News Column

Restoration Hardware Shares Drop Despite Jump in Revenue

September 10, 2013

The Associated Press

restoration hardware
Restoration Hardware store in Naperville, Ill. (photo: Creative Commons)

CORTE MADERA, Calif. (AP) — Restoration Hardware said Tuesday that revenue in its fiscal second quarter jumped 30 percent and it lifted its 2013 outlook. But the furniture and housewares retailer booked a loss for the period over charges linked to stock awards given to Chairman and co-CEO Gary Friedman, sending shares lower in after-hours trading.

Adjusted results topped Wall Street expectations. The company is several years into a turnaround: it was losing money when it was bought by a private equity firm in in 2008. Since then Restoration Hardware has since redesigned stores, revamped its product line and focused on a higher-end market.

Due to the vesting of some stock awards and the one-time, fully vested option that Friedman received when he was reappointed chairman and CEO in July, Restoration Hardware booked $59.8 million in non-cash compensation charges.

The charges drove a loss of $17.8 million, or 46 cents per share, for the three months that ended on Aug. 3, compared with profit of $17.6 million, or 48 cents per share, a year earlier. Excluding one-time items, Restoration Hardware would have earned 49 cents per share, up from 33 cents per share a year ago. Revenue grew to $382.1 million from $292.9 million.

The company said that its revenue from stores open at least one year surged 26 percent. Sales at stores open at least a year are considered a key measurement of retailer health because they exclude results from stores that opened or closed within the last year.

The results beat analysts' average forecast for net income of 42 cents per share and $376.6 million in revenue, according to FactSet.

Restoration Hardware said that based on sales trends and the cost savings it expects to enjoy from cancelling the mailing of its big fall catalogs in favor of one annual spring issue, it is liftig its 2013 outlook. The company is now forecasting net income of $1.65 to $1.70 per share and $1.56 billion to $1.58 billion in revenue for the fiscal year ending on Feb. 1. Its prior guidance called for net income of $1.41 to $1.47 per share and $1.47 billion to $1.51 billion in revenue.

Analysts have been expecting earnings of $1.48 per share and $1.52 billion in revenue, on average.

"Los Angeles and Houston delivered comps in excess of 29 percent during the second quarter, ahead of the rest of our chain. Also, our new locations in Scottsdale, Boston and Indianapolis continue to perform ahead of expectations," Co-CEO Carlos Alberini said in a statement. The company plans to open new full-line design galleries in Greenwich, Conn., Atlanta and Los Angeles in 2014 and is currently in negotiations for more than 30 locations in other markets.

"We continue to believe we can open more than 10 locations a year, beginning in 2015." Alberini said.

Restoration Hardware Holdings Inc. had 70 retail stores at the end of the quarter, down from 73 a year ago. It has 17 outlet locations, up from 10. Shares fell 74 cents to close at $76.06 on Tuesday before the report. The stock lost 4.4 percent to $72.72 in aftermarket trading.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Original headline: Restoration Hardware books 2Q loss on charges


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Source: Copyright 2013 The Associated Press. All rights reserved.


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