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RH beats Wall Street expectations in Q3 results, including 6% revenue rise

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Corte Madera-based RH (NYSE: RH), formerly known as Restoration Hardware, on Wednesday reported fiscal third-quarter profit of $52.5 million. Net income was $2.17 per share; earnings, adjusted for nonrecurring costs, came to $2.79 per share.

The results beat Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of $2.22 per share.

The home-furnishings retailer posted revenue of $677.5 million in the period. Its adjusted revenue was $676.7 million, also surpassing Street forecasts. Seven analysts surveyed by Zacks expected $675.6 million.

RH, over the course of its multiyear reinvention, has opened dozens of gallery stores — a luxury retail model comprised of a structure that CEO Gary Friedman describes as blurring the line between residential and retail. Each gallery store includes a restaurant, wine vault, barista bar, garden courtyard and a rooftop park.

RH Yountville opened in September 2018, and RH San Francisco will open in the first half of next year. RH Corte Madera, while getting closer to completion, has been delayed.

“We plan to increase our gallery openings to five to seven per year despite unexpected delays in development timelines we’ve experienced in our recent projects,” Friedman said, following the release of RH’s Q3 results. “As an example, the mall construction related to the development of RH Marin, The Gallery at the Village of Corte Madera is not complete and we have decided to delay the opening until the first quarter of next year. We do not get a second chance to make a first impression, and opening our new gallery facing unsightly construction is not an option.”

Friedman said RH New York, the company’s “largest and most important new gallery, continues to trend comfortably in excess of $100 million in revenue for fiscal 2019, and will generate more than $30 million of cash contribution in its first full fiscal year.”

The company also is preparing to go international within the next two years, and is close to completing real estate transactions for five to seven initial locations across Europe.

“We now believe RH International represents our largest growth opportunity, and based on the penetration of other luxury businesses, we believe it will position RH to become a $20 billion global brand,” Friedman said.

The company will first land in the United Kingdom, followed by Paris, then likely Germany, Barcelona and Madrid, he said.

“There’s no one like us internationally. We have less competition internationally than in the U.S.,” Friedman said on a post-earnings conference call, adding he thinks RH will be impactful and disruptive across the pond.

RH also has a new investor.

Berkshire Hathaway stated in an SEC filing in November that it owned 1.2 million shares of the company as of Sept. 30, a stake worth $206.3 million as of that date, according to reporting by CNBC.

The Associated Press contributed to this report.

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