Dive Brief:

• RH (formerly Restoration Hardware) on Tuesday reported that second quarter net revenue rose 4% to $640.8 million, up from $615.3 million in the year-ago period, (but missing analyst expectations for $660.9 million cited by Benzinga), with net revenue of stores rising 3% and direct net revenue rising 5%.

• Stores provided 56% of revenues while direct-to-consumer sales provided 44%, according to a company press release. Comparable sales in the quarter rose 5% after a 7% rise in the year-ago period, despite a three-point drag from last year's inventory reduction efforts, the company said; that missed a forecast from Retail Metrics emailed to Retail Dive for a 7.7% comp rise.

• Net income in the quarter reached $64 million, and handily bested Wall Street earnings-per-share estimates, as adjusted operating margin in the quarter reached 12.3%, up from 6.4% in the year-ago period. The retailer raised its revenue guidance 15% for its full fiscal year while lowering revenue guidance by about 2%, as the company continues "to prioritize earnings over revenue growth and focus on optimizing profitability," according to the press release.

Dive Insight:

RH CEO Gary Friedman on Tuesday emphasized that the home furnishings retailer is operating under a heavy bias for earnings versus revenue growth. "We will restrain ourselves from chasing low quality sales at the expense of profitability, and instead focus on optimizing our new business model while building an operating platform that will enable us to compete and win over the long-term," he said in a statement.

Without naming names, he derided rivals' approaches of increasingly chasing furniture sales online. La-Z-Boy Inc. in July acquired online furniture startup Joybird, which was still in customer acquisition mode, for example, while online player Wayfair continues to struggle.

"It remains clear to us as we witness the failures of high growth-no profit, online pure plays and the declining operating margins of traditional retailers who are driving an unnatural shift online — that the complexities and costs of scaling a furniture business will favor those who control their brand from concept to customer, offer an immersive and inspiring physical and digital experience, and have a superior logistics network that extends the brand into the customer's home," he said.

He went on to invoke America's foremost poet: "The road of endless promotions, free shipping, and a shrinking store base is resulting in broken and unsustainable retail models. We prefer the road less traveled by, and like Robert Frost, believe it will make all the difference."

But that wasn't enough for many on Wall Street, where shares fell after the report on the retailer's sales miss. But the strategy has carried the retailer from an $8 million loss a year ago to a $64 million profit, which is even more impressive in light of its tough year-ago comparisons, according to Neil Saunders, Managing Director of GlobalData Retail.

Friedman, as he has for years, once again on Tuesday emphasized that the retailer is staking its fortunes in brick and mortar. RH stores, however, are a notch above most furniture showrooms, with elevated experiences that in some locations include dining opportunities.

"These spaces provide the perfect backdrop for RH to showcase its innovative products and to demonstrate its deep expertise in home furnishings … execution is a long way ahead of other players in the sector," Saunders said in comments emailed to Retail Dive, noting that the company's restaurants could soon furnish a significant revenue stream of their own. "The food and beverage concept that RH has developed is more than just a bolt-on, it is a viable, high-end concept that generates strong levels of footfall in its own right."