RH (NYSE:RH) Reports Sales Below Analyst Estimates In Q4 Earnings
Luxury furniture retailer RH (NYSE:RH) missed analysts' expectations in Q4 CY2023, with revenue down 4.4% year on year to $738.3 million. It made a non-GAAP profit of $0.72 per share, down from its profit of $2.88 per share in the same quarter last year.
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RH (RH) Q4 CY2023 Highlights:
Revenue: $738.3 million vs analyst estimates of $777.8 million (5.1% miss)
EPS (non-GAAP): $0.72 vs analyst estimates of $1.71 (57.9% miss)
Revenue guidance for the full year calls for growth of 9.0% year on year, above expectations of 7.7%
Management added that "we expect our demand trends to accelerate throughout fiscal 2024"
Gross Margin (GAAP): 43.5%, down from 47.8% in the same quarter last year
Free Cash Flow was -$251.5 million, down from $3.7 million in the same quarter last year
Market Capitalization: $5.22 billion
Formerly known as Restoration Hardware, RH (NYSE:RH) is a specialty retailer that exclusively sells its own brand of of high-end furniture and home decor.
Home Furniture Retailer
Furniture retailers understand that ‘home is where the heart is’ but that no home is complete without that comfy sofa to kick back on or a dreamy bed to rest in. These stores focus on providing not only what is practically needed in a house but also aesthetics, style, and charm in the form of tables, lamps, and mirrors. Decades ago, it was thought that furniture would resist e-commerce because of the logistical challenges of shipping large furniture, but now you can buy a mattress online and get it in a box a few days later; so just like other retailers, furniture stores need to adapt to new realities and consumer behaviors.
Sales Growth
RH is a mid-sized retailer, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the other hand, it has an edge over smaller competitors with fewer resources and can still flex high growth rates because it's growing off a smaller base than its larger counterparts.
As you can see below, the company's annualized revenue growth rate of 3.4% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was weak as its store footprint remained relatively unchanged.
This quarter, RH missed Wall Street's estimates and reported a rather uninspiring 4.4% year-on-year revenue decline, generating $738.3 million in revenue. Looking ahead, Wall Street expects sales to grow 8.3% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Same-store sales growth is an important metric that tracks demand for a retailer's established brick-and-mortar stores and e-commerce platform.
RH's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 10% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
Key Takeaways from RH's Q4 Results
While RH's revenue unfortunately missed analysts' expectations, revenue guidance for the full year was more encouraging. The company stated that they "expect demand trends to accelerate throughout fiscal 2024" despite a challenging backdrop due to a weak US housing market. Overall, the results could have been better, but the outlook is encouraging. The stock is up 4.1% after reporting and currently trades at $309.08 per share.
So should you invest in RH right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
