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Why is Restoration Hardware (RH) Up 14.5% Since its Last Earnings Report?
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It has been about a month since the last earnings report for Restoration Hardware Holdings Inc. (RH - Free Report) . Shares have added about 14.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is RH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
RH posted strong fourth-quarter fiscal 2017 results, with shares gaining a solid 14.7% during after-hours trading. The new membership model — RH Members Program — is improving its brand image, streamlining operations and enhancing customer experience. The company’s efforts to redesign its supply chain network and rationalize product offerings bode well.
RH reported fourth-quarter fiscal 2017 earnings per share of $1.69, surging 149% from the prior-year quarter. Also, earnings surpassed the Zacks Consensus Estimate of $1.56 by 8.3%.
Revenues improved 14% to $670.3 million but missed the consensus mark of $671.5 million. RH’s comparable brand revenues inched up 2% year over year, against 18% decline in the prior-year quarter. The company’s direct revenues rose10%, while store revenues increased 18% from the year-earlier quarter.
Margins
Adjusted operating income of $75.1 million in the reported quarter improved from the prior-year quarter’s figure of $50.9 million. Adjusted operating margin expanded 260 bps to 11.2%. Adjusted gross profit was $257.5 million, up 25.9% year over year. Adjusted gross margin improved 390 bps to 38.5%.
Store Update
As of Feb 3, 2018, RH operated 84 retail galleries, slightly lower than 85 in the prior-year quarter. These include 47 legacy galleries, six large format galleries, 10 next generation design galleries, one RH Modern Gallery and four Baby & Child galleries in the United States and Canada, respectively, along with 15 Waterworks showrooms in the United States and the U.K.
Fiscal 2017 Highlights
Revenues rose 14% to $2.44 billion and adjusted diluted earnings per share of $3.05 surged 140% year over year.
Balance Sheet
RH had cash and cash equivalents of $17.9 million as on Feb 3, 2018, compared with $87 million as on Jan 28, 2017. The company ended the quarter with merchandise inventories worth $527 million, compared with $752.3 million as on Jan 28, 2017.
First-Quarter Outlook
Revenues are projected in the range of $555-$565 million.
Adjusted gross margin is projected in the band of 36.4-36.8%. Adjusted operating margin is expected in the range of 7.6-8.1%.
Adjusted SG&A, as a percentage of revenues, is expected in the 28.7-28.8% range.
Adjusted earnings per share are projected between 95 cents to $1.05.
Fiscal 2018 Outlook
Net revenues are expected in the $2.53-$2.57 billion range, representing growth of 5-7%.
Adjusted gross margin is projected in the 37.7-38.5% range, while adjusted operating margin is expected in the 9.2-10.2% band, up from the previous estimate of 9-10%.
Adjusted SG&A, as a percentage of revenues, is expected in the 28.3-28.5% range.
Adjusted earnings per share are expected in the $5.45-$6.20 range.
Free cash flow is projected in excess of $250 million, up from the previous estimate of $240 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter.
Restoration Hardware Holdings Inc. Price and Consensus
At this time, RH has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth and momentum investors than value investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, RH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why is Restoration Hardware (RH) Up 14.5% Since its Last Earnings Report?
It has been about a month since the last earnings report for Restoration Hardware Holdings Inc. (RH - Free Report) . Shares have added about 14.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is RH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
RH posted strong fourth-quarter fiscal 2017 results, with shares gaining a solid 14.7% during after-hours trading. The new membership model — RH Members Program — is improving its brand image, streamlining operations and enhancing customer experience. The company’s efforts to redesign its supply chain network and rationalize product offerings bode well.
RH reported fourth-quarter fiscal 2017 earnings per share of $1.69, surging 149% from the prior-year quarter. Also, earnings surpassed the Zacks Consensus Estimate of $1.56 by 8.3%.
Revenues improved 14% to $670.3 million but missed the consensus mark of $671.5 million. RH’s comparable brand revenues inched up 2% year over year, against 18% decline in the prior-year quarter. The company’s direct revenues rose10%, while store revenues increased 18% from the year-earlier quarter.
Margins
Adjusted operating income of $75.1 million in the reported quarter improved from the prior-year quarter’s figure of $50.9 million. Adjusted operating margin expanded 260 bps to 11.2%. Adjusted gross profit was $257.5 million, up 25.9% year over year. Adjusted gross margin improved 390 bps to 38.5%.
Store Update
As of Feb 3, 2018, RH operated 84 retail galleries, slightly lower than 85 in the prior-year quarter. These include 47 legacy galleries, six large format galleries, 10 next generation design galleries, one RH Modern Gallery and four Baby & Child galleries in the United States and Canada, respectively, along with 15 Waterworks showrooms in the United States and the U.K.
Fiscal 2017 Highlights
Revenues rose 14% to $2.44 billion and adjusted diluted earnings per share of $3.05 surged 140% year over year.
Balance Sheet
RH had cash and cash equivalents of $17.9 million as on Feb 3, 2018, compared with $87 million as on Jan 28, 2017. The company ended the quarter with merchandise inventories worth $527 million, compared with $752.3 million as on Jan 28, 2017.
First-Quarter Outlook
Revenues are projected in the range of $555-$565 million.
Adjusted gross margin is projected in the band of 36.4-36.8%. Adjusted operating margin is expected in the range of 7.6-8.1%.
Adjusted SG&A, as a percentage of revenues, is expected in the 28.7-28.8% range.
Adjusted earnings per share are projected between 95 cents to $1.05.
Fiscal 2018 Outlook
Net revenues are expected in the $2.53-$2.57 billion range, representing growth of 5-7%.
Adjusted gross margin is projected in the 37.7-38.5% range, while adjusted operating margin is expected in the 9.2-10.2% band, up from the previous estimate of 9-10%.
Adjusted SG&A, as a percentage of revenues, is expected in the 28.3-28.5% range.
Adjusted earnings per share are expected in the $5.45-$6.20 range.
Free cash flow is projected in excess of $250 million, up from the previous estimate of $240 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter.
Restoration Hardware Holdings Inc. Price and Consensus
Restoration Hardware Holdings Inc. Price and Consensus | Restoration Hardware Holdings Inc. Quote
VGM Scores
At this time, RH has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth and momentum investors than value investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, RH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.