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Why Restoration Hardware (RH) Stock Soared Despite Market Rout

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Shares of Restoration Hardware (RH - Free Report) gained more than 9% on Tuesday, a trading session that saw broader indexes battered on renewed trade war fears and bearish yield curve trends. The home furnishings retailer managed to stick out from the pack thanks to its strong earnings result and guidance.

Restoration Hardware posted earnings of $1.73 per share, crushing the Zacks Consensus Estimate of $1.27 and improving 66% from the year-ago period. This performance also exceeded RH’s own guidance range of $1.15 to $1.33 per share.

Adjusted revenues for the quarter came in at $638.5 million, up 8% from the year-ago period. This also beat analysts’ expectations of $633 million. RH’s comparable brand revenues (comps) increased 4% on a year-over-year basis. This is especially interesting given that the comparable quarter saw comps growth of 6%.

“While the luxury housing market has sequentially slowed throughout 2018, our revenues have sequentially accelerated, despite cycling inventory reduction efforts and managing the business with a bias for earnings versus revenue growth, clearly demonstrating our ability to gain market share,” the company said in its release.

RH maintained its fiscal year 2019 revenue guidance. The company sees sales in the range of $2.72 billion to $2.82 billion, which would represent increases of 8% to 12%. RH raised its estimate for return on invested capital to more than 50% from 35%. Management said it will not see a material impact from Chinese tariffs.

RH shares opened at $145.45, up 17.6% from yesterday’s close. The stock reached an intraday high of $148.54 per share in early morning trading. The day’s volatility eventually took some steam out of its momentum, but RH still managed to close up 10.9% to $137.13 per share.

Meanwhile, it was a brutal day for broader indexes. Concerns about a flattening yield curve, slowing economic growth, and renewed trade uncertainties between the U.S. and China battered stocks. The S&P 500 lost more than 3.2%, while the dropped almost 3.1%.

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