Moody’s views Restoration negatively

Moody's Investors Service said it changed Restoration Hardware, Inc.'s outlook to negative from stable and affirmed the company’s ratings including its corporate family rating at Ba3 and probability of default rating at Ba3-PD. The senior secured first-lien term loan ratings were also affirmed at Ba3. The speculative grade liquidity rating is unchanged at SGL-1.

“The change in outlook to negative reflects RH's weak operating performance as it is expected to continue to face a challenging luxury furniture market in 2023. RH is working to reduce inventories and launch new product collections in the second half of the year to reengage customers while streamlining certain costs. Its international expansion will continue with its first opening outside of London in 2023 which adds margin pressure as these efforts are scaled. Although LTM debt/EBITDA is approximately 3.9x, Moody's expects earnings to decline such that leverage will increase significantly and, at RH's current levels of debt, will approach 5.5x at the end of fiscal 2023,” the agency said in a press release.

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