Restoration Hardware’s fourth-quarter financial results improved but fell short of Wall Street expectations. The company asserted that its momentum has been solid despite a down housing market.
Net income was $13.9 million, or 69 cents per diluted share, versus $11.4 million, or 57 cents per diluted share, in the year-previous quarter. Adjusted for one-time events, net income was $31.7 million, or $1.58 per diluted share, versus $14.3 million, or 72 cents per diluted share, in the year-before period.
A Zacks Investment Research analyst consensus estimate called for fourth quarter adjusted diluted earnings per share of $1.91 and revenues of $827 million.
Net revenues were $812.4 million versus $738.3 million in the year-prior quarter, the company reported. Income from operations was $70.3 million versus $64.3 million in the year-earlier period while adjusted operating income was $92.1 million versus $66.9 million.
Net income was $72.4 million, or $3.62 per diluted share, versus $127.6 million, or $5.91 per diluted share, in the year previous. Adjusted net income was $107.2 million, or $5.39 per diluted share and $147.4 million, or $6.87 per diluted share, in the year before.
Net revenues were $3.18 billion versus $3.03 billion in the year prior, RH maintained. Income from operations was $322.6 million versus $366.1 million in the year earlier while adjusted operating income was $358.2 million versus $393.8 million.
In a letter to shareholders, RH chairman and CEO Gary Friedman, said, “The important work and substantial investments we’ve made over the past two years are now resulting in meaningful share gains and significant strategic separation, positioning the RH brand to expand its leadership position across the luxury home market over the next decade.
The positive inflection of our business continued to accelerate in the fourth quarter with revenue up 18%, and adjusted operating income increasing 57%, in each case on a comparable 13-week basis, outperforming other home furnishing businesses by a wide margin, as the most prolific product transformation and platform expansion in the history of our industry continues to unfold. Our industry-leading growth in the quarter was driven by the RH brand where fourth quarter demand increased 21%, demonstrating the disruptive nature of our product transformation. While demand softened in mid-December after mortgage rates spiked and mortgage applications fell 22% post the Fed signaling rates would remain largely unchanged this year, RH Brand demand stabilized at up 19% in January.”
Risk in 2025 may be higher than during last year due to the uncertainty caused by tariffs, market volatility and inflation concerns, Friedman said, but he added, “We believe it’s important to separate the signal from the noise. The fact is, we’ve been operating in the worst housing market in almost 50 years. For context, in 1978, there were 4.09 million existing homes sold when the U.S. had a population of 223 million. Contrast that to 2024, where 4.06 million existing homes sold with a population of 341 million, and it illuminates just how depressed the housing market has been this past year. Despite that fact, we are performing at a level most would expect in a robust housing market. We believe it’s a result of investing with a very narrow focus and a long-term view, or what we like to call ‘an inch wide and a mile deep.’ Elevating and expanding our platform by creating the most desired products presented in the most inspiring spaces in the world, with bespoke interior design services and beautiful restaurants that generate energy, engagement and tremendous awareness of the RH brand, while also serving as a profitable customer acquisition vehicle. Our intentions and attention to detail are reflected in everything we do, and in every house we turn into a home.”
Friedman said the company finished the year with meaningful debt, mostly due to $2.2 billion in stock repurchases, but it also closed 2024 with significant business momentum and meaningful assets.
“These assets include real estate that we believe has an estimated equity value of approximately $500 million, which we plan to monetize opportunistically as market conditions warrant, and excess inventory of $200 to $300 million at cost, that we plan to turn into cash as we optimize our assortments post our product transformation. Inclusive of our plans for significant and growing cash flow from operations, we remain confident in our ability to make the necessary investments to continue our industry-leading growth, while paying down debt and lowering interest expense,” he asserted.
