Home-goods retailer

Restoration Hardware


said Monday that it swung to a second-quarter profit, marking the first time it has been in the black outside of the holiday-enriched fourth quarter.

The company also slightly boosted its full-year sales and margin guidance. Shares were surging nearly 15% in after-hours trading.

For the quarter ended July 29, Restoration Hardware recorded a profit of $236,000, or 1 cent a share, compared with a year-earlier loss of $2.5 million, or 7 cents a share. Analysts polled by Thomson First Call had an average estimate for a loss of 5 cents a share.

The results included 2 cents a share in stock-option costs and a charge of 1 cent a share related to a review into the company's stock-option grants. Restoration Hardware said it completed a voluntary review of its option practices and found incorrect measurement dates, primarily during 2002 to 2004. The company attributed the incorrect accounting was the result of "lapses in documentation and deficiencies in option plan administration controls." The errors resulted in the additional noncash compensation of $600,000, or 1 cent a share.

Second-quarter revenue increased 24% to $179.3 million from $144.8 million, while same-store sales rose 4.3%. Wall Street expected sales of $171.2 million.

In addition to the revenue growth, the company said it was aided by significantly improved product margins despite a "difficult retail home furnishings environment."

For the third quarter, Restoration Hardware forecast a loss of 13 cents to 19 cents a share, compared with analysts' projection for a loss of 13 cents a share. The company anticipates 17% to 20% revenue growth, with a same-store sales rise in the mid-single-digits percentage.

The retailer expects full-year revenue growth of 19% to 23%, narrowly higher than its May forecast of 18% to 22%. The company also raised its margin projections, forecasting full-year operating margins of 1.7% to 2.2%, compared with an earlier view of 1.5% to 2.0%.

Restoration Hardware shares recently were up 90 cents to $7.04 in late trading.