Dive Brief:
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Shares of Restoration Hardware tumbled 20% after the furniture retailer reported an adjusted loss per share of 5 cents in the lfirst quarter, compared with the forecast of a 5 cents gain by analysts surveyed by FactSet.
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Same-store sales in the quarter, rose 4% compared to a 15% rise the same quarter last year. Net revenues increased 8% to $455.5 million from $422.4 million year over year.
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The retailer lowered its outlook for the year, saying it expects second quarter revenue in the range of $505 million and $520 million, missing the FactSet consensus for revenue of $534 million.
Dive Insight:
Restoration Hardware has been the poster child for brick-and-mortar success, staking its comeback on its physical stores and its immense print catalog. That strategy has ignored much of the conventional wisdom of today’s retail world, which is seeing many retailers invest heavily in e-commerce and omnichannel initiatives. After struggling years ago, going private to regroup and then going public again, the home furnishings retailer has dedicated its efforts to legacy approaches, leaving its social media strategy to customers and fans.
That seemed to work until recent quarters where the company has suffered bloated inventories and sales slumps. A recent move to create a paid loyalty program for its RH Grey Card in lieu of holding sales has been met with some skepticism. For a $100 a year, customers enjoy 25% off in all departments, 10% off clearance items, complimentary interior design services, early access to clearance events and lower interest rates on the RH credit card. Perks don’t include free shipping.
Analysts Thursday met the retailer’s report with dim views, according to Bloomberg. BB&T Capital Markets analysts said they weren't “completely surprised” by the first quarterly results, but questioned its way forward, Marketwatch reports.
“[W]e are still flabbergasted by how quickly the wheels appear to be falling off of Restoration Hardware, and think the last two quarters’ debacles cast significant doubt on management’s credibility and ability to achieve long-term financial targets,” the bank wrote in a note published Thursday, according to Marketwatch.
CEO Gary Friedman said headwinds presented by the strong U.S. dollar, slowdowns in spending in wealthy areas normally buoyed by the energy-based economy, and a general slowdown in luxury spending are besetting Restoration Hardware.
“While there is uncertainty regarding the headwinds impacting revenues, we expect many of the cost and margin related issues to be short term in nature,” he said in a statement. “Despite our recent difficulties, we remain the leading luxury home brand in the world.”