RH RH Raises Forecast as Organizational Changes Improve Profits
BY Dow Jones & Company, Inc.— 7:27 PM ET 12/03/2018
Luxury-furniture retailer RH on Monday gave a strong financial picture for this year and next, touting its business overhaul as setting the pace for growth -- with a planned international expansion yet to come.
Shares in RH, formerly known as Restoration Hardware, rose 20% in post-market trading after the company lifted its earnings and sales targets for the current fiscal year and guiding adjusted profit well ahead of forecasts in fiscal 2019. The stock closed Monday up 6.5% to $123.65, bringing its gain over the past 12 months to 21%.
The latest results help Chief Executive Gary Friedman prove to Wall Street that the company is finding its footing amid a shifting retail landscape. RH launched a subscription-based membership program in early 2016, which gave customers access to certain promotions and interior-design services, and moved to streamline operations, including scrapping some brands. Operational changes have also included reducing inventory, closing distribution centers and building new, high-end stores to help RH fight online retail competition.
The company has also had an aggressive share buyback campaign over the last year, and in October, its board authorized a new $700 million share-buyback program.
The "massive cultural change" RH has undergone, Mr. Friedman said during the earnings call, allowed RH to break away from the retailer's traditional promotional model.
"That is nothing but a downward spiral," Mr. Friedman said.
In the most recent quarter, which ended Nov. 3, RH's profit surged 70% to $22.4 million, or 81 cents a share. Excluding reorganization-related costs and other items, profit rose to $1.73 a share from $1.04 a share a year earlier.
Revenue rose 7% to $636.6 million, beating analysts' expectations.
Mr. Friedman said the company's business had strengthened during the quarter, despite a slowdown in the housing market, suggesting a strong entry to the key holiday season.
For the year ending Feb. 2, the Corte Madera, Calif., company said it expects adjusted profit to reach a range of $ 8.33 to $8.47 a share, with revenue reaching $2.52 billion to $2.53 billion. Next year, RH expects to earn an adjusted profit between $9.30 and $10.70 a share and sales to reach $2.72 billion to $2.82 billion, compared with the consensus adjusted-profit forecast of $8.38 a share and $2.73 billion in sales, according to FactSet data.
The forecast, Mr. Friedman said, assumes that tariffs remain in place.
"If they don't, that's good news for us, and good news for the consumer, " Mr. Friedman said, referring to the U.S. and China potentially reaching a truce in their trade spat following the recent Group of 20 Summit in Buenos Aires.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
12-03-18 1927ET
