Looking Past the Shine on Restoration Hardware

Restoration Hardware (RSTO Quote) has crawled out of one hole, but some people wonder if its stock isn't heading down another.

Certainly the yuppie furniture and accessories chain has its fans. The stock has rallied into the $11 range this spring after trading for just pennies early last year. Same-store sales rose strongly last month, as the company continued to benefit from cocooning consumers' renewed interest in home furnishings.

But there are those who characterize Restoration's rebound as a classic case of smoke and mirrors. A former executive points to the strong competition in home furnishings and questions whether the company, which lost $34 million last year, can ever make a profit. A short-seller notes that insiders have filed to sell millions of shares, potentially flooding the market. Despite repeated promises, the company has failed to share financial guidance with Wall Street, prompting the one analyst who was covering the stock to give up. ...