Restoration Hardware threw out every excuse in the book to explain what is shaping up to be a dismal quarter for the company.
In an earnings pre-release, the company laid out all of the reasons for its lowered revenue and profit expectations and what is ailing the company just about everywhere else.
Here’s a quick rundown of all the issues Restoration Hardware said it ran into:
- Supplier issues: The company said that while it booked a strong growth in orders in the fourth quarter, many of these did not translate into revenue. “While the initial response to RH Modern has been outstanding, we are experiencing shipping delays as certain vendors are struggling to ramp up production of this new product line,” said the release. Of note, the company’s Chief Operating Officer left the company suddenly earlier in February.
- Oil: The company said the energy-exposed markets of Canada and Miami were significant drags on sales.
- Canada: Not only was the company impacted by the oil-related drag in the Canadian market, but due to foreign exchange as well. The release said that Canadian sales did not pick up even with “reduced shipping charges to incentivise our Canadian customers.”
- The stock market: Since Restoration Hardware is generally more upscale (they call them “high-end customers”), the company said the stock market’s recent downtrend has hit their bottom line. “Our sense is the increased volatility in the US stock markets, especially the extreme conditions in January… contributed to our performance. Historically, our business has a correlation to large movements in stock prices as we believe asset valuations influence our customers’ buying patterns.”
- Sales: “Our attempt to drive incremental revenue through increased promotional activity in the fourth quarter was less successful than in prior periods, signalling a further pullback by the high-end consumer.”
- The global economy: “In summary, despite the macro economic challenges, our two key growth strategies are performing beyond our expectations. When we pause and think about the current market uncertainty, our bias is to de-risk our strategy in the short term, focus on sharpening execution in our core business, and continue to invest in the important long-term strategies that will continue to fuel our growth and strengthen our brand.”
Despite these issues, the release signed by CEO Gary Friedman ended on a positive note saying that the company is still performing in a tough macro environment.
At our core we are innovators,” he said. “We obsessively look for opportunities to destroy the current version of ourselves to create something significantly better and more valuable. This remains true in any and all market conditions.”
Friedman closed the note writing, “Carpe Diem.”
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