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RH Reports 109% YoY Increase in Q1 Core Demand and Raises FY/21 Outlook

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RH, formerly Restoration Hardware Holdings, Inc., shares traded 15% higher after the company reported Q1/21 financial results that included a 78% increase in YoY total revenue.

After U.S. Markets closed for trading yesterday, luxury home furnishings marketplace firm RH (RH:NYSE), formerly Restoration Hardware Holdings, Inc., announced financial results for the first quarter of 2021 ended May 1, 2021. The firm reported the details in a letter to shareholders from RH's Chairman and CEO Gary Friedman.

The report highlighted that total revenue in Q1/21 increased by 78% to $860.8 million, compared to $482.9 million in Q1/20. During the same period the firm stated that GAAP gross margin increased by 600 basis points to 47.3% and GAAP operating margin increased 1,450 basis points to 21.8%, versus 41.3% and 7.3%, respectively in the prior year's corresponding quarter.

RH advised that for Q1/21, it posted GAAP net income of $130.7 million, compared to a net loss of $3.2 million in Q1/20 and GAAP diluted earnings per share (EPS) of $4.19, versus a GAAP diluted EPS loss of $0.17 in the same quarter last year.

Friedman led off his comments by noting that FY/21 started strongly and stated that total company demand increased by 101% and RH core demand increased by 109% in Q1/21.

Friedman remarked, "RH continues to set a new standard for financial performance among home furnishings retailers with adjusted operating margin increasing 1,260 basis points in Q1/21 to 22.6% versus 10.0% for Q1/20." Friedman added that adjusted net income also increased significantly by 375% year-over-year and adjusted diluted EPS increased to $4.89 per share, representing a 285% increase over the adjusted diluted EPS of $1.27 registered in the same period last year.

The company provided forward guidance and stated that it was increasing it FY/21 outlook. The firm noted that due to the positive trends it is seeing in its business, it is raising its FY21 revenue growth outlook to be in the range of 25-30%, compared to its previous estimates of 15-20%. RH stated it now expects FY/21 adjusted operating margin will fall within the range of 23.5-24.3% and said that this percentage represents a 170-250 basis point increase versus its prior outlook of 100-200 basis points and that it expects return on invested capital (ROIC) will be in excess of 60%.

The company advised further that for Q2/21, it expects revenue growth of 35-37% and an adjusted operating margin of between 25.9-26.1%.

In the letter to shareholders, Friedman commented that the company feels optimistic that its strong performance will continue in H2/21 and accelerate further in FY/22 and beyond buoyed by a strong housing and renovation market, pent up demand, low interest rates and the reopening of large parts of the U.S. economy.

RH explained that it is continuing with it strategy to build a luxury brand business model, which "generate luxury margins." The firm pointed out that "with 21.8% adjusted operating margin in FY/20, RH has eclipsed the operating margin of LVMH, and now has a clear line of sight to 25%-plus adjusted operating margin over the next several years."

The firm indicated that it has successfully built "the most comprehensive and compelling collection of luxury home furnishings under one brand in the world." RH stated in the letter that in its current form it believes it has the potential to become a $20-25 billion global brand.

The company explained that it is continuing its global expansion efforts with the scheduled spring 2022 opening of RH England along with the pending reopening plans for RH Paris in the fall of 2022. The firm also stated that it has now secured five locations in Europe including two in Germany that will open during the next two to three years.

RH is headquartered in Corte Madera, Calif., and describes itself as "a curator of design, taste and style in the luxury lifestyle market." The firm operates and sells its products thru retail galleries in North America, the company's multiple Source Books and online via RH.com, RHBabyandChild.com, RHModern.com, RHTeen.com and Waterworks.com.

RH started the day with a market cap of around $12.9 billion with approximately 21.03 million shares outstanding and a short interest of about 12.75%. RH shares opened more than 12% higher today at $686.03 (+$74.70, +12.22%) over yesterday’s $611.33 closing price. The stock has traded today between $681.00 and $714.69 per share and closed at $707.14 (+$94.30, +15.39%).


1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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