Stocks drifted mostly sideways Tuesday, with the Dow Jones Industrial Average (DJINDICES:^DJI) closing virtually unchanged and the S&P 500 (SNPINDEX:^GSPC) up a small amount.

Today's stock market

Index Percentage Change Point Change
Dow (0.01%) (1.58)
S&P 500 0.17% 4.85

Data source: Yahoo! Finance.

Stocks sensitive to interest rates rose in anticipation of news from the Federal Reserve meeting this week. The Utilities Select SPDR ETF (NYSEMKT:XLU) rose 1.2% and the iShares US Home Construction ETF (NYSEMKT:ITB) gained 1.6%.

As for individual stocks, RH (NYSE:RH) jumped on strong profit growth and Dave & Buster's Entertainment (NASDAQ:PLAY) rose after reporting first-quarter results and announcing plans for expanding its offering of exclusive virtual reality titles.

Up and down arrows superimposed on stock prices.

Image source: Getty Images.

RH jumps on huge profit gain

Shares of luxury home furnishings seller RH soared 30.6% after the company smashed profit expectations and raised guidance for the year. Revenue fell 0.8% to $557 million, hitting the low end of previous guidance, but missing analyst expectations for sales of $563 million. Adjusted earnings per share, however, came in at $1.33 compared with $0.05 last year, well ahead of Wall Street expectations of $1.02.

In Q1 last year, RH reported high sales volumes and low profit due to markdowns and inventory adjustments. Comparable-brand revenue grew 1% year over year, but that number would have been 5% if it weren't for the inventory actions last year. Adjusted gross margin increased to 38% from 30.5% in the period last year, reflecting more full-price selling and lower outlet sales. Record first-quarter operating margin of 9.6% compares with only 1.5% in Q1 last year.

Looking forward, RH forecast Q2 revenue of $655 million to $662 million, above the analyst consensus of $654 miilion, and adjusted EPS of $1.70 to $1.77, well above expectations of $1.51. For the full year, the company raised its EPS guidance to a range of $6.34 to $6.83, which at the midpoint is 13% above the company's estimate given three months ago.

Coming after a strong fourth quarter, investors were more than willing to believe that RH's radical overhaul is allowing it to thrive in today's retail environment.

Dave & Buster's Entertainment beats expectations, plans new virtual reality games

Dining and entertainment specialist Dave & Buster's stock rose 16.7% after the company reported better-than-expected sales and earnings despite a drop in comparable-store sales and the retirement of its CEO. Revenue increased 9.2% to $332 million and earnings per share rose 6.1% to $1.04. Analysts were expecting EPS of $0.93 on sales of $322 million. Stephen M. King will retire as CEO but remain as chairman, and CFO Brian Jenkins will be promoted to the top spot.

Comparable-store sales sales fell 4.9%, which was less than the 5.9% drop last quarter. The revenue gain was largely attributable to six new stores that opened during the quarter, as well as to strong contributions from 20 other recently opened stores that are not included in the comparable-store sales metric. Noncomparable-store sales increased to $74.5 million compared with $30.3 million in the period last year. The company's 116 stores produced net income that was slightly less than last year's, but the EPS gain came thanks to a 6.7% reduction in share count due to buybacks.

Dave & Buster's beat expectations that were lowered after a disappointing Q4, but executives also generated excitement with investors by elaborating on plans to grow its virtual reality (VR) gaming offerings. The company is in the process of rolling out its first proprietary VR game, Jurassic World VR Expedition, and will launch a second title later this year.

Jim Crumly has no position in any of the stocks mentioned. The Motley Fool recommends Dave & Buster's Entertainment and RH. The Motley Fool has a disclosure policy.