Luxury furnishings retailer RH (RH -0.70%) reported earnings that beat consensus estimates on both the top and bottom lines, and said demand and margins were strong.
The company formerly known as Restoration Hardware reported revenue that was ahead of the previous-year period, even with the challenges of the COVID-19 pandemic. Net income also increased 54% for this second quarter ending Aug. 1, 2020.
Along with strong demand has come high margins. RH said that its adjusted operating margin increased from 14.9% last year to a record 21.8% in this year's second quarter. The company said it now expects to surpass 20% adjusted operating margin if revenue grows more than mid-single digits, and now sees "a long term path to 25% adjusted operating margins."
The strong earnings report has analysts piling up price-target increases. Prior to today's surge in share price, RH shares were up 50% since the start of the year. Cristina Fernandez at Telsey Advisory Group raised her price target from $345 to $450 per share after the report. Other analysts at UBS, Wedbush, and Baird also raised their price targets to between $380 and $390.
RH chairman and CEO Gary Friedman said demand accelerated throughout the quarter, and remains strong in September. He credits the positive trends from "efforts to elevate product design and quality," as well as developing its network of designers and manufacturers.
Friedman said he believes that elevated spending on quality home furnishings will persist through 2021 and possibly beyond. "This is a time to be defined by our vision, not by a virus," he said.