RH Gearing Up to Report Q1 Earnings: What's in the Offing?
RH RH is slated to report first-quarter fiscal 2020 results on Jun 4, after market close.
In the last reported quarter, this leading luxury home furnishing retailer’s earnings surpassed the Zacks Consensus Estimate by 3.6% and grew 27% on a year-over-year basis. Markedly, the company beat earnings expectations in each of the last four quarters, with the average being 17%.
However, it lagged revenue expectation by 6.3% and fell 1% year over year in fourth-quarter fiscal 2020.
Trend in Estimate Revision
For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved 18.5% upward to 32 cents over the past 60 days. The estimated figure indicates a decrease of 82.7% from $1.85 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $444.86 million, suggesting a 25.7% decline from the year-ago reported figure of $598.83 million.
RH Price and EPS Surprise
RH price-eps-surprise | RH Quote
Factors to Note
The spread of the coronavirus resulted in the closure of many retail stores throughout the world. Temporary store closures across the globe are expected to have impacted the company’s fiscal first-quarter performance. Also, it has been witnessing lower customer traffic in both in stores and online during the peak weeks; higher-than-expected backorders due to a 18% drop in fiscal fourth-quarter 2019 inventories; and persistent softness in the high-end housing market. All these factors are likely to reflect on RH’s fiscal first-quarter results.
Weakness in core business due to market volatility, and exit from unprofitable and non-strategic businesses are likely to have affected RH’s revenues in the to-be-reported quarter. Also, increased shipping and labor costs may have restricted its margin improvement.
That said, the company has been working on various strategies to elevate and reimage the RH brand. Also, it has been transforming the entire business into a digital platform via The World of RH — a portal presenting the company’s products, places, services and spaces. Its digital experience — including RH Interiors, Modern, Outdoor, Baby & Child plus Teen — has been significantly adding strength to the company as it generates strong revenues online, while its Source Books drives traffic to Galleries and websites. Meanwhile, the company has been working on cost-saving initiatives such as redesigning the supply chain, reducing inventory, improving product margins and so on. These positives are expected to reflect on the upcoming results.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for RH this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The company has an Earnings ESP of 0.00%.
Zacks Rank: RH currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks Worth a Look
Here are a few stocks in the Zacks Retail-Wholesale sector, which according to our model have the right combination of elements to beat estimates in their respective quarters to be reported.
Casey's General Stores, Inc. CASY has an Earnings ESP of +40.82% and a Zacks Rank #3.
Chico's FAS, Inc. CHS has an Earnings ESP of +67.74% and a Zacks Rank #3.
Darden Restaurants, Inc. DRI has an Earnings ESP of +15.19% and a Zacks Rank #3.
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