Restoration Hardware Holdings, Inc. RH delivered fourth-quarter fiscal 2014 earnings of $1.02 per share that beat the Zacks Consensus Estimate by a penny and surged 23% year over year. However, we observe that the rate of growth of earnings per share decelerated sharply from 53% registered in the third quarter.
Moreover, due to labor disputes at West Coast ports, the company provided a subdued outlook for the first quarter of fiscal 2015. Consequently, shares of this Zacks Rank #3 (Hold) stock fell 4.4% during after-market trading hours, yesterday. Even the company’s initiatives of expanding its business and focusing on new products and categories could not bring relief to investors.
This home furnishing retailer is not the only company to be impacted by the West Coast ports’ slowdown. Lululemon Athletica Inc. LULU and Williams-Sonoma, Inc. WSM too have been hit by the congestion.
Restoration Hardware generated net revenue of $582.7 million in fourth-quarter fiscal 2014 that surged 24% year over year and came almost in line with the Zacks Consensus Estimate of $582.4 million.
Restoration Hardware’s comparable brand revenue, including direct revenues, went up 24% year over year. Further, the company’s direct revenues came in at $304.8 million, advancing 33% year over year.
Adjusted operating income jumped 27% to $73.8 million from the year-ago period, whereas adjusted operating margin expanded 30 basis points to 12.7%.
Store update
At the end of the fourth quarter, Restoration Hardware operated 67 retail outlets, including 57 legacy Galleries, 7 large format Galleries and 3 Baby & Child Galleries. The company also operates 17 outlet stores all over the U.S. and Canada.
Balance Sheet
Restoration Hardware, which competes with Mattress Firm Holding Corp. MFRM, ended the quarter with cash and cash equivalents of $148.9 million, merchandise inventories of $559.3 million, convertible senior notes (net) of $284.4 million, and total shareholders’ equity of $702.9 million.
Going forward, capex is expected to hover around $140–$160 million for fiscal 2015. The company plans to continue focusing on transforming its retail outlets, adopting multi-channel platforms and expanding its product portfolio.
Outlook
Management now anticipates adjusted earnings in the band of 18–20 cents for the first quarter (including an adverse impact of 5–6 cents from the port disruption) and between $2.95 and $3.10 per share for fiscal 2015. The current Zacks Consensus Estimate for the first quarter and fiscal 2015 stands at 22 cents and $2.98 per share, respectively.
Also, Restoration Hardware now projects revenues in the range of $415–$420 million for the first quarter (including an adverse impact of $10–$12 million from the port disruption) and between $2.13 billion and $2.17 billion for fiscal 2015.
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