Restoration Hardware keeps building on growth streak
Restoration Hardware Holdings’ (RH) innovative store growth initiatives are starting to bear fruit, as the luxury home furnishings retailer reported record sales and profits in the third quarter.
For the period ended Oct. 31, the company reported net income of $20.7 million, or 49 cents per share, compared to $19.4 million for the same period last year.
Revenue increased 10% to $532.4 million, from $484.7 million in the year-ago period. It was the firm's 23rd consecutive quarter of double-digit revenue growth. Same-store sales increased 7%.
“Since our IPO in 2012, we have outperformed our peers by a wide margin, while remaining focused on our two value-driving strategies – the expansion of our brand and the transformation of our retail stores," said Gary Friedman, chairman and CEO. "As it relates to the expansion of our brand, we are innovating and executing at an unprecedented pace and are extremely encouraged by the early results we are seeing out of our most recent launches – RH Modern and RH Teen. Our early data suggests that RH Modern is trending to add significant incremental revenues and opens up the RH brand to an entirely new market.”
RH has been remodeling stores, expanding its product assortment and opening new store concepts, including RH Modern, and RH Baby & Child. It also has opened cafes, and even a wine bar and restaurant in in new Chicago flagship. The company plans to open a boutique hotel and restaurant around the corner from its upcoming flagship store in Manhattan’s Meatpacking District. Friedman has previously said that the company's new vision is about "the RH lifestyle," not about a store that sells light fixtures and home chotchkies.
“We believe that our strategy of what is arguably the most significant retail transformation in history will prove to be the right one," Friedman said. "We could not be more pleased with the early results out of our recently opened next generation Design Galleries in Chicago, Denver, and Tampa – each well on track to exceed our expectations. In addition, our first next generation Design Gallery – RH Atlanta – is comping up strongly now that the store has come up against its one year anniversary, despite not yet having RH Modern or RH Teen on the retail floor. We expect to see sales at RH Atlanta accelerate further once these concepts are added in the first quarter of fiscal 2016.”
For the fourth quarter, the company expects to see revenue of between $708 million and $718 million. For the full year, Restoration Hardware guided sales to a higher range of $2.17 billion to $2.18 billion, and narrowed its previous bottom-line guidance to the higher-end of its previous range, now expecting adjusted earnings of $3.11 to $3.16 per share.
Friedman concluded: “Over the past five years our compounded growth rates in total revenues, comparable brand revenues, and adjusted net earnings demonstrate the power of our platform, and a culture of innovation that is widely referenced but rarely seen in our industry. When we step back and consider the positive response to our two new businesses – RH Modern and RH Teen, the outperformance in all of our next generation Design Galleries, and the exciting new real estate and businesses we have in the pipeline for 2016 and beyond, we could not be more confident in our long term goal of reaching $4 billion to $5 billion in North American revenues, mid-teens operating margins, significant free cash flow and industry-leading return on invested capital.”
As of Oct. 31, the company operated a total of 68 stores and 17 outlet locations throughout the United States and Canada.