Restoration Hardware (RH, Financial) recently released not-so-impressive results for the second quarter. The company did show some improvements in the top line and the bottom line, but it failed to meet analysts’ expectations. However, management is focusing on its product offerings and is undertaking many strategic initiatives to get better. Let us have a look at the overall business of Restoration Hardware.
A closer view of the results
Restoration posted a 14% improvement in the net revenue amounting $433.8 million on the board which failed to meet the analysts’ estimates of $453.6 million. On the earnings front Restoration posted earnings of $27.3 million. The company posted profit of $0.66 per share which indeed exceeded consensus estimates of $0.64 per share.
Restoration Hardware seems to be in good shape. The recent results indicate that the stock has much steam for better performance and by the signs and favorable environment around Restoration is expecting better results in future. The company also is now focusing on various key aspects to improve its profitability. It is now laser focusing on innovations to make its product competitive in the market. It is also aligning itself to bring about a change in both brand and business model by testing new concepts and methodology.
The way ahead
In addition, it is also focused on some of key values such as expansion of its product offer and transformation of its retail store. In this league, Restoration is also focusing on enhancement of its multi-channel platform and operating infrastructure. It is also has extensive expansion strategies under which it is opening a new larger full design Gallery on Meirose avenue in Los Angeles followed by its Full Line Design gallery in Atlanta.
Restoration has also signed leases for the next eight generations of Full Line Design Galleries. In addition, it has also working on negotiations for more than 30 additional locations. These are some of the bright spots for the company showing that there is a lot more to happen under Restoration Hardware camp. This is expected to strengthen its position in the market, also improving its sales leading to better financial performance in future.
Also, Restoration is continuously working on emerging as a superior business model. It is focusing on emerging as a leading home luxury brand and is happy to be on track with its objectives. But the company thinks that it is still in its infancy and will take some more time to be fully in line with its objectives. Besides, it is putting in efforts to improve the sales and for the long term it is expecting $4 billion to $5 billion sales in North America. This will also help it to gain good market share in future.
Restoration is also expanding its assortments across furniture, lighting, textiles, small spaces and baby and child. It is now having the largest collection of curated home furnishings under its roof. Seeing this positive growth Restoration is excited about its growth opportunities later in the fiscal year.
Conclusion
Moving on to the fundamentals of the stock, with a trailing P/E of 55.75, the stock seems slightly over valued, but the forward P/E of 33.13 the earnings growth of the stock in the near term looks impressive. The stock also looks like a good long-term holding as its earnings are growing at a CAGR of 29.03% for the next five years as compared to the industry average of 12.64%.
In addition, the company is also extending its footprints in other segments, which is seeing good traction and is expected to get better in the future. So, considering all these facts and statistics, it is clear that Restoration Hardware is a good pick as of now and the investors should definitely include it in their portfolio.
