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RH Reports Solid Q4, But Notes Challenges Ahead

RH reported solid gains in comparable store sales and net income for the fourth quarter, but company officials offered a less optimistic outlook for sales growth citing negative trends in the high-end housing market.

For the fourth quarter ended February 2, the retailer posted net income of $36.1 million, or $1.41 per diluted share, compared to net income of $261,000, or $0.01 diluted share, in the prior-year period. Adjusted net income was $76 million, or $3 per diluted share, versus net income of $43.3 million, or $1.69 per diluted share, in the year-earlier quarter.

RH topped a MarketBeat published fourth-quarter analyst consensus adjusted diluted earnings per share estimate of $2.83.

Comparable revenue was up 5% in the period year over year or 7% taking into consideration calendar adjustments, the company said.

Net revenues were $670.9 million versus $670.3 million while income from operations was $103.2 million versus $69.1 million in the year-previous period. Stores generated 55% of sales in the quarter.

“Our focus on elevating the brand and architecting an integrated operating platform has resulted in our profit model leapfrogging past the home furnishings industry, and RH becoming one of the few retailers that is expanding margins, increasing operating earnings and driving significantly higher returns on invested capital,” said Gary Friedman, RH chairman/CEO.

He noted that part of RH’s growth over the prior fiscal year has been the company’s ability to leverage its physical stores.

“The simplifying assumption that digital was more profitable than physical, and online furniture businesses should somehow be confused with technology companies may prove to be misplaced as digital brands rush to build physical stores in search of growth and profitability,” Friedman said.

For the full fiscal year, RH posted net income of $150.6 million, or $5.68 per diluted share, compared to $2.2 million, or $0.07 per diluted share, in the prior year. Adjusted net income was $223.7 million, or $8.54 per diluted share,  versus $89.2 million, or $3.05 per diluted share, in the year earlier.

Net revenues were $2.51 billion versus $2.44 billion while income from operations was $289.2 million versus $131.3 million in the year previous. Stores represented 56% of revenue in the fiscal year. Comp revenue was up 4% year over year or 5% taking into consideration calendar adjustments.

Looking ahead, the company lowered its fiscal 2019 sales forecast, now saying sales for the year will fall between $2.585 billion and $2.635 billion. RH officials restated its forecast citing negative trends in the high-end housing market and its continued efforts to edit unprofitable and non-strategic businesses.