Restoration Hardware (RH) Stock: Tanking On Poor Guidance | Earnings Miss


Restoration Hardware Holdings, Inc Common Stock (NYSE: RH)

Restoration Hardware is having an incredibly rough time in the market today, and for good reason. The company reported its earnings for the quarter ending on April 30th, and needless to say, the report fell well below expectations. Today, we’ll talk about what we saw from the report, how investors reacted to the news, and what we can expect to see from RH stock moving forward.

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RH Releases A Troubling Earnings Report

As mentioned above, Restoration Hardware is having a bad day in the market after releasing a less than desirable earnings report. Here’s what we saw from the report:

  • Earnings – In terms of earnings per share, RH fell well below expectations. During the quarter, Wall Street analysts expected that the company would generate earnings of $0.05 per share. However, the company actually reported a loss that came in at a total of $0.05 per share, missing expectations by $0.10 per share.
  • Revenue – While earnings was a big miss, RH did not disappoint when it comes to revenue. During the quarter, analysts expected that the company would generate revenue in the amount of $452.14 million. However, the company actually generated revenue in the amount of $455.46 million, proving an 8% year-over-year increase.
  • Guidance – While earnings per share was negative, guidance proved to be the most concerning part of the report. During the full year, analysts are expecting Restoration Hardware to generate earnings per share in the amount of $2.66. However, the company actually announced that it’s expecting earnings for the full year to come in the range between $1.60 and $1.80 per share, well below analyst expectations, even on the high end.

As you can see from the information above, the earnings report from RH left much to be desired. Gary Friedman, the CEO of the company, said that the near-term performance is seeing pressure from a slowdown in the luxury consumer market. Here’s what he had to say:

Our near term business performance is being pressured by the continued headwinds in the markets impacted by energy and currency, as well as a general slowdown in the luxury consumer market..”

How The Market Reacted To The News

One of the first things that investors learn when they get started in the market is that the news causes movements. When positive news is released surrounding a publicly-traded company, we can expect to see gains. Adversely, negative news will lead to declines. Unfortunately, the news surrounding RH was overwhelmingly negative. As a result, we’re seeing declines in the value of the stock today. Currently (12:21), the stock is trading pat $28.46 per share after a loss of $7.60 per share, or 21.08%, thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from Restoration Hardware stock. In the short term, the global economic slowdown is likely to continue putting pressure on the luxury goods market. As a result, we are likely to see further declines in the value of the stock. However, this may be presenting an opportunity. At the end of the day, poor economic conditions aren’t going to last forever. When the global economy starts to move in a positive direction, demand for RH products will likely climb. So, buying at the bottom will likely yield strong long-run gains.

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What Do You Think?

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