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Here's Why RH Is Surging Toward A Record High Today

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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.

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


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

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