Shares of RH ( RH ), formerly known as Restoration Hardware, blasted to their highest level in roughly two years after the high-end furniture chain reported strong preliminary third-quarter earnings and forecast fiscal 2018 revenue above analyst forecasts.
[ibd-display-video id=2666455 width=50 float=left autostart=true]The outlook, issued late Wednesday before RH's investor event today, also follows a year-plus effort from the home furnishings chain to streamline its supply network, lay off promotions and move to a membership-driven business.
RH sees earnings for the October-ending third quarter of about $1.02-$1.04 a share vs. prior guidance of 68-80 cents. It also sees Q3 revenue of roughly $592.5 million, up from a range of $575 million to $590 million. That's despite hurricanes Harvey and Irma, which left large parts of Texas and Florida with massive flooding. The better EPS figures reflects a lift from an expected lower effective tax rate.
Wall Street had expected EPS of 79 cents and sales of $594 million, according to Zacks Investment Research.
RH sees sales for the next fiscal year ranging from $2.58 billion and $2.62 billion. Wall Street has expected $2.576 billion.
The retailer also sees 2018 operating margin of 9%-10%.
"Looking forward, we are forecasting margins to rise and costs to fall as we cycle our efforts to reduce inventory, and benefit from our new operating model," RH said in a statement.
Shares shot up nearly 26% to 104.81 the stock market today , nearing their record high set in November 2015 The stock began crumbling in 2015 and began rebounding this year.
IBD'S TAKE:Amazon's moving in on retailers' turf, in more ways than one. The e-commerce giant's private label lines are giving clothing stores a run for their money.
RH's outlook also comes as the company resists a retail-industry trend of playing exclusively on Amazon's ( AMZN ) terms - staying committed to big, palatial showrooms and large catalogs. As more analysts talk up the importance of brick-and-mortar "experiences," RH has also developed Design Galleries that sell food and drinks.
The company, best known for its palatial showrooms, said it would close a distribution center in Dallas by the end of the fiscal year. That move would follow a closure of one such facility in Los Angeles.
For the fourth quarter, however, RH sees sales of $655 million to $680 million. That's down from prior expectations for $664 million to $689 million, due to a decision to delay opening a design gallery in New York until next spring or summer. RH said it was delaying that opening due to street construction in Manhattan's Meatpacking District.
Analysts had expected $683 million in Q4.
Williams-Sonoma ( WSM ), which also appeals to upscale shoppers looking to spruce up their homes, rose 4.1%. Williams-Sonoma reports quarterly results late Thursday.