Source: Company reports/Fung Global Retail & Technology

3Q16 RESULTS

Restoration Hardware reported 3Q16 revenues of $549.3 million, up 3.1% year over year and above the $527.7 million consensus estimate. Store revenues increased by 9% year over year, to $306.8 million, on top of a 16% increase in store revenues in the year-ago period. The increase was partially offset by a 3% decline in direct revenues, to $242.5 million. Direct revenues represented 44% of total net revenues. Comparable-brand sales, which include direct sales, declined by 6% year over year, versus a 7% increase in the year-ago period and the (12.8)% consensus estimate. Adjusted EPS was $0.20, ahead of the $0.16 consensus estimate but  down 69.2% year over year. Management attributed the decline to costs related to the company’s transition from a promotional business model to a membership model, the timing of recognizing membership revenues related to the transition and efforts to reduce inventories.

OUTLOOK

The company lowered its FY16 guidance and now expects adjusted EPS of $1.19–$1.29, versus previous guidance of $1.60–$1.80 and the $1.64 consensus estimate. The company expects FY16 revenues of $2.11–$2.14 billion, which represents growth of 0%–1%, versus previous guidance of 1%–3%. The revenue figure is below the $2.16 billion consensus estimate. Management noted that business in November, in the current quarter, was below expectations due to “consumer softness” related to the US election, the Holiday Collection not selling as strongly as had been expected and delayed delivery of its fall catalog.