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Restoration Hardware: We’ve got some bad news on the financial front

Restoration Hardware aims to shore up customer experience as part of its overall strategy to get growth and financials in a healthier state.

February 25, 2016

A peek at what's coming with fourth-quarter financials for Restoration Hardware apparently is not sitting well with shareholders as its stock price dipped 20 percent Wednesday after the retailer noted in a letter there is a "fair amount of bad news" regarding Q4.

Yet, as a Daily News X report notes, not everything is doom and gloom as orders increased during the quarter.

In the earnings update, the company expects net revenue to hit $647.2 million, compared to an earlier projection of $713 million and adjusted earnings will likely hit $0.99, not the earlier projection of $1.40 per share.

In a letter to shareholders, CEO Gary Friedman listed out the bad news, noting the company is now thinking and operating differently than it was a year ago due to changing market conditions. He also states some positive developments he believes is reason to feel confident in the retailer's long-term growth approach.

He cites shipping delays with the company's RH Modern brand as one challenge in ramping up production on the new product line, which has been received very well. Markets impacted by energy and oil fluctuations are underperforming but that should cycle out, he notes.

The letter notes pullback by high-end consumers, specifically regarding big furniture purchases, is tied to volatile stock market activity.

"Historically, our business has a correlation to large movements in stock prices as we believe asset valuations influence our customers’ buying patterns," states the letter.

But overall the company leader is obviously optimistic about the years ahead.

"While there is certainly a fair amount of bad news in the quarter, the good news from our point of view greatly outweighs the bad when you put it into the context of our long-term growth strategy. Despite the economic headwinds, our two key growth strategies — the expansion of our product offer and the transformation of our real estate — are working exceptionally well," he stated.

Consumer response to the company's RH Modern brand is leading to billion-dollar growth and the company expects to expand the brand and increased retail footprint this year.

"Our ability to blur the lines between residential and retail, creating an immersive environment that is more home than store, is producing industry leading results and positioning RH as the clear leader in the luxury home furnishings market," states the letter.

In mapping out its focus points for the year the company aims to elevate the customer experience.

"We are focusing a significant amount of our energy on improving the end-to-end customer experience. As we have elevated our brand, especially at retail, other customer touch points also need to leapfrog forward to create a cohesive experience. This initiative will focus on everything from product quality to in-home delivery across all channels, and includes new people, processes and systems," stated the letter.

The company will provide its quarterly earnings on March 23.