Image source: Restoration Hardware.

The high-end retail market has gone through some difficulties lately, and home furnishings specialist Restoration Hardware (NYSE:RH) has seen its stock take a big hit in response to tough industry conditions. As the company prepares to release its first-quarter results, Restoration Hardware investors aren't certain what to expect, but they're bracing for a big drop in earnings despite remaining hopeful that the company will see its sales rise from year-ago levels. Still, other retailers have had trouble this earnings season, and some fear that Restoration Hardware might not be able to overcome even the low hurdle it has before it. Let's take an early look at what we're likely to see from Restoration Hardware and what its future looks like.

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Data source: Yahoo! Finance.

Can Restoration Hardware earnings rebound?

In recent months, investors have gotten much less optimistic about Restoration Hardware earnings. They've marked down their fiscal first-quarter estimates by almost three-quarters, and they've reduced their full-year projections for the current and next fiscal years by more than 10% each. The stock has continued to languish, falling another 16% since late February.

Restoration Hardware's fiscal fourth-quarter results included a number of challenges that the retailer has faced. Revenue was up 11% from the year-ago quarter, but net income declined more than expected. The company said that production delays from its RH Modern suppliers prevented Restoration Hardware from delivering on all of its orders, and it also pointed to weakness in areas of the country that had previously provided substantial growth because of the long energy boom. Promotional activity that Restoration Hardware used to try to increase its revenue wasn't as successful as hoped, and the retailer cited the general negative environment for high-end retail as a contributing factor to its sluggish results. Negative guidance for the full fiscal year also gave investors pause about the company's longer-term prospects.

Yet one interesting response that Restoration Hardware has implemented takes a page from the warehouse retail business model. The new RH Grey Card aims to address the mixed success of the retailer's promotional strategy by offering a 25% discount to anyone willing to pay the $100 annual fee for the card. The move caters to the demand among shoppers for discounts, something that is even affecting the upper end of the retail industry. Nevertheless, as other retailers have discovered, implementing an alternative method for savings won't necessarily stop other shoppers from continuing to demand the promotions that they've grown used to seeing from Restoration Hardware in the past.

Still, one problem that Restoration Hardware faces is that its competitors aren't seeing all the same negative trends that it has experienced. General home-improvement retailers like Home Depot have continued to take full advantage of the booming housing market, finding ways to keep growing even as fears about rising interest rates have some wondering how long housing can help support the overall U.S. economy. Some of Restoration Hardware's higher-end peers haven't seen pullbacks to the same extent, either, even though the broader environment for non-furnishings retailers has been ugly across the industry.

In the Restoration Hardware report, shareholders need to see how well the company's strategic moves have panned out so far. It's early to expect substantial results from the RH Grey Card, but if the company's explanations for supplier delays were correct, then some of the pent-up order fulfillment should actually boost the retailer's numbers. If that doesn't happen, then investors will need to be even more cautious about Restoration Hardware going forward.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.