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Luxe home furnishings retailer Q4 tops Street


Things are looking up at RH (formerly known as Restoration Hardware) which capped a busy year with better-than-expected results for its fourth quarter.

RH reported that revenue fell 9% to $586.7 million in the fourth quarter, beating analysts’ estimates.

Adjusted net income fell by nearly a third to $27.9 million, with adjusted earnings of $0.68 per share, also better than expected. The retailer said several one-time costs – including the launch of RH Modern – impacted its bottom line.

Full-year revenues edged up 1.2% to $2.13 billion. Brick-and-mortar sales rose 9%, but e-commerce and catalog revenues were down 7%.

RH, which has been working to improve its business, launched a number of new business initiatives in 2016, including RH Modern, RH Teen, RH Hospitality, the rollout of “design ateliers” in its stores and the addition of the Waterworks brand, which it purchased in April 2016, to its platform. All of these new initiatives are expected to contribute to growth in 2017 and beyond, the company said.

"2016 was a year of transformation and transition at RH," stated CEO Gary Friedman. "We transformed our business from a promotional to a membership model that we believe will enhance our brand, streamline our operations, and vastly improve the customer experience. We also began the redesign of our supply chain network, transitioning inventory into fewer facilities, which enabled us to forgo building a planned distribution center scheduled to open in 2017.”

The retailer is optimistic about its future. For the year, RH forecast earnings of $1.78 to $2.19 a share on revenue of $2.3 billion to $2.4 billion. Analysts forecast $1.94 a share on revenue of $2.33 billion.

Friedman noted that in contrast to the transformation and transition that characterized 2016, 2017 will be a year of execution, architecture, and cash flow at RH.

“Our focus will be on executing our new business model, architecting a new back-end operating platform, and maximizing cash flow,” he said. “While our investment strategy will always maintain a long-term view, we believe we can improve working capital and returns by having a more disciplined approach to capital allocation.”

The company is reducing its new store openings to three to five per year, which is expected to drive “high-quality sustainable growth, while lowering capital requirements and execution risk over the course of our real estate transformation,” Friedman said.

As of January 28, 2017, RH operated a total of 85 retail locations.
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