RH RH has been on the acquisition spree and announced the acquisition of Dmitriy & Co, a To-the-Trade custom upholstery atelier, as well as, Jeup, Inc., a To-the-Trade custom bespoke furniture workroom. These buyouts would help the company accelerate the brand’s transformation into a luxury lifestyle brand over time.
Inside the Headlines
RH’s acquired Dmitriy & Co and appointed Dmitriy founders Donna and David Feldman. This will aid the company in forming RH Couture Upholstery. Meanwhile, the company took over the business of Jeup, Inc. and hired Joseph Jeup to form RH Bespoke Furniture.
RH has also appointed Margaret Russell, former Editor in Chief of Architectural Digest and Elle Decor, to form RH Media. Notably, RH Media is an editorial-content platform that will showcase the most innovative and influential individuals and ideas that are shaping the world of architecture and design.
In 2016, RH acquired the luxury bath and kitchen brand, Waterworks to create what it calls “the first global and fully integrated luxury home platform.”
RH has been thoughtfully integrating and enhancing these brands and businesses to transform itself into the world’s most innovative and dynamic global design platform, thereby fundamentally changing the landscape of the luxury home furnishings market and the To-the-Trade design industry.
RH has been busy architecting a new operating platform that includes emphasizing a number of strategic initiatives to evolve it from a home furnishings retailer to a luxury lifestyle brand over time, including Product Elevation, Gallery Transformation, Brand Elevation & Digital Reimagination and Global Expansion.
RH’s efforts to elevate and increase collection will continue with the introductions of RH Couture, RH Bespoke, RH Color, RH Antiques & Artifacts, RH Atelier and other new collections scheduled to launch over the next decade.
The company plans to open Design Galleries in every major market to unlock its vast assortment, generating revenues of $5 to $6 billion in North America and $20 to $25 billion globally in the long term.
Q3 Highlights
In a separate release, RH also reported third-quarter fiscal 2022 (ended Oct 29, 2022), with adjusted earnings and revenues beating the Zacks Consensus Estimate. This marks the company’s 20th consecutive quarter of earnings beat. On a year-over-year basis, earnings and revenues declined. Gross margin contracted 50 basis points in the quarter due to fixed occupancy deleverage, partially offsetting an increase in product margins as RH continues to resist promoting the business.
For fiscal 2022, the company expects business trends to continue to deteriorate, given the weakness in the housing market over the next several quarters due to the Federal Reserve’s hawkish stance and the cycling of record COVID-driven sales and backlog reductions.
RH now expects fiscal 2022 revenue to decline between 3.5% and 4.5% versus the prior expectation of down 3.5%-5.5%. Adjusted operating margin is expected in the range of 21.5% to 22% versus the prior outlook of 21% to 21.5%.
Share Price Performance
Image Source: Zacks Investment Research
RH shares have unperformed the industry year to date. Earnings estimates for fiscal 2022 and 2023 have declined to $24.46 per share and $21.06 per share from $24.78 and $21.78, respectively, over the past 30 days.
Zacks Rank & Key Picks
RH currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Monarch Casino & Resort, Inc. MCRI, Hyatt Hotels Corporation H and Crocs, Inc. CROX.
Monarch Casino presently sports a Zacks Rank #1. MCRI has a trailing four-quarter earnings surprise of 9.1%, on average. The stock has gained 19% in the past year.
The Zacks Consensus Estimate for MCRI’s 2022 sales and earnings per share (EPS) indicates growth of 21.1% and 29.2%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 12.4% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates a surge of 92.2% and 121%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. Shares of Crocs have plunged 39.2% in the past year.
The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s levels.
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