Restoration Hardware solidified a comeback on Wednesday with fourth quarter results that outpaced expectations in some measures. GAAP net revenues rose 14% year over year to $670.3 million from $586.7 million in the year-ago period, which missed the Zacks consensus estimate for $671.49 million.
Adjusted diluted earnings in the quarter surged 149% to $1.69 per share, beating the Zacks Consensus Estimate for $1.56 per share.
The company scaled back guidance for revenue growth, while raising it for earnings. Adjusted operating margins are now forecast to range between 9.2% and 10.2%. Adjusted gross margins are expected to increase 260 to 340 basis points, and the adjusted net income outlook is raised 63% to 85% over last year’s prior guidance of $125 million to $145 million to a range of $145 million to $165 million.
Restoration Hardware’s new membership model, which had invited much skepticism, provided 95% of the company’s core business in the quarter, according to a statement from CEO Gary Friedman. "[W]e can confidently declare our move from a promotional to membership model a success," he said. "Membership has enhanced our brand, streamlined our operations and vastly improved the customer experience."
The company has made strides toward achieving more efficient operations, including the closure of two distribution centers, along with simplifying its reverse logistics and outlet model. The retailer also reduced inventory year-over-year by 30%, or $225 million.
With plans for more elaborate showrooms that include hospitality, the retailer is achieving on (literal) ground what can’t be done online, Friedman insisted again this week. The company is expanding its hospitality approach, with plans to integrate cafés, wine vaults and barista bars in three of the four new locations planned for this year (in Portland, Nashville, Yountville, CA and New York). The Nashville Gallery will replicate the architecture and layout of RH Chicago, according to a press release.
"We do understand that many of the strategies we are pursuing … are all in direct conflict with conventional wisdom and the plans being pursued by many in our industry," he said. That includes opening "the largest specialty retail experiences in our industry" while rivals close stores, moving to a membership model, while others increase promotions and continuing to mail inspiring print Source Books, he said.
"[We are] refusing to follow the herd in self-promotion on social media, instead allowing our brand to be defined by the taste, style, design and quality of the products and experiences we are creating," he also said, adding that the approach has allowed RH to have "total control of our brand from concept to customer."