HR Results & Revenue Q2 Top, Q3 & FY’22 Views Warm


HR RH delivered impressive results in the second quarter of fiscal 2022 (ended July 30, 2022), with adjusted earnings and revenue exceeding Zacks’ consensus estimate. This is the company’s 19th straight quarter of earnings. Year-over-year earnings declined despite revenue growth.

Shares of the major luxury home furnishings retailer rose more than 1% in the September 8 after-hours trading session after the earnings release.

RH expects continued weakness in business trends due to the weakness in the housing market that will likely persist over the next few quarters and expected interest rate hikes by the Federal Reserve. Due to construction and approval delays, RH is delaying the opening of RH England until Spring 2023. Additionally, RH Palo Alto is now shifted to Q1 2023.

Profit, Revenue and Margin Discussion

Adjusted earnings of $8.08 per share exceeded the consensus mark of $6.81 by 18.7%, but fell 4.7% from the figure of $8.48 a year ago.

HR, Consensus and EPS Surprise Awards

RH price-consensus-eps-surprise-chart | HR Quote

Adjusted net revenue of $991.62 million topped the consensus mark of $970.77 million by 2.2% and edged up 0.3% year-over-year. Revenue exceeded its revised forecast thanks to a faster reduction in the order backlog.

Adjusted gross margin increased by 350 basis points to 52.8% for the quarter. The increase was driven by higher product margins.

Adjusted selling, general and administrative expenses increased by 530 basis points to 28.1%, as a percentage of total revenue. Adjusted operating margin contracted 90 basis points year-on-year to 24.7%. Adjusted EBITDA decreased 3.6% year over year to $279.8 million for the quarter. Adjusted EBITDA margin also contracted by 120 basis points year over year to 28.2%.

Store Update and Review

As of July 30, there were 67 HR Galleries, 39 Factory Outlets and 14 Waterworks showrooms operational.

RH cash and cash equivalents were $2,085.1 million at the end of the second fiscal quarter, compared to $2,177.9 million at the end of fiscal 2021 (ended January 29, 2022). The company ended the second fiscal quarter with merchandise inventory worth $859.1 million, compared to $734.3 million at the end of fiscal 2021. RH ended the quarter with net debt of $446.1 million.

Free cash flow from operating activities was $192.5 million in the first half, compared to $316.7 million in the comparable period last year. Free cash flow totaled $23.4 million at the end of the second fiscal quarter compared to $94 million a year ago.

For the 12-month period, total net debt to adjusted EBITDA was 0.4. Adjusted capital expenditures for the current period were $53.5 million, compared to $61.7 million a year ago.

lukewarm views

Based on current market conditions and the change in RH England, RH expects net sales to decline by 15-18% for the third fiscal quarter. This is in comparison with a growth of 19% in the period a year ago. The company expects an operating margin of 18.5-19% for the next fiscal quarter, up from 27.7% a year ago.

For fiscal 2022, RH now expects net revenue growth in the range of negative 3.5-5.5%, compared to negative 2-5% growth expected earlier. The latest projected figure indicates a decline from the 32% growth recorded in fiscal year 2021.

For the full year, RH now expects an adjusted operating margin in the range of 21-21.5% (compared to 21-22% of the previous projection). A year ago, the measure was 25.6%.

Zacks ranking and key picks

RH currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Based in Mexico Coca-Cola FEMSA, SAB de CV KOF, the largest franchise bottler of Coca-Cola, is a subsidiary of Fomento Economico Mexicano. It remains committed to leveraging its revenue management capabilities, working hard to deliver affordability to consumers, and offering the right product at the right price. The company will likely benefit from progress made on its strategic objectives, including the rollout of its omnichannel digital platform. Volume growth, pricing initiatives and favorable price mix effects drove Coca-Cola FEMSA’s revenues.

Zacks’ consensus estimate for KOF sales in 2022 points to a 12.1% year-over-year increase. The same for earnings suggests a decline of 4.3%. The company currently sports a No. 1 Zacks rank.

The Mexico-based company Fomento Economico Mexicano, SAB de CV FMX is also known as FEMSA. It has exposure in various industries including beverages, beer, and retail, giving it an edge over its competitors. The company benefited from favorable trends in all of its operations. FEMSA remains on track with its strategy of creating a national distribution platform in the United States through the expansion of its footprint in the specialty distribution industry.

The Zacks consensus estimate for FMX sales in 2022 points to an 11.3% year-over-year increase. The same for revenue suggests a 3.6% drop. The company currently has a Zacks rank #2 (buy).

The Hershey Company. HSY is benefiting from solid consumer demand due to sustained at-home consumption. Higher prices, improved volumes and the contribution from buybacks boosted HSY’s performance. The purchases of Pretzels, Dot’s and Lily’s boosted turnover by 4.6 points. Additionally, Hershey benefits from its focus on innovation and capacity expansion. HSY raised its vision from the top and bottom, supported by greater visibility in 2022.

Zacks’ consensus estimate for HSY’s 2022 sales and earnings indicate a year-over-year increase of 13.9% and 14.4%, respectively. The company currently has a No. 2 Zacks rank.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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