RH momentum continues in stellar Q2; cites supply chain challenges

RH delivered another strong quarter despite supply chain challenges that it said have been amplified by the spread of the Delta variant.

The luxe home furnishings retailer, formerly known as Restoration Hardware, reported net income of $226.7 million, or $7.09 per share, for the quarter ended July 31, up from $98.4 million, or $3.71 per share, in the year-ago period. Adjusted earnings were $8.48 per share far ahead of analysts estimates $6.51.

Net revenues rose 39% to $988.9 million from $709.3 million last year. Analysts were looking for $973.4 million. Net revenues increased 40% compared to the second quarter of 2019.

“Our demand growth has accelerated during the third quarter on a two-year basis and has continued to build momentum despite cycling the most difficult comparisons from a year ago and the continued supply chain challenges that have been amplified by the spread of the Delta variant,” RH chairman and CEO Gary Freidman wrote in his quarterly shareholder letter.

Amid supply chain challenges, the company is delaying the launch of RH Contemporary until spring 2022. And citing the uncertainty of how the Delta variant will impact the hospitality industry this winter, it is delaying the opening of its first-ever RH Guesthouse in New York City, also until spring. The company remains on track to open locations with integrated hospitality options in Chicago, Jacksonville and San Francisco this fall. Also on track: the opening of RH England, located on a 73-acre estate and the launch of the digital portal, World of RH.

In his letter, Friedman noted that the data and current trends support the argument of “a more long-term and sustainable step change in consumer spending on the home.

“An important point to consider when analyzing the strong demand in the housing market is the migration of consumers to larger suburban and second homes,” he said. “This trend is resulting in substantial square footage growth that is driving increased furniture and furnishings demand. Add to that, historically low interest rates, a record stock market and the reopening of several large parts of the economy, and elevated spending on the home could have a very long tail.”

RH said it was once again raising its fiscal 2021 outlook based on the “continued strength of our business and the power of our operating model.”  It now expects revenue growth of 31% to 33% versus its prior outlook of 25% to 30%.

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