RH (NYSE: RH) today announced updated second quarter and fiscal
year 2019 revenue and earnings guidance and Chairman & Chief
Executive Officer Gary Friedman provided a brief update of the
Company’s recent performance and outlook.
The Company’s updated outlook for second quarter fiscal year
2019:
Adjusted net revenues in the range of $696 million to $699
million, an increase of 8% to 9% over last year, versus the
previous outlook for revenues in the range of $681 million to $688
million
Adjusted diluted EPS in the range of $2.65 to $2.72, an increase
of 40% to 44% over last year, versus the previous outlook for
adjusted diluted EPS in the range of $2.33 to $2.47
Free cash flow of approximately $95 million versus $25 million
last year, resulting in net debt to TTM Adjusted EBITDA of
approximately 2.4 times
The Company’s updated outlook for fiscal year 2019:
Adjusted net revenues in the range of $2.658 billion to $2.674
billion, an increase of 6% to 7% over last year, versus the
previous outlook for adjusted net revenues in the range of $2.643
billion to $2.663 billion
Adjusted diluted EPS in the range of $9.08 to $9.52, an increase
of 24% to 30% over last year, versus the previous outlook for
adjusted diluted EPS of $8.76 to $9.27
Gary Friedman, the Company’s Chairman and Chief Executive
Officer commented, “Our revenues continue to build momentum as we
begin to pivot the Company back to growth. We are pleased with the
early results of RH Beach House introduced late Spring, and plan to
unveil RH Ski House plus several new collections across RH
Interiors and RH Modern this Fall. We continue to be cautiously
optimistic about our prospects for the second half of 2019 as we
begin to cycle the compounding negative effect of multiple interest
rate hikes and a depressed high end housing market last year, plus
the stock market volatility that disrupted our business in the
fourth quarter.”
Mr. Friedman continued, “Despite achieving industry leading
operating margins we continue to demonstrate our ability to grow
earnings significantly faster than revenues, illustrating the
desirability of our proprietary product offering, and the emerging
power of our new operating platform. As previously communicated, we
believe the RH brand has the potential to reach $4 to $5 billion in
North American revenues with mid-to-high teens operating margins
and ROIC in excess of 50%. Additionally, we now believe there is an
opportunity to more than double those revenues as we begin to
expand globally, and move the brand beyond creating and selling
products to conceptualizing and selling spaces.”
ABOUT RH
RH (NYSE: RH) is a curator of design, taste and style in the
luxury lifestyle market. The Company offers its collections through
its retail galleries across North America, the Company’s multiple
Source Books, and online at RH.com, RHModern.com,
RHBabyandChild.com, RHTeen.com and Waterworks.com.
NON-GAAP FINANCIAL MEASURES
To supplement its condensed consolidated financial statements,
which are prepared and presented in accordance with Generally
Accepted Accounting Principles (“GAAP”), the Company uses the
following non-GAAP financial measures: adjusted net revenue,
adjusted operating income, adjusted net income or adjusted net
earnings, adjusted net income margin, adjusted diluted earnings per
share, normalized adjusted net income, normalized adjusted diluted
net income per share, ROIC or return on invested capital, free cash
flow, adjusted operating margin, adjusted gross margin, adjusted
SG&A, EBITDA and Adjusted EBITDA (collectively, “non-GAAP
financial measures”). We compute these measures by adjusting the
applicable GAAP measures to remove the impact of certain recurring
and non-recurring charges and gains and the tax effect of these
adjustments. The presentation of this financial information is not
intended to be considered in isolation or as a substitute for, or
superior to, the financial information prepared and presented in
accordance with GAAP. The Company uses these non-GAAP financial
measures for financial and operational decision making and as a
means to evaluate period-to-period comparisons. The Company
believes that they provide useful information about operating
results, enhance the overall understanding of past financial
performance and future prospects, and allow for greater
transparency with respect to key metrics used by management in its
financial and operational decision making. The non-GAAP financial
measures used by the Company in this press release may be different
from the non-GAAP financial measures, including similarly titled
measures, used by other companies.
The Company's guidance on adjusted net revenues, adjusted
diluted EPS, free cash flow and trailing twelve-month EBITDA
contained in this press release does not include certain charges
and costs. The adjustments to these non-GAAP financial measures in
future periods are generally expected to be similar to the kinds of
charges and costs excluded from such non-GAAP financial measures in
prior periods, such as unusual non-cash and other compensation
expense; legal claim related expenses; recall accruals;
reorganization costs including severance costs and related taxes;
and non-cash amortization of debt discount, among others. The
exclusion of these charges and costs in future periods could have a
significant impact on the Company’s adjusted diluted earnings
guidance, free cash flow guidance and trailing twelve-month EBITDA.
The Company is not able to provide a reconciliation of the
Company’s non-GAAP financial guidance to the corresponding GAAP
measures without unreasonable effort because of the uncertainty and
variability of the nature and amount of these future charges and
costs.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of the federal securities laws, including without
limitation, statements regarding: the Company’s updated outlook for
the second quarter fiscal year 2019 and for the full fiscal year
2019; the Company’s future growth; the Company’s planned
introduction of RH Ski House and other new collections; the
Company’s prospects for the second half of 2019; the Company’s
belief that the RH brand has the potential to reach $4 to $5
billion in North American revenues with mid-to-high teens operating
margins and ROIC in excess of 50%; the Company’s belief that there
is an opportunity to more than double those revenues as the Company
begins to expand globally; and any statements or assumptions
underlying any of the foregoing. You can identify forward-looking
statements by the fact that they do not relate strictly to
historical or current facts. These statements may include words
such as “anticipate,” “estimate,” “expect,” “project,” “plan,”
“intend,” “believe,” “may,” “will,” “should,” “likely” and other
words and terms of similar meaning in connection with any
discussion of the timing or nature of future events. We cannot
assure you that future developments affecting us will be those that
we have anticipated. Important risks and uncertainties that could
cause actual results to differ materially from our expectations
include, among others, risks that the financial outlook provided
for the second quarter of fiscal year 2019 and the full fiscal year
2019 does not represent actual financial results and is subject to
change based upon the preparation of our financial statements; our
dependence on key personnel and any changes in our ability to
retain key personnel; successful implementation of our growth
strategy; risks related to the number of new business initiatives
we are undertaking; successful implementation of our growth
strategy including our real estate transformation and the number of
new gallery locations that we seek to open and the timing of
openings; uncertainties in the current performance of our business
including a range of risks related to our operations as well as
external economic factors; general economic conditions and the
housing market as well as the impact of economic conditions on
consumer confidence and spending; changes in customer demand for
our products; our ability to anticipate consumer preferences and
buying trends, and maintaining our brand promise to customers;
decisions concerning the allocation of capital; factors affecting
our outstanding convertible senior notes or other forms of our
indebtedness; our ability to anticipate consumer preferences and
buying trends, and maintain our brand promise to customers; changes
in consumer spending based on weather and other conditions beyond
our control; risks related to the number of new business
initiatives we are undertaking; strikes and work stoppages
affecting port workers and other industries involved in the
transportation of our products; our ability to obtain our products
in a timely fashion or in the quantities required; our ability to
employ reasonable and appropriate security measures to protect
personal information that we collect; our ability to support our
growth with appropriate information technology systems; risks
related to our sourcing and supply chain including our dependence
on imported products produced by foreign manufacturers and risks
related to importation of such products including risks related to
tariffs, the countermeasures and mitigation steps that we adopt in
response to tariffs and other similar issues, as well as those
risks and uncertainties disclosed under the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in RH’s most recent Form 10-K
and Form 10-Q filed with the Securities and Exchange Commission,
and similar disclosures in subsequent reports filed with the SEC,
which are available on our investor relations website at ir.rh.com
and on the SEC website at www.sec.gov. Any forward-looking
statement made by us in this press release speaks only as of the
date on which we make it. We undertake no obligation to publicly
update any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by any applicable securities laws.
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version on businesswire.com: https://www.businesswire.com/news/home/20190729005710/en/
Allison Malkin 203-682-8225 allison.malkin@icrinc.com
RH (NYSE:RH)
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