On Jul 9, 2014, Zacks Investment Research upgraded furniture and
Restoration Hardware Holdings, Inc.
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The company recently posted spectacular first-quarter fiscal
2014 earnings of 18 cents a share, which grew threefold year over
year while comfortably beating the Zacks Consensus Estimate of 10
cents and exceeding the company's guidance of 9-11 cents a
The bottom line was driven by a robust 22% surge in the
company's net revenues of $366.3 million. Net sales not only
surpassed the Zacks Consensus Estimate of $346.0 million, but also
came ahead of the company's predicted range of $345-$350
Shares of this home furnishings retailer surged 21.3% since the
earnings release. Moreover, Restoration Hardware has witnessed
rising earnings estimates over the last 30 days, as the Zacks
Consensus Estimate for fiscal 2014 and 2015 increased 7.2% and 2.9%
to $2.37 and $2.86 per share, respectively. This reflects that
investors have become constructive on the stock's performance.
Further, management seems highly impressed with the company's
first-quarter performance despite eliminating the mailing of the
"Fall 2013" Source Book. The solid results coupled with its leading
position in the home furnishings industry and multi-network
business model make Restoration Hardware confident of its future
This was well reflected in the company's encouraging outlook for
fiscal 2014. It now expects net revenues in the range of
$1.86-$1.89 billion, compared with $1.825-$1.86 billion predicted
earlier. Moreover, it anticipates adjusted earnings per share in
the band of $2.24-$2.30, up from $2.14-$2.22 per share projected
Going forward, the company plans to maintain its focus on
transforming its retail outlets and expanding its product
portfolio. In fiscal 2014, the company plans to introduce new
Galleries in Greenwich and Los Angeles.
The company believes that subsequent to its real estate
transformation in North America, it will record annual sales of
$4-$5 billion, generating operating margins in the mid-teens and
producing adequate free cash flow.
Also, most recently, Restoration Hardware announced the pricing
of 0% convertible senior notes (maturing on Jun 15, 2019) worth
$300 million. The company has offered initial buyers a 13-day
option to buy another $50 million worth of notes on the same terms
and conditions for a potential offering size of up to $350
The company is likely to use the proceeds to fund business
initiatives including the continual upgrade of its real estate
platform, repayment of higher interest borrowings from its existing
credit line, and further improvement of its balance sheet in the
next five years.
Following this announcement, the retailer's shares have moved
northwards by 3.6%.
Other Stocks to Consider
Other home furnishings retailers with a favorable Zacks Rank
Tempur Sealy International Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
TEMPUR SEALY (TPX): Free Stock Analysis Report
KIRKLANDS INC (KIRK): Free Stock Analysis
RESTORATION HDW (RH): Free Stock Analysis
WILLIAMS-SONOMA (WSM): Free Stock Analysis
To read this article on Zacks.com click here.