Restoration Hardware (RH, Financial) has been an up trending stock ever since its IPO was launched and has grown more than three times over the period. Even in the second quarter the company reported significant growth in both revenue and profits. On the flipside, revenue failed to impress the street as it lagged behind the analysts’ consensus and the stock declined.
However, the stock mainly tumbled as the seller of high-end home furnishing cut its sales forecast for the year. But this could be seen more as a consolidation after having a rally in the month of June. Moreover, the company has strong fundamentals and with an improving housing market there could be more upside to Restoration Hardware in the days ahead.
Making good moves
The company is experimenting with new concepts and methodologies with the release of its new Source Books. It includes the expansion of its products and their dominance in each business. Restoration Hardware is counting on its source books heavily and, looking at the improving trends, it has raised its earnings guidance for the year. The company expects a revenue growth of more than 20% for the second half.
It has modified its products that will appeal to its prospective customers. For example in the newly launched Source Book, it has presented its Maxwell Sofa and the new destroyed leather along with the galleries of leather hides and chairs. Not only this, it will roll out its new rug fixtures and place the new rug assortment in all of its galleries during the fourth quarter. Restoration expanded its product assortments across various segments such as furniture, lighting, textiles, small spaces and baby. Its enhanced product portfolio is its greatest strength that will boost its business in the coming days.
In addition the company has come up with an excellent strategy to stand out in the crowd. Taking serious note of the fact that the customers have to undergo a series of procedures such as looking from showroom to showroom, tracking orders independently and various others before buying a product. Consequently, Restoration Hardware is integrating all the categories of a design district under one roof with a stylistic and esthetic point of view. This will attract customers in the days to come and ultimately drive its revenue.
Conclusion
Restoration Hardware currently has a trailing P/E of 49.47 but its forward P/E looks impressive at 29.19 reflecting improvement in its earnings. Backed by its strong fundamentals and along with year over year growth it seems that the company will resume its upward momentum in the days to come.
