Restoration Hardware Holdings Inc. (NYSE: RH) issued a business update and released its preliminary fourth-quarter results after the markets closed on Wednesday. The company expects earnings per share (EPS) to be $0.99 on $647.2 million in revenue. The consensus estimates call for $1.35 in EPS on revenue of $707.73 million. The same period from the previous year had $1.02 in EPS on $582.73 million in revenue.

During the fourth quarter, net revenues increased by 11%, on top of a 24% increase from last year. Also comparable brand revenues increased 9%, compared to the 24% increase from the same period last year. Demand sales/written orders increased 21% in this quarter, versus the 26% increase from last year.

Gary Friedman, chairman and CEO, commented on the preliminary results:

While the initial response to RH Modern has been outstanding, we are experiencing shipping delays as certain vendors are struggling to ramp up production of this new product line. We expect the majority of the demand/written orders to turn into revenues in the first and second quarter, and anticipate our vendors will be substantially caught up by the end of the first half. Additionally, we believe the poor in-stocks also suppressed orders, and we expect demand to build as our in-stocks improve.

Second, we continue to see underperformance in markets affected by energy, oil, or currency fluctuations. The Canada, Texas and Miami markets were a drag of 2 points to total Company revenues in the first half, then accelerated to a 4 point drag in the third quarter, and continued as a 4 point drag in the fourth quarter despite increased promotional efforts, including reduced shipping charges to incentivize our Canadian customers. These results tell us the conditions remain weak in these markets and in aggregate they are trending 20 points below the rest of the Company. Looking forward, we will begin to cycle the underperformance, and the negative drag should be mitigated.

He added:

Third, our attempt to drive incremental revenue through increased promotional activity in the fourth quarter was less successful than in prior periods, signaling a further pullback by the high-end consumer. Our sense is the increased volatility in the US stock markets, especially the extreme conditions in January, which is historically our biggest month of the quarter for furniture sales, contributed to our performance. Historically, our business has a correlation to large movements in stock prices as we believe asset valuations influence our customers’ buying patterns.

Shares were trading down 27% at $37.57 on Thursday, with a consensus analyst price target of $98.25 and a 52-week trading range of $37.00 to $106.49.

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