Restoration Hardware: 4 Different Insiders Have Sold Shares During The Last 30 Days

| About: Restoration Hardware (RH)

Summary

Four insiders sold Restoration Hardware stock within one month.

The stock was not purchased by any insiders in the month of intensive selling.

All four of these insiders decreased their holdings by more than 10%.

Restoration Hardware Holdings (NYSE:RH) is engaged in the retail of home furnishings.

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Insider selling during the last 30 days

Here is a table of Restoration Hardware's insider activity during the last 30 days.

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Eri Chaya Director April 3 14,000 No 44,045 shares 24.1%
Carlos Alberini Director April 2 350,000 No 1,032,855 shares 25.3%
Thomas Mottola Director April 2 160,000 No 170,568 shares 48.4%
Kenneth Dunaj COO Mar 28-Apr 1 53,900 Yes 55,280 shares + 71,700 options 29.8%
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There have been 577,900 shares sold by insiders during the last 30 days. Kenneth Dunaj sold shares pursuant to the Rule 10b5-1 plan. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Restoration Hardware's insider activity by calendar month.

Month Insider selling / shares Insider buying / shares
April 2014 567,900 0
March 2014 10,000 0
February 2014 0 0
January 2014 0 0
December 2013 0 23,275
November 2013 0 0
October 2013 75,000 0
September 2013 3,978,731 0
August 2013 1,175,797 0
July 2013 7,836,137 100,000
June 2013 0 0
May 2013 9,933,613 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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There have been 23,577,178 shares sold, and there have been 123,275 shares purchased by insiders since January 2013.

Financials

Restoration Hardware reported the fiscal 2013 full-year, which ended February 1, financial results on March 27 with the following highlights:

Revenue $1.6 billion
Net income $18.2 million
Cash $13.4 million
Debt $123.2 million
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The four insiders sold their shares after these results.

Outlook

Restoration Hardware's guidance is as follows:

Q1/2014 FY2014
Revenue $345-$350 million $1.825-$1.860 billion
Adjusted net income $3.7-$4.5 million $87.6-$90.9 million
EPS $0.09-$0.11 $2.14-$2.22
CapEx N/A $115-$125 million
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The company will be cash flow negative this year.

Competition

Restoration Hardware's competitors include Williams-Sonoma (NYSE:WSM), Bed Bath & Beyond (NASDAQ:BBBY), and Pier 1 Imports (NYSE:PIR). Here is a table comparing these companies.

Company RH WSM BBBY PIR
Market Cap: 2.60B 5.79B 13.10B 1.80B
Employees: 2,600 7,800 57,000 3,700
Qtrly Rev Growth (yoy): 0.19 0.04 -0.06 -0.07
Revenue: 1.55B 4.39B 11.50B 1.77B
Gross Margin: 0.36 0.39 0.40 0.44
EBITDA: 147.04M 605.39M 1.83B 221.30M
Operating Margin: 0.08 0.10 0.14 0.06
Net Income: 18.19M 278.90M 1.02B 107.53M
EPS: 0.45 2.82 4.79 1.01
P/E: 148.60 21.81 13.30 17.60
PEG (5 yr expected): 1.11 1.51 1.33 1.15
P/S: 1.65 1.35 1.14 1.04
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Restoration Hardware has the highest P/S ratio among these four companies.

Here is a table of these competitors' insider activities this year.

Company Insider buying/shares Insider selling/shares
WSM 0 133,863
BBBY 0 0
PIR 0 52,500
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Williams-Sonoma has also seen intensive insider selling during the last 30 days.

Conclusion

There have been four different insiders selling Restoration Hardware, and there have not been any insiders buying Restoration Hardware during the last 30 days. All four of these insiders decreased their holdings by more than 10%. Restoration Hardware has an insider ownership of 57.03%.

Before going short Restoration Hardware, I would like to get a bearish confirmation from the Point & Figure chart. The three main reasons for the proposed short entry are a relatively high P/S ratio, negative cash flow, and the intensive insider-selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.