I'm not one to rely on charts to make investing decisions, but I do often take a look at a chart that offers a company's share performance over its entire life. The chart itself doesn't actually help in making an investment decision, but they often paint curious pictures that lead to questions needing answers.
In the case of Restoration Hardware (NASDAQ:RSTO) the chart does not paint a pretty picture. Since its debut in the late '90s, Restoration Hardware has gradually slid lower and lower. The reason is actually quite simple: Profits have been elusive, and this quarter wasn't much different. The company turned in a loss of $0.09 per share, though that is an improvement over last year's loss of $0.12 per share.
On the bright side, revenues were up an impressive 19%, and same-store sales were a solid 5% with more strong sales growth expected in the next quarter. With such strong sales growth it does raise the interesting question of what exactly is causing the company to continue to lose money. After all, this isn't a high-tech growth outfit; it's a retailer that's been around for a while now.
A quick glance at the income statement shows that selling, general, and administrative expenses (SG&A) grew just as quickly as sales did. Strong direct-to-customer growth is allowing Restoration Hardware to get some leverage on its cost of goods sold and occupancy costs, but not on its SG&A expense.
Like many retailers, Restoration Hardware counts on its final quarter to pull it into the black, and so far this year looks to be no different. However, the company does seem to be gaining some traction in its war to attain profitability. With competitor Pier 1 Imports (NYSE:PIR) having a rough go of it as of late, there is room for Restoration Hardware to move in and make an impression on consumers that have passed by Williams-Sonoma's (NYSE:WSM) Pottery Barn and the still privately held Crate & Barrel.
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Nathan Parmelee has a sofa from Crate & Barrel and various other trinkets from a variety of retailers, but he has no financial interest in any of the companies mentioned.
