RH Design Galleries Boost Store Sales In Third Quarter

For the third quarter ended October 31, RH (Restoration Hardware Holdings) posted net income of $20.7 million, or 49 cents per diluted share, versus $19.4 million, or 47 cents per diluted share, in the year-earlier period. Adjusted net income was $27.7 million, or 65 cents per diluted share, versus $20.3 million, or 49 cents per diluted share, in last year’s quarter.

RH beat a MarketBeat analyst average estimate of 63 cents per diluted share.

Comparable brand revenue, including results from store and direct operations, increased 7%. On net revenue terms versus last year’s quarter, stores gained 16% while direct advanced 4% for a company total of 10%. Store sales made up 53% of total revenues versus 50% in the year-previous quarter.

Net revenues were $532.4 million as compared to $484.7 million, the company reported. Adjusted operating income increased 36% to $50 million.

“During the third quarter, we grew our adjusted operating margin by 180 basis points and adjusted net income by 37%, both ahead of our expectations, further demonstrating the disruptive nature of the RH brand and the power of our multi-channel platform,” said Gary Friedman, RH chairman and CEO. “Net revenues increased 10% on top of 22%— representing our 23rd consecutive quarter of double-digit revenue growth. Since our IPO in 2012, we have outperformed our peers by a wide margin, while remaining focused on our two value-driving strategies: the expansion of our brand and the transformation of our retail stores. As it relates to the expansion of our brand, we are innovating and executing at an unprecedented pace and are extremely encouraged by the early results we are seeing out of our most recent launches, RH Modern and RH Teen. Our early data suggests that RH Modern is trending to add significant incremental revenues and opens up the RH brand to an entirely new market.”

Friedman added, “We could not be more pleased with the early results out of our recently opened next generation Design Galleries in Chicago, Denver, and Tampa, each well on track to exceed our expectations. In addition, our first next generation Design Gallery, RH Atlanta, is comping up strongly now that the store has come up against its one-year anniversary, despite not yet having RH Modern or RH Teen on the retail floor. We expect to see sales at RH Atlanta accelerate further once these concepts are added in the first quarter of fiscal 2016.”

The company operates a total of 68 retail galleries throughout the United States and Canada.