RH (RH) Q4 2019 Earnings
Did RH Beat Earnings? Q4 2019 Results
Yes. RH reported Q4 2019 earnings of $3.72 a share on Mar 30, 2020, beating the $3.59 consensus estimate by 3.6%. Revenue was $665.0M against a $708.9M estimate.
RH delivered a mixed fourth quarter for fiscal 2019, beating on the bottom line while falling short on revenue against a backdrop increasingly clouded by the emerging COVID-19 crisis. Adjusted diluted EPS of $3.72 topped the consensus estimate of $3.59 by 3.62%, extending the luxury home furnishings retailer's streak of earnings beats to 13 consecutive quarters, even as net revenues slipped 0.9% year-over-year to $664.98 million, missing the $708.87 million estimate by 6.19%. Management pointed to the deliberate elimination of the Holiday assortment as the primary culprit behind the revenue shortfall, citing lower customer traffic during peak holiday weeks and higher-than-expected backorders with inventories down 18% year-over-year. The strong profitability picture, however, underscored operational discipline, with adjusted operating margin expanding 230 basis points to 17.4%. Looking ahead, RH withdrew all fiscal 2020 guidance, noting that core business demand had fallen roughly 40% since gallery closures on March 18, though management reaffirmed long-term targets of 8-12% revenue growth and adjusted operating margins in the high teens to low twenties.
- Higher product margins drove adjusted operating margin expansion of 230 basis points in Q4
- Lower occupancy and shipping costs from elimination of Holiday assortment
- Continued efficiencies from new operating platform
- Inventories down 18% year-over-year contributed to higher-than-expected backorders
- Elimination of Holiday assortment created collateral damage to core business through lower customer traffic
“Fiscal 2019 was an outstanding year for Team RH. We achieved record results across every key metric of our business while continuing to elevate the brand and create strategic separation in our industry.”
RH CEO, on the earnings call
What Was RH's Outlook in Q4 2019?
RH withdrew all prior guidance and outlook statements for fiscal year 2020 due to the significant disruption caused by COVID-19. Since the closing of galleries, restaurants and outlets on March 18, 2020, core RH business demand is running down approximately 40% year-over-year, while total company demand is down approximately 43%. Prior to the COVID-19 impact, core business demand was up 8% in February. The company expects to defer new business introductions and capital spending while reducing costs. Executive leadership elected to forgo salaries until business conditions stabilize. Long-term, RH expects to return to previously communicated targets of 8-12% revenue growth, adjusted operating margins in the high teens to low twenties, adjusted net income growth of 15-20% annually, and ROIC in excess of 50%. The company sees a path to over $5 billion in North America revenues and a $20 billion global brand opportunity through international expansion.
RH YoY Financials
| Metric | Q4 2019 | Q4 2018 | Year over year |
|---|---|---|---|
| Revenue | $665.0M | $670.9M | −0.9% |
| Gross Profit | $283.1M | $262.7M | +7.7% |
| Operating Income | $101.0M | $94.7M | +6.6% |
| Net Income | $68.4M | $36.1M | +89.4% |
Figures from SEC filings and company reports. Not investment advice.