Restoration Hardware Surges on Upbeat Outlook - Analyst Blog


Gaining momentum from the better-than-expected results and an upbeat outlook, shares of Restoration Hardware Holdings, Inc . ( RH ) jumped 16% to close at $68.47 on Friday. In fact, share price of this luxury home furnishings retailer has been witnessing an uptrend since the company went public for the second time in Nov 2012 and has more than doubled year to date.

Fabulous 1Q, Guidance Hiked

Restoration Hardware continued with its strong performance and posted impressive first-quarter fiscal 2013 results on Jun 13. The quarterly earnings of 6 cents a share surpassed the Zacks Consensus Estimate by a couple of cents and improved significantly from the adjusted loss of 4 cents per share witnessed in the year-ago quarter. This provided impetus to the stock that surged to create a new 52-week high of $70.48 the very next day.

Increased product demand led to a 38% jump in total sales to $301.3 million, while comparable-store-sales surged 41% during the quarter. Adjusted EBITDA soared 82% to $11.2 million, whereas adjusted operating income improved considerably to $4.6 million compared with the year-ago loss of $0.6 million.

Encouraged by the strong quarterly results, Restoration Hardware raised its fiscal-2013 guidance. The company now expects top-line improvement in the range of 23% to 27%, up from its earlier guidance range of 19% to 22%. Moreover, earnings are forecasted in the range of $1.41 to $1.47 per share, significantly rising from its previous guidance range of $1.29 to $1.37.

Moreover, for the second quarter, total sales are expected in the range of $375 million to $380 million, while earnings are projected to range from 40 cents to 42 cents per share.

The Zacks Consensus Estimate currently stands at 38 cents and $1.40 for the second quarter and fiscal 2013. However, given management's upbeat guidance, the Zacks Consensus Estimate could witness an upward revision in the coming days.

Looking Beyond Numbers

We are encouraged by the company's strong performance during the last reported quarter, despite the challenging macroeconomic environment. The company's focus on strategic initiatives to drive growth and profitability in the luxury home furnishings market is quite encouraging.

Several initiatives on the company's part like product expansion and its planned foray in the Kitchen and Antiquities segment with two new lines of business are expected to accelerate sales growth in the long run.

Restoration Hardware's real estate transformation strategy also comes as a positive. The company is receiving favorable lease offers from landlords to become an anchor tenant at high end malls. The move promises long-term growth opportunities for the company to increase sales, lower costs and expand margins.

Considering the strengths of the stock, Restoration Hardware carries a favorable Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Besides Restoration Hardware, other stocks worth considering in the home furnishings & fixtures sector include Fortune Brands Home & Security, Inc . ( FBHS ) and Haverty Furniture Companies Inc. ( HVT ) both of which hold a  Zacks Rank #1 (Strong Buy) and are expected to continue with their upbeat performance. Kirkland's Inc. ( KIRK ) carrying a Zacks Rank #2 (Buy) is also worth considering.

FORTUNE BRD H&S (FBHS): Free Stock Analysis Report

HAVERTY FURNIT (HVT): Free Stock Analysis Report

KIRKLANDS INC (KIRK): Free Stock Analysis Report

RESTORATION HDW (RH): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: FBHS , HVT , KIRK , RH

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