=Restoration Hardware(RH) reported earnings Wed 8 June 2016 (b/o)

Restoration Hardware misses by $0.10, reports revs in-line; guides Q2 EPS well below consensus, revs below consensus; lowers FY17 guidance below consensus :

• Reports Q1 (Apr) loss of $0.05 per share, excluding non-recurring items, $0.10 worse than the Capital IQ Consensus of $0.05; revenues rose 7.8% year/year to $455.5 mln vs the $452.27 mln Capital IQ Consensus.
• Comparable brand revenue growth, which includes direct, was 4% in Q1 (ests +5.4%) on top of 15% for the same period last year.
  • Stores revenues increased 19% to $256.1 million in the first quarter of fiscal 2016. This growth is on top of a 13% increase in stores revenues in the first quarter of fiscal 2015.
  • Direct revenues decreased 4% to $199.4 million in the first quarter of fiscal 2016. Direct revenues during the first quarter of fiscal 2016 represented 44% of total net revenues.
• Co issues downside guidance for Q2, sees EPS of $0.28-0.33, excluding non-recurring items, vs. $0.80 Capital IQ Consensus Estimate; sees Q2 revs of $505-520 mln vs. $531.78 mln Capital IQ Consensus Estimate.
• Co issues downside guidance for FY17:
  • Lowers EPS to $1.60-1.80 from 'flat to down slightly from $2.72', excluding non-recurring items, vs. $2.66 Capital IQ Consensus
  • Lowers FY17 revs to +1-3% (from low to mid single digit growth) to ~$2.13-2.17 bln vs. $2.21 bln Capital IQ Consensus Estimate. 
• "Our near term business performance is being pressured by the continued headwinds in the markets impacted by energy and currency, as well as a general slowdown in the luxury consumer market. In addition, the costs associated with RH Modern production delays and investments to elevate the customer experience, the timing of recognizing membership revenues related to the transition from a promotional to a membership model, and a more aggressive approach to rationalizing our SKU count to optimize inventory, are expected to negatively impact our fiscal 2016 adjusted diluted EPS outlook by approximately $0.90 to $1.00. While there is uncertainty regarding the headwinds impacting revenues, we expect many of the cost and margin related issues to be short term in nature.
• "Despite our recent difficulties, we remain the leading luxury home brand in the world, with a clear path to $4 billion to $5 billion in North American revenues with mid-teens operating margins. The two fundamental strategies that get us there - the expansion of our product offer and the transformation of our real estate - remain well on track.