Sales gained but Restoration Hardware earnings slipped in the second quarter as market conditions took a toll.
Still, RH topped a MarketBeat analyst consensus estimate on adjusted diluted earnings per share, at $6.82, and revenue, at $969.2 million.
RH posted net revenues of $991.6 million versus $988.9 million in the year-previous quarter. Income from operations was $234.4 million compared to $250 million in the year-before period.
In a letter announcing the financial results, Gary Friedman, RH CEO, stated, “We are pleased to report better-than-expected results as revenue increased to $992 million versus $989 million a year ago and was up 40% on a two-year basis from revenues of $709 million. Results exceeded our revised guidance due to faster backlog relief despite a deteriorating macro environment. Gross margin expanded 350 basis points in the second quarter primarily due to an increase in product margins as we continue to resist promoting the business as demand trends continue to slow. As we’ve mentioned, there continues to be widespread discounting across our industry, and while there may be short-term risk of market share loss as a result of our choice not to promote, we believe there is certain long-term risk of brand erosion and model destruction once you begin down that path.
“It’s that discipline and long-term thinking that has enabled us to set new standards for financial performance in the home furnishings industry and our results continue to reflect those of the leading luxury brands, as we delivered a 24.7% adjusted operating margin in the second quarter, also exceeding our outlook.”
He said the results came even as the company continue to make “investments related to the launch of RH Contemporary, the openings of RH San Francisco and RH Guesthouse, the development of RH International, and the rollout of RH In-Your-Home which led to approximately 400 of the 530 basis points of SG&A deleverage in the quarter.
Friedman added, “While we expect the next several quarters to pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift and shed less valuable market share as we continue to raise our quality and navigate through the multiple macro headwinds, we believe our long-term investments will enable us to continue driving long term industry-leading performance.”
