JMP Securities downgraded Restoration Hardware (RSTO ) to market underperform from market perform.
The company sees lower-than-expected fourth quarter comparison store sales growth of 2% to 4%. Analyst David Rose says the disappointing quarter was due to heavy promotional activity that suggests the company's new merchandise strategy was less effective than planned and the turn-around was slower than expected.
He notes year to date, same store sales comparison and merchandise margin improvement have been relatively easy, now comparisons will become more difficult. He thinks future earnings per share growth will require more sales at higher margins Rose cut his three cents fiscal 2003 (Jan.) earnings per share estimate to a 10 cent loss, and cu t the 20 cents fiscal 2004 earnings per share estimate to eight cents earnings per share. He also slashed the $6.50 target to $3.50.