Photographerer: Victor J. Blue/Bloomberg

Restoration Hardware Crashes After Results Miss Estimates

  • Upscale retailer blames stock-market rout for weak sales
  • Shares tumble the most since the company's IPO in 2012

Restoration Hardware Holdings Inc. shares suffered their worst decline ever after quarterly results missed analysts’ estimates, in part because the recent stock-market rout may have scared away shoppers.

Restoration Hardware plunged 26 percent to $38.49 on Thursday, the biggest single-day drop since the upscale retailer held its initial public offering in 2012.

Customers held off on purchases in January, which is typically a strong sales month for the chain, Chief Executive Officer Gary Friedman said in a letter to investors. Wall Street’s woes in particular may have hurt demand as investment portfolios took a hit, he said. The Standard & Poor’s 500 Index declined 5.1 percent in January, its worst performance since August.

“Our sense is the increased volatility in the U.S. stock markets, especially the extreme conditions in January, which is historically our biggest month of the quarter for furniture sales, contributed to our performance,” Friedman said. “Our business has a correlation to large movements in stock prices as we believe asset valuations influence our customers’ buying patterns.”

The company posted fourth-quarter earnings of 99 cents a share, excluding some items. That missed the $1.40 a share that analysts had projected, according to data compiled by Bloomberg. Preliminary revenue of $647.2 million also was well short of the average estimate of $711.1 million.

Shares Plummet

A flurry of analyst downgrades followed, contributing to Restoration Hardware’s stock decline. Even before the latest bad news, Restoration Hardware was struggling. Its shares were down 35 percent this year through Wednesday.

A slumping energy industry and currency fluctuations contributed to Restoration Hardware’s problems, Friedman said in the letter.

Restoration Hardware sells items like decorative propellers and saber-tooth tiger skulls cast in resin, which may make its wares less of a necessity when times get tough. But a bear market wouldn’t be all bad news for the company, said Friedman, who concluded his letter with the phrase “carpe diem.” It could bring lower real estate prices, which would help the chain, he said.

“In times of market dislocation, asset values in real estate generally come down,” Friedman said. “We plan to take advantage of this likely outcome.”

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