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We discuss the situation of Restoration Hardware (RH – Snapshot Report). It launched two new brands in the fourth quarter of 2015, RH Modern and RH Teen. Both had their own source catalogs and web sites.
It was a huge undertaking which apparently didn’t go according to plan as orders overwhelmed inventories, especially in RH Modern, resulting in delayed deliveries. Almost 20% of orders had a 3+ month wait time.
As a result, many orders were simply cancelled by customers. That meant fewer sales. The result was a comparable store sales number in the quarter of “only” 9%. This was below analyst expectations.
Shares plunged on the news.
Presumably, the company will be disclosing even more details of how things are going in the first few months of this year in its earnings conference call on Mar 29, 2016.
I argue that the shares are now cheap and she is buying. But after taking a look at the technicals in the chart, does David agree?
Is Restoration Hardware a value stock or a value trap?
