Net cash provided by operating activities was $202.2 million in fiscal 2023 compared with $403.7 million in the year-ago period. Adjusted free cash flow totaled negative $67.1 million in fiscal 2023 versus $235.3 million a year ago.
Adjusted capital expenditures for the reported period were $269.4 million compared with $173.6 million a year ago.
Guidance
For fiscal 2024, RH expects demand growth of 12-14% and revenue growth of 8-10% year over year. It also projects an adjusted operating margin in the range of 13-14% and adjusted EBITDA margin between 18% and 19%.
RH is forecasting to end fiscal 2024 with an increased backlog of $110-$130 million as revenues lagging demand throughout 2024. This will negatively impact the adjusted operating and EBITDA margin by approximately 140 bps for the year. Additionally, investments and startup costs to support its international expansion are estimated to be approximately 200 bps for 2024.
For the fiscal first quarter, RH expects demand to grow in the mid-single digits but revenues to decline in the low-single digits. It anticipates an adjusted operating margin in the band of 6-7% and adjusted EBITDA margin in the 12-13% range.
Williams-Sonoma Inc. (WSM - Free Report) reported results for the fourth quarter of fiscal 2023 (ended Jan 28, 2024). In the quarter, earnings and net revenues beat the Zacks Consensus Estimate but declined year over year.
The quarterly results reflect low contributions from the company’s reportable brands, including Pottery Barn, West Elm, and Pottery Barn Kids and Teen. The downtrend was due to ongoing softness in the housing market and geopolitical uncertainties. Also, an increase in occupancy costs, along with employment and general expenses, added to the downtrend.
Darden Restaurants, Inc. (DRI - Free Report) reported dismal third-quarter fiscal 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. The metrics increased on a year-over-year basis.
DRI provided a lower-than-expected sales outlook for fiscal 2024. Management cited concerns relating to a challenging operating environment.
Papa John’s International, Inc. (PZZA - Free Report) reported mixed fourth-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis.
During the fiscal fourth quarter, the company registered benefits from the expansion of the global footprint and enhancements in digital solutions and marketing platforms. Also, it stated improvements in domestic company-owned restaurant-level margins and sequential improvement in U.K. sales with franchisees. The company intends to focus on the Back to Better 2.0 growth initiative and accelerate North American development to drive growth.
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RH Q4 Earnings & Revenues Miss Estimates, FY24 View Solid
RH (RH - Free Report) shares rose 8.5% in the after-hours trading session on Mar 27, despite posting tepid results for fourth-quarter fiscal 2023 (ended Feb 3, 2024).
The top and bottom lines missed the Zacks Consensus Estimate and declined on a year-over-year basis. Nonetheless, its strong fiscal 2024 guidance for revenues and margins is encouraging investors.
While RH expects business conditions to remain challenging until interest rates ease and the housing market begins to rebound, it expects demand trends to accelerate throughout fiscal 2024.
Earnings, Revenue & Margin Discussion
Adjusted earnings of 72 cents per share lagged the consensus mark of $1.71 by 57.9% and decreased from the year-ago figure of $2.88.
RH Price, Consensus and EPS Surprise
RH price-consensus-eps-surprise-chart | RH Quote
Adjusted net revenues of $738 million missed the consensus mark of $777 million by 5% and fell 4.4% on a year-over-year basis. Revenues declined $40 million due to the severe weather in January and shipping delays related to the ongoing conflict in the Red Sea.
Adjusted gross margin contracted 430 basis points (bps) to 43.5% in the reported quarter. Adjusted selling, general & administrative expenses decreased 320 bps to 34.4% of total revenues.
Adjusted operating margin contracted 750 bps year over year to 9.1%. Adjusted EBITDA declined 31.6% year over year to $112.8 million for the quarter. Adjusted EBITDA margin also contracted 600 bps year over year to 15.3%. Deleverage from lower revenues, increased markdowns to support the product transformation and investments in international expansion ailed the bottom line.
Fiscal 2023 (Ended Feb 3, 2024) Highlights
Adjusted earnings came in at $6.87 per share, significantly down from $20.06 a year ago. Net revenues were $3.03 billion, down 15.6% from a year ago.
Adjusted gross margin contracted 490 bps to 45.9% in the year. The adjusted operating margin was 13% in the year, down 900 bps from 22% a year ago. Adjusted EBITDA margin contracted 770 bps year over year to 18.2%.
Store Update & Balance Sheet
In fiscal 2023-end, RH’s Cash, cash equivalents and restricted cash were $123.7 million compared with $1.51 billion at the end of fiscal 2022 (ended Jan 28, 2023). The company ended fiscal 2023 with merchandise inventories worth $754.1 million compared with $801.8 million at the end of fiscal 2022.
RH ended the year with a net debt of $2.37 billion and a net debt to adjusted EBITDA of 4.3.
Net cash provided by operating activities was $202.2 million in fiscal 2023 compared with $403.7 million in the year-ago period. Adjusted free cash flow totaled negative $67.1 million in fiscal 2023 versus $235.3 million a year ago.
Adjusted capital expenditures for the reported period were $269.4 million compared with $173.6 million a year ago.
Guidance
For fiscal 2024, RH expects demand growth of 12-14% and revenue growth of 8-10% year over year. It also projects an adjusted operating margin in the range of 13-14% and adjusted EBITDA margin between 18% and 19%.
RH is forecasting to end fiscal 2024 with an increased backlog of $110-$130 million as revenues lagging demand throughout 2024. This will negatively impact the adjusted operating and EBITDA margin by approximately 140 bps for the year. Additionally, investments and startup costs to support its international expansion are estimated to be approximately 200 bps for 2024.
For the fiscal first quarter, RH expects demand to grow in the mid-single digits but revenues to decline in the low-single digits. It anticipates an adjusted operating margin in the band of 6-7% and adjusted EBITDA margin in the 12-13% range.
Zacks Rank
RH currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Releases
Williams-Sonoma Inc. (WSM - Free Report) reported results for the fourth quarter of fiscal 2023 (ended Jan 28, 2024). In the quarter, earnings and net revenues beat the Zacks Consensus Estimate but declined year over year.
The quarterly results reflect low contributions from the company’s reportable brands, including Pottery Barn, West Elm, and Pottery Barn Kids and Teen. The downtrend was due to ongoing softness in the housing market and geopolitical uncertainties. Also, an increase in occupancy costs, along with employment and general expenses, added to the downtrend.
Darden Restaurants, Inc. (DRI - Free Report) reported dismal third-quarter fiscal 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. The metrics increased on a year-over-year basis.
DRI provided a lower-than-expected sales outlook for fiscal 2024. Management cited concerns relating to a challenging operating environment.
Papa John’s International, Inc. (PZZA - Free Report) reported mixed fourth-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis.
During the fiscal fourth quarter, the company registered benefits from the expansion of the global footprint and enhancements in digital solutions and marketing platforms. Also, it stated improvements in domestic company-owned restaurant-level margins and sequential improvement in U.K. sales with franchisees. The company intends to focus on the Back to Better 2.0 growth initiative and accelerate North American development to drive growth.