Restoration Hardware anyone?

Guys - it is hard for me to judge some very US centric players as well as the mood on the street (not counting CNBC/Bloomberg etc), however I’d be interested in folks views on this one. RH has been completely smashed to bits in the last 3 months. It is a 20% revenue growth story with an even stronger profit build over the last 5 years. In Q4 the stock as well as the growth rate cut in half as some sector headwinds as well as internal execution issues reduced the growth rate to 11%.

The travails have been well documented…
http://seekingalpha.com/article/3954006-restoration-hardware…
http://seekingalpha.com/article/3938816-short-restoration-ha…

It has some fairly stern critics and it maybe best to wait passed the results announcement on 29th, however I can’t help but feel this is a high quality company with a very good growth record which even in hard times is still moving forwards in double digits with a double digit operating margin, a p/e now of 15 and expected PEG of 0.48.

Any holders or views out there? I’m starting to research this further but I feel very remote on this kind of play.
Ant

5 Likes

I’ve taken a small nibble.

Nothing new but here is a new post on the Deranged Monkeys;

http://discussion.fool.com/rh-restoration-hardware-32175046.aspx…

JT

I glanced at it too, as I know it’s one of David G’s Stock Advisor recommendations, but for the life of me I can’t figure out why it was ever trading near $100 a share. Even at it’s current valuation, it doesn’t look as cheap as some of Saul’s stock which are growing much faster. Seems kind of meh.

Also, there’s reason to doubt how well the company is run, as management just absurdly blamed oil prices (!?) for part of the reason revenue was down this quarter. Simply baffling.

1 Like

Well, if you just took RH’s numbers at face value, they don’t look so bad. In fact, you get:


Revenue (millions)	Q1		Q2		Q3		Q4			
2013									471.7
2014			366.2		433.7		484.7		582.7
2015			422.4		506.9		532.4			

EPS (adjusted)		Q1		Q2		Q3		Q4	
2013									0.83	
2014			0.18		0.67		0.49		1.02		
2015			0.23		0.85		0.65			

Current (2015 Q3 Earnings):

Revenue Growth (millions)
2014 Q4 TTM Revenue = 1756.3
2015 Q4 TTM Revenue = 2044.4
Year Over Year Revenue Growth = 16.4%

EPS Growth (adjusted)
2014 Q4 TTM Earnings = 2.17
2015 Q4 TTM Earnings = 2.75
Year Over Year EPS Growth = 26.7%

P/E (Check Current Price) = 37.13/2.75 = 13.5

1YPEG = 13.5/26.7 = 0.51

They report earnings later this week but have already pre-announced they would miss analyst expectations by quite a bit. In fact, they estimated their EPS coming in at around $0.99 per share. If this is accurate, it would mean their earnings will decrease from their Q4 last year.

Now this might be similar to the situation Michael Kors found itself in last year, where a flawed company was punished too much by the market and I was fortunate to get in at a great price. But I am not so confident this time around. Reading comments on the RH board makes me think they are facing significant logistical issues with their new furniture lines. Plus, from what little I know, I’m not too fond of their CEO’s leadership at this point: http://www.forbes.com/sites/retailwire/2016/03/07/restoratio…

It’s more than enough to keep me out for now. Worth keeping an eye on though if it keeps dropping.

Matt
MasterCard (MA) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

9 Likes

pictures are werth a thousand werds.

Doink !!! Timberrrrrrrrr !

Any Fool would have dumped this stock way back in Mid November of 2015.

http://stockcharts.com/h-sc/ui?s=RH&p=D&yr=0&mn=…

http://stockcharts.com/h-sc/ui?s=RH&p=D&yr=1&mn=…

Quillnpenn - Just JAFOing

“Few analysts or advisors are willing to take responsibility for bad calls they’ve made and therefore, refuse to tell you to cut your losses before things get out of hand. It’s important to remember that investment advisors are in the business of accumulating accounts. That’s usually their #1 priority, whether they work for themselves or for larger firms.” Paul Rubillo CEO and Founder of Dividend.com who wrote “Be a Dividend Millionaire.”

"Buy-and-hold is what people say;buy-and-bail is what they do." JASON KELLY who wrote “The 3% Signal”

6 Likes

Thanks Matt for the response!

Thanks for the nice summary Matt. Greatly appreciated.

IBD ratings show it it pretty weak.

Checklist…Rating
Composite Rating 37 Fail
EPS Rating …88 Pass
RS Rating …2 Fail
Group RS Rating E Fail
SMR Rating …A Pass
Acc/Dis Rating B- Pass

2 Likes

Today they released earnings and it wasn’t pretty. But the guidance was even worse:

Shares of Restoration Hardware Holdings Inc. slid in Tuesday’s extended session after the upscale home furnishings retailer issued a weak outlook for the current quarter. Restoration Hardware reported its fourth-quarter earnings slid to $33.3 million, or 79 cents a share, from $42.5 million, or $1.02 a share, a year earlier. On an adjusted basis, the company earned 98 cents a share, which fell short of its own projection released in February. Revenue rose to $647.2 million from $582.7 million. The results missed FactSet survey’s estimate of earnings of $1.39 a share and revenue of $711 million.

In the first quarter, Restoration Hardware is forecasting revenue in a range of $452 million to $456 million and adjusted earnings per share of 6 cents to 4 cents. Wall Street is expecting revenue of $460 million and EPS of 17 cents. For fiscal 2016, the company expects revenue to grow by low to mid-single digits and flat or slightly lower EPS compared with the previous year.

Read the entire article at http://www.foxbusiness.com/markets/2016/03/29/restoration-ha…

Adjusted EPS guidance of $0.04 to $0.06 for next quarter? Ouch! There might be a lot more pain ahead for this stock.

Matt
No position
MasterCard (MA) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

3 Likes

Quillnpenn,

I have two questions, if you don’t mind:

Are you long RH?

What’s JAFOing?

Thanks. So much to learn,
Jackson

2 Likes

re: RH

Jackson,

picked up a few shares of RH Friday @ 43.13 the price line crossed up and over the 20ema heading north. Exit at the Xover. The MACD gave an early warning on 3/10/16 @ 38.50.

JAFO comes from the 1983 movie Blue Thunder where the person riding shotgun has a baseball cap with the letters JAFO meaning “Just Another F----ing Observer” on it.

https://www.google.com/webhp?ie=UTF-8&rct=j#q=blue+thund…
http://www.abbreviations.com/JAFO
https://www.google.com/webhp?ie=UTF-8&rct=j#q=What+does+…
http://thomaspluck.com/2008/07/01/j-a-f-o-blue-thunder-still…

Quillnpenn -

2 Likes