Restoration Hardware’s second-quarter earnings and revenues tumbled, but the company still beat a Wall Street estimate as it maps out continuing expansion.
In the quarter, net income was $76.5 million, or $3.36 per diluted share, versus $122.3 million, or $4.54 per diluted share, in the year-previous period. Adjusted for one-time events, net income was $88.7 million, or $3.93 per diluted share, versus $164.1 million, or $6.12 per diluted share, in the year-before quarter, the company stated.
RH beat a Zacks Investment Research analyst consensus estimate of $2.63 per adjusted diluted share and topped its revenue estimate by 2.9%.
Net revenues were $800.5 million versus $991.6 million in the year-earlier quarter. Income from operations was $151.3 million versus $234.4 million in the year-prior period. the company reported, and adjusted operating income was $161.4 million versus $244.7 million.
In a letter to shareholders, Gary Friedman, RH chairman and CEO, stated revenues of $800.5 million and adjusted operating margin of 20.2% exceeded the company’s second-quarter guidance with help from a $25 million revenue benefit from faster-than-expected deliveries and a shift of about $40 million in advertising costs from the second quarter to the third quarter, reflecting the later mailing of the RH Interiors Sourcebook this year.
Friedman continued, “We are raising the low end of our revenue guidance for the year, and now expect revenue in the range of $3.04 billion to $3.1 billion versus our prior outlook of $3.0 to $3.1 billion, and are maintaining our outlook for adjusted operating margin of 14.5% to 15.5%. We continue to expect the luxury housing market and broader economy to remain challenging throughout fiscal 2023 and into next year as mortgage rates continue to trend at 20-year highs and the current outlook is for rates to remain unchanged until the second quarter of 2024.”
As part of its expansion, he noted, company plans for North America continue to include the debuts of RH Indianapolis and RH Cleveland during this year’s second half.
“RH Palo Alto and RH Montecito will now open in early 2024,” Friedman added. “Additionally, we have 12 North American Galleries in the development pipeline scheduled to open over the next several years. We also believe there is an opportunity to address new markets locally by opening Design Studios in neighborhoods, towns and small cities where the wealthy and affluent live, visit and vacation. We have several existing locations that have validated this strategy in East Hampton, Yountville, Los Gatos, Pasadena and our former San Francisco Gallery in the Design District, where we have generated annual revenues in the range of $5 to $20 million in 2,000 to 5,000 square feet. We have just secured our first new location for a Design Studio in Palm Desert, which should open in the first half of 2024. We have identified over 40 locations that are incremental to our previous plans in North America and believe the results of these Design Studios will provide data that could lead to opening larger Galleries in those markets.”
