Upscale furniture chain RH (RH) boosted its full-year earnings outlook, but trimmed its revenue forecast, and revenue and same-store sales for the second quarter missed estimates.
Second-quarter revenue of $640.8, meanwhile, million missed estimates for $661 million. Consensus Metrix forecast a 7.7% gain in same-store sales, but comparable brand revenue only rose 5%.
The company dialed back its full-year revenue outlook by around 2%, saying it continued to "prioritize earnings over revenue growth and focus on optimizing the profitability of our new operating model."
Unlike other retailers that are slashing prices and closing stores to address the threat of e-commerce, RH has banked on print catalogs and opulent, Instagrammable furniture galleries — some of them decked out with restaurants and wine lounges, and nice enough for weddings. The company has also debuted a membership program and streamlined distribution.
But after rocketing 30% higher following its earnings report in June, RH's weaker sales trends appeared to send investors fleeing.
RH Stock
Shares of RH tumbled 5.3% to 144.50 after hours in the stock market today, after jumping nearly 7% in the minutes after the company reported results. Soon after the open, RH stock hit 161.93, briefly topping a 161.49 buy point of a cup-with-handle base.
XThe stock has a strong 93 Composite Rating out of 99. That overall score has been rising as earnings and share price have surged in recent months amid a broader turnaround.
Meanwhile, upscale housewares retailer Williams-Sonoma (WSM) was unchanged at 72.31. Williams-Sonoma stock is now once again slightly extended from a breakaway gap buy point of 167.79. Shares surged 16.5% on Aug. 23 following its quarterly results.
RH's second-quarter earnings per share surged to $2.49, well above estimates for $1.74. RH said it expects full-year EPS of $7.35-$7.75, up from an earlier forecast of $6.34-$6.83. Wall Street had expected $6.66. The company also raised its third-quarter and fourth-quarter earnings-per-share forecasts above analyst forecasts.
"We will restrain ourselves from chasing low quality sales at the expense of profitability, and instead focus on optimizing our new business model while building an operating platform that will enable us to compete and win over the long-term," RH said in a statement.
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RH Aims To 'Revolutionize Physical Retailing'
RH stock blasted 31% higher on June 12 after the company reported soaring Q1 earnings and hiked its profit outlook. Management cited "the power of our new membership model," along with "efforts to revolutionize physical retailing, and our work designing a massively more efficient operating platform."
The membership program, CEO Gary Friedman in September, had "eliminated the frantic buying patterns and associated returns, exchanges, and canceled orders that are the result of a chaotic promotional model."
RH in July opened a 70,000 square foot location in Nashville, Tenn. RH has also partnered with a company that creates 3D replicas of selected artworks, some which appear in some RH galleries. Two new locations — RH New York and RH Yountville — open this month.
The company on Tuesday also touted the popularity of its furniture galleries' restaurants.
"With three of our four restaurants trending to generate $5 million to $6 million annually, and our fourth at approximately $4 million," the company said, "we believe RH Hospitality is now a proven scalable business, and we plan to increase the number of new Galleries with integrated restaurants, wine vaults, and barista bars going forward."
As President Donald Trump continues to make tariff threats, RH in July said it expected to reduce its sourcing from China.
RH, in July, also said it expects to get around 35% of its products from China this year. For next year, it said imports from China would comprise around 25% to 30% of the total. The company said it was "well positioned" to adjust prices. It also said it believed its vendor partners would work with the company to look at "sourcing alternatives."
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