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UBS maintained its Neutral rating and $215.00 price target on Restoration Hardware (NYSE:RH) stock following the company’s first-quarter earnings report. The luxury home furnishings retailer, currently trading at a P/E ratio of 45.5x, demonstrated solid sales momentum and profitability despite challenging conditions in the broader home goods category. According to InvestingPro data, RH’s revenue grew 8.3% in the last twelve months, though the stock appears overvalued based on its Fair Value analysis.
The first-quarter performance provided evidence that Restoration Hardware can continue its streak of outperforming industry peers. The company’s full-year outlook has become more heavily weighted toward the second half of the year, with sales shifting from the second quarter into later periods due to tariff-related supply chain disruptions. InvestingPro analysis reveals that five analysts have recently revised their earnings expectations downward for the upcoming period, with the company maintaining a weak overall Financial Health Score.
UBS expressed concern about the composition of Restoration Hardware’s elevated inventory position, noting the company had over $1 billion of inventory entering the second quarter despite the planned sales shift. The retailer did not provide commentary on the current underlying run rate of its business, creating additional uncertainty. This concern is amplified by RH’s significant debt burden of $3.8 billion and a debt-to-capital ratio of 0.53, as reported by InvestingPro’s comprehensive financial analysis.
Restoration Hardware’s decision to increase its membership discount while maintaining profitability expectations raised questions about future gross margin normalization. UBS indicated this move could generate incremental sales, though the company may need to adjust pricing in certain areas.
"These factors make it difficult to gauge which direction forward EPS estimates are heading over the next few quarters. As such, we view risk-reward as balanced," UBS stated in its analysis of Restoration Hardware’s outlook.
In other recent news, Restoration Hardware reported a surprise profit for its first quarter, posting earnings of $0.13 per share, significantly outperforming analyst expectations of a $0.07 loss. Despite this positive earnings surprise, the company’s revenue slightly missed forecasts, coming in at $814 million compared to the expected $818.06 million. The company maintained its full-year fiscal 2025 guidance, reflecting confidence in its business outlook despite ongoing economic uncertainties. Stifel reiterated a Buy rating on Restoration Hardware, with a $390.00 price target, highlighting the company’s performance and indicating a meaningful recovery in demand. KeyBanc, however, maintained a Sector Weight rating, noting the challenges in the luxury housing market and the competitive landscape. Jefferies also maintained a Hold rating while slightly raising its price target to $209.00, citing ongoing challenges and increased promotional activity. Restoration Hardware announced a delay in its brand extension plans to fiscal 2026 due to tariff uncertainties, reflecting caution in the current economic climate.
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