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RH Continues to Innovate With 2019 Outdoor Source Book

Zacks Equity Research

RH RH recently unveiled one of the largest curated and fully integrated high-quality outdoor design varieties, namely 2019 RH Outdoor Source Book. In conjugation with the industry’s most reputed designers and manufacturers, the company has launched its resource book of more than 400 pages, with exclusive new collections of outdoor furniture, performance textiles and distinctive garden accents.

Innovation has been a key growth strategy for this leading luxury home furnishing company. The company has undertaken various initiatives to expand its platform. The company has launched RH Modern, RH Teen, RH Hospitality, RH Interiors Source Book and Design Ateliers in this regard. These initiatives are expected to contribute to the company’s growth. Moreover, it has plans to increase collections in key categories and accelerate the introduction of new collections. In 2019, the company has many new brand extensions in its development pipeline, such as RH Beach House and RH Color.

Although RH’s sales have remained subdued in recent times due to its increased focus on earnings and operating margins, it aims to re-emphasize on sales growth in fiscal 2019. The company expects 8-12% revenue growth on the back of brand and merchandise category expansion, which was kept on hold over the past two years, and greater new-gallery contribution. Meanwhile, the company believes that it could become a $7-$10 billion global brand in the long run.

In the first nine months of fiscal 2018, the company’s adjusted earnings grew more than 3.7 times to $5.58 per share. RH has been exhibiting strong results, buoyed by its focus on improving profit margins rather than chasing for sales, and creating a new and differentiating shopping experience with the addition of hospitality (restaurants and cafes) in new Full Line Design Galleries. Revenues in the same period increased 3.7% from the comparable year-ago period to $1.83 billion.

Share Price Performance

Shares of RH have gained 84% in the past year against its industry’s growth of 9.9%. The company’s solid price performance was backed by strong earnings surprise history, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with average of 23.5%. Notably, its fiscal fourth-quarter adjusted earnings are anticipated in the range of $2.75-$2.90 per share. The Zacks Consensus Estimate for the quarter is pegged at $2.87, reflecting 69.8% year-over-year growth.



 



Zacks Rank & Other Key Picks

Currently, RH sports a Zacks #1 Rank (Strong Buy). Other top-ranked stocks in the Retail-Wholesale sector include Haverty Furniture Companies, Inc. HVT, Darden Restaurants, Inc. DRI and Boot Barn Holdings, Inc. BOOT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haverty surpassed earnings estimates in each of the trailing four quarters, resulting in average positive surprise of 19.3%.

Darden and Boot Barn’s earnings for the current year are expected to increase 18.3% and 90%, respectively.

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