The first quarter turned to a loss for Restoration Hardware, which reported it is sticking to expansion plans as the company pursues new U.S. and international business.
Net loss was $3.6 million, or 20 cents per diluted share, versus net income of $41.9 million, or $1.76 per diluted share, in the year-prior quarter. Adjusted for one-time events, the net loss was $7.3 million, or 40 cents per diluted share, versus net income of $52.2 million, or $2.21 per diluted share, in the period a year earlier, the company reported.
A Zacks Investment Research analyst consensus estimate called for a first-quarter loss of eight cents per adjusted diluted share and revenues of $724.7 million.
Net revenues were $727 million versus $739.2 million in the year-before quarter. Income from operations was $54.7 million versus $99.2 million in the period a year earlier.
In a letter to stakeholders, Gary Friedman, RH chairman and CEO, stated: “We are pleased to report that our demand trends inflected positive in the first quarter and continue to build momentum despite operating in the most challenging housing market in three decades. We believe our investments in the most prolific product transformation and platform expansion in our history has positioned RH to gain significant market share in North America while building the foundation for our long-term global expansion across the United Kingdom, Europe, Australia and the Middle East over the next several years.
“Our results for the first quarter largely reflected expectations with revenues of $727 million, adjusted operating margin of 6.5%, and adjusted EBITDA margin of 12.3%,” Friedman continued. “Demand was up 3% in the quarter, slightly below our guidance as growth softened when interest rates once again exceeded 7% post the hawkish Fed commentary throughout April.”
Investing in the company and its growth during the downturn has pressured short-term results while positioning the company to capitalize on long-term opportunities, Friedman noted.
Through the current fiscal year, RH planned initiatives include the rollout of the RH Outdoor Sourcebook, an assembly of luxury outdoor furniture in 14 new collections the company contends will meet ongoing strong demand and help it gain market share in the category. The new RH Modern Sourcebook arrived in homes throughout early June with 30 new collections across living, dining, bedroom and bathroom, Friedman indicated, and the second mailing of the new RH Interiors Sourcebook is planned for early July with new collections and improved in-stocks.
An updated RH Contemporary Sourcebook will emerge in early August with new collections and a compelling value proposition, Friedman maintained, while a second mailing of the RH Modern Sourcebook and a third mailing of the RH Interiors Sourcebook will occur in the second half of 2024.
“These mailings will result in a doubling of our sourcebook circulation and customer contacts in 2024 versus 2023. Our data would suggest the increased number of contacts alone should provide another lift factor for our business,” Friedman pointed out.
As for RH store openings, 2024 should see the unveiling of five North American design galleries, including Cleveland and Palo Alto,CA, which are already open, and Raleigh, NC, Newport Beach, CA and Montecito, CA. In the international operation, a store in Brussels, Belgium, opened during the first quarter, and one in Madrid, Spain, recently debuted. The company is also moving forward with its RH Interior Design Studio format set to debut in Palm Desert, CA.
