Please ensure Javascript is enabled for purposes of website accessibility

Restoration Hardware Is Already Seeing a Strong Rebound

By Howard Smith – Jun 5, 2020 at 9:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The luxury furnishing retailer managed through first-quarter COVID-19 impacts and is now resuming capital expenditure and investment plans.

Restoration Hardware parent RH (RH -1.77%) reported strong first-quarter results, considering the impacts related to the ongoing COVID-19 pandemic.

Although the company's galleries, restaurants, and outlets were all closed from March 17 through the quarter that ended May 2, 2020, CEO Gary Friedman said he was optimistic in seeing a strong rebound. He said the company is resuming previously suspended capital spending and investments, because of "strong business trends and the expectation of expanded operating margins."

luxury home furniture decorating a living room

Image source: Getty Images.

Revenue declined 19.3% compared to the year-ago quarter, but Friedman said the report included "unimaginable results during what has been one of the most disruptive business environments of our lifetime." The company strategy during the pandemic crisis is to remain a high-margin, luxury brand and "not chase demand through promotions," he said. 

During the first quarter, the company took steps to protect its balance sheet by reducing costs and deferring new investments. RH was able to maintain adjusted operating margins of 10% for the quarter, and Friedman said despite the difficult period from the pandemic crisis, he still expects operating margins to grow in fiscal 2020. "[We] now see a clear path to 20% operating margin in the next few years," he said.

The company said it has ample liquidity and plans to pay the balance of a convertible note due in July in cash. It said it plans to spend "$125 [million] to $150 million net of landlord contributions and asset sales for the year." Management also plans to "reinvest approximately $80 to $90 million of the previously announced $150 million of expense reductions."

Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

RH Stock Quote
$246.07 (-1.77%) $-4.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.