RH has joined the list of retail and consumer brands facing challenges as COVID-19 impinges on manufacturing operations in Vietnam.
The home furnishings and décor retailer announced that its RH Contemporary collection will be pushed back to spring. Fall catalogs, which the company calls Source Books, will be mailed at a later date than planned to give the supply chain a chance to catch up with order backlogs.
And the RH Guesthouse location in New York, which the company, formerly known as Restoration Hardware, describes as a “hospitality concept for travelers seeking privacy and luxury,” has been pushed back to spring 2022. The company linked the delay to the possible impact the delta variant will have on travel during the winter.
Numerous companies have cited supply-chain problems in Vietnam as they’ve reported earnings and provided updates. Vietnam had to temporarily close facilities due to COVID-19 cases. Late Wednesday, Lululemon Athletica Inc.
said its manufacturing in that country had been disrupted by the pandemic.
Despite the delays, RH’s stock
closed higher by nearly 7.7% on Thursday after the company reported second-quarter earnings and revenue that beat expectations.
Net income totaled $226.7 million, or $7.09 per share, up from $98.4 million, or $3.71 per share, a year earlier. Adjusted earnings per share of $8.48 far exceeded the FactSet consensus of $6.51. Revenue of $988.9 million was up from $709.3 million last year and also ahead of the FactSet consensus of $973.4 million.
“An important point to consider when analyzing the strong demand in the housing market is the migration of consumers to larger suburban and second homes,” wrote Chief Executive Gary Friedman in a letter attached to the quarterly results.
“This trend is resulting in substantial square footage growth that is driving increased furniture and furnishings demand. Add to that, historically low interest rates, a record stock market and the reopening of several large parts of the economy, and elevated spending on the home could have a very long tail.”
Revenue for the year is now expected to rise 31% to 33%, up from previous guidance of 25% to 30% sales growth. The FactSet-compiled analyst consensus calls for full-year revenue of $3.738 billion, implying an increase of 31.2%.
The company’s stock has run up 62.2% to date in 2021, while the S&P 500 index
is up 19.8% over the period.
Despite launches being pushed to spring, RH said it is looking forward to its “most exciting year on record,” with the opening of RH England, located on a 73-acre estate whose history dates to 1615, and the launch of the digital portal, World of RH.
RH has also recently talked about the addition of residences, yachts and spas to its offerings.
JPMorgan maintained its overweight RH stock rating, but moved its price target to $800 from $770.
And Wedbush maintained its outperform rating and increased its price target to $760 from $720.
“Importantly, the delayed the launch of RH Contemporary and Guesthouses is from a position of strength,” wrote Wedbush analysts led by Seth Basham.
“The company continues to push forward with European expansion for 2022, and sees the U.K. market contributing a very solid $50 [million to] $250 million in sales in the first year of operation based on brand recognition among designers and the affluent, as well as its marketing plans.”
UBS raises some concern about whether the company can actually achieve its “grand vision of creating an luxury RH ecosystem.” UBS rates RH stock neutral with a $700 price target, up from $660.
“The vision is exciting to contemplate,” UBS says. “But, realistically, it appears difficult, particularly in a reasonable investment horizon. Thus, it’s not clear how much credit the stock should garner for the potential contributions today. As such, we think the shares have a balanced risk reward.”