Restoration Hardware shares punch higher on upbeat results

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Upscale furniture chain Restoration Hardware Holding, which has previously pointed to weather, the elections and oil prices for disappointing results, saw its shares surge nearly 10 per cent after it posted an upbeat outlook and better-than-expected fourth quarter results.

The purveyor of $7,000 canopy beds said for the current quarter net revenues are expected to climb between 16 to 20 per cent from a year ago to a range of about $530m to $545m, boosted by the acquisition of luxury bath and kitchen brand Waterworks last year and higher outlet and warehouse sales. Excluding those factors, sales are expected to rise by between six to 10 per cent from a year ago.

However, efforts to optimise inventory and higher outlet sales are expected to have a negative impact on the company’s margins and earnings as RH expects adjusted net income in the range of $800,000 to $2.4m.

Adjusted earnings in the range of 2 to 6 cents a share, compared with analysts estimates of 6 cents, while the high-end of its projections for fiscal 2017 earnings in the range of $1.78 to $2.19 a share topped analysts expectations of $1.92.

That accompanied a sharp drop in quarterly profits to $9.4m or 23 cents a share in the fourth quarter, compared with $33m or 79 cents a share in the year ago quarter. Adjusting for one-time items, earnings of 68 cents topped analysts’ estimates.

Net revenues fell 9 per cent to $586.7m, better than analysts’ fears of a drop to $580.8m.

The California-based company spent much of 2016 transitioning away from a promotional environment to a membership model and making investments to change its business.

“While 2016 was a year of transformation and transition, 2017 will be a year of execution, architecture, and cash flow at RH,” Gary Friedman, chief executive, said. “Our focus will be on executing our new business model, architecting a new back-end operating platform, and maximizing cash flow.”

Restoration Hardware shares, which are up nearly 24 per cent so far this year, were up an additional 9.6 per cent to $41.63 in after hours trade.

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