RH To Report Q1 Earnings: Will The Beat Streak Continue?
Zacks Investment Research | Jun 04, 2018 04:06AM ET
RH (NYSE:RH) , formerly Restoration Hardware, is expected to report first-quarter fiscal 2018 results on Jun 7.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Meanwhile, the company surpassed/met expectations in the last four quarters, with the average beat being 17.91%.
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.
Meanwhile, year-to-date performance has not been an encouraging one for the home furnishing industry. Despite belonging to the same industry, RH has managed to navigate smoothly. So far this year, the Zacks Home Furnishings industry has witnessed a fall of 11.8% against the S&P 500’s gain of 2.3%. However, the sluggish run of the industry has been mitigated to a certain extent by the exceptional performance of RH, whose shares have gained 14% in the same time frame.
Let’s see how things are shaping up prior to this announcement.
Factors at Play
RH’s efforts toward redesigning its supply chain network and rationalizing product offerings are driving its growth, and the trend is expected to have continued in the to-be-reported quarter as well. The company’s initiatives like RH Modern, RH Teen, RH Hospitality, redesign of RH Interiors Source Book and the rollout of Design Ateliers across its retail Galleries are expected to contribute to growth.
The company expects first-quarter revenues to be in the range of $555-$565 million compared with $562 million reported in the year-ago quarter. The Zacks Consensus Estimate for first-quarter revenues is pegged at $564 million, showing an expected 0.4% year-over-year increase. Revenues are expected to be roughly flat, incorporating approximately 5% headwind from cycling last year’s inventory-optimization efforts.
Meanwhile, RH is working on various cost-saving initiatives such as redesigning its supply chain, reducing inventory, improving product margins and more. These have helped the company report stellar gross, EBITDA (earnings before interest, tax, depreciation and amortization) and net margins in the last reported quarter. The upside was mainly due to expansion in its product margins, lower SG&A (selling, general and administrative) expenses and reduced effective tax rate.
Get The News You Want
For the to-be-reported quarter, the company expects adjusted gross margin in the band of 36.4-36.8% versus 30.5% reported in the year-ago level. Adjusted operating margin is expected in the range of 7.6-8.1% compared with 1.5% reported in the year-ago quarter. Adjusted SG&A, as a percentage of revenues, is expected in the 28.7-28.8% range versus 30.3% reported in the first quarter of fiscal 2017.
Overall, despite almost flat revenue growth, first-quarter earnings per share are projected to grow between 95 cents and $1.05 per share, driven by a significant improvement in operating margin. For the quarter, the consensus estimate for earnings is pegged at $1.01 per share, implying significant growth from earnings of 56 cents per share recorded in the year-ago period.
What Does the Zacks Model Unveil?
RH has the right combination of the two key ingredients — a positive Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.