Maybe it's time to give home decor specialist Restoration Hardware (NASDAQ:RSTO) another look. Granted, it hasn't been easy over the past few years as the once-hip hot spot of rustic retailing has lost its shine. Until last night's favorable earnings report, you had to go back four years to find its last annual operating profit and even further still for reported profitability.
That's why Restoration Hardware deserves your attention this time. On the strength of a robust fourth quarter -- and it's usually that way for the company as it overcomes three duds before closing out the year with a healthy holiday period -- Restoration Hardware saw its revenue climb by 20% to hit $525.8 million.
Comps were up a welcome 8%, yet another sign that the concept is working its way back into consumer fancy. With fourth-quarter earnings racing from $0.21 to $0.28 a share, the company closed out the year with a meager -- yet notable -- profit of $0.04 a share.
The company's disappointing fall from grace has been cruel. Those who figured that lower mortgage rates would inspire homebodies to refinance and remodel their homes with Restoration Hardware fixtures were stung. Rivals like Pier 1 Imports (NYSE:PIR) and Williams-Sonoma (NYSE:WSM) didn't come through with flying colors, but at least they have been consistently profitable.
So it's not so ironic to see Restoration Hardware get back on its horse, now that the Fed has been trigger-happy raising rates.
Although Restoration Hardware has a long way to go -- some cynics may be quick to point out that inventory levels have outpaced sales growth -- the company expects comps to tick higher this year, while consumer-direct sales should continue to grow faster than its store-level production. That would give the company an extra kick beyond its renewed storefront popularity.
Sure, Restoration Hardware's stock is trading at a fraction of its 1998 highs, but it's trading just where it was five years ago as its retail empire was starting to come undone. It's a different Restoration Hardware chiming in these days. Take notice.
Some other stories that may hit close to home:
- The company has its seasonality.
- Its year-end quarter last year could have been better.
- Move into our roomy Home Center.
Longtime Fool contributor Rick Munarriz has been burned believing in Restoration Hardware before, but he is not an investor in the stock. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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