Restoration Hardware (RH) Sinks On Dismal View: What Next?
Zacks Investment Research | Dec 08, 2016 09:58PM ET
Shares of Restoration Hardware Holdings, Inc. (NYSE:RH) plunged nearly 19% in after-hours trading session on Dec 8. Investors punished the stock following the sharp decline in earnings and a dismal fiscal 2016 projection thereafter. In fact, we have observed that the stock has nosedived roughly 57% in the past one year, when the Zacks categorized Retail-Home Furnishings industry has witnessed a decline of approximately 27%.
The company reported fiscal third-quarter 2016 earnings per share of 20 cents significantly down from the year-ago figure of 65 cents. However, it managed to surpass the Zacks Consensus Estimate of 16 cents.
Quarter in Detail
Revenues increased 3.2% to $549.3 million, beating the Zacks Consensus Estimate of $533 million. Restoration Hardware’s comparable brand revenues, including direct revenues, declined 6% year over year compared with 7% increase last year. The company’s direct revenues dipped 3% to $242.5 million, whereas stores revenues jumped 9% to $306.8 million.
Meanwhile, adjusted operating income in the reported quarter declined sharply from the prior-year figure of $50 million to $18.1 million. Adjusted operating margin contracted 610 basis points to 3.3%.
Store Update
At the end of the fiscal third quarter, Restoration Hardware operated 85 retail outlets. These included 51 legacy galleries, six large format galleries, seven next generation design galleries, one RH Modern Gallery and five Baby & Child galleries. Further, the company has 15 outlets across the U.S. and Canada.
Balance Sheet
Restoration Hardware, which shares space with Williams-Sonoma Inc. (NYSE:WSM) , ended the quarter with cash and cash equivalents of $55.4 million, merchandise inventories of $776.6 million and total shareholders’ equity of $902.2 million. Additionally, the company had convertible senior notes (net) worth $308.6 million (due in 2019) and $231.9 million (due in 2020) at the end of the quarter.
RESTORATION HDW Price, Consensus and EPS Surprise
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