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RH Locations Are Closed Until Further Notice

Luxury home-furnishings retailer RH (NYSE: RH) released 2019 financial results on Monday, and it was a record year. However, higher on investors' radars is the fact that the company is keeping its locations closed indefinitely due to the COVID-19 pandemic. Previously, it hoped to keep stores closed only until March 27. But as the coronavirus continues to spread, RH was forced to extend its closures.

For RH employees of closed locations, the company intended to pay them until March 27, when its reopening was planned. Now, the company will pay its workers only through April 3.

Image source: Getty Images.

Good results, but a tough 2020 ahead

For 2019, RH generated $2.6 billion in revenue, up 6% from 2018. Fourth-quarter revenue was below expectations, in part due to low inventory placing purchases on back order. Undeterred, the company grew full-year earnings per share an impressive 77% year over year to $9.07.

While those results are good, it could be a rough road in 2020 as RH retail locations are now closed indefinitely. The company has thus withdrawn all guidance for the year. But it did provide some current statistics. Since closing on March 17, demand at RH Gallery locations is down 40% from 2018. Demand at RH's Restaurants and Outlets is down 43%.

New Gallery openings -- the RH furniture segment of the business -- have also been put on hold for now. It currently has 68 Gallery locations and had planned on opening five to seven new Gallery locations in 2020. But considering other consumer-discretionary retailers could permanently close in the coming months, it seems prudent for RH to wait on new openings for now.

In light of not being able to pay workers much longer, CEO Gary Friedman and his management team have elected to forgo their salaries as well.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends RH. The Motley Fool has a disclosure policy.


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