Analyst Calls Restoration Shares Overvalued

Restoration Hardware Inc. shares fell 20% after NationsBanc Montgomery Securities Inc. analyst Shelly Hale said the home furnishings retailer’s stock is overvalued compared with peers such as Pier 1 Imports Inc. Shares of Corte Madera-based Restoration fell $5.19 to close at $20.63 on Nasdaq. Earlier, the shares fell as low as $19.88. Before the drop, Restoration shares had risen 36% since they were first sold to the public in June at $19. Concerns about reduced consumer spending have sent the stock of rivals such as Pier 1 and Williams-Sonoma Inc. tumbling in recent weeks, reducing their price-to-expected-earnings multiples for calendar year 1999 to an average of 17 from 22. At the same time, Restoration’s multiple rose to 45 times earnings from 33, Hale said. Hale forecast break-even results in the third quarter. Revenue for the period is expected to more than double to $48.5 million, with sales at stores open at least a year rising 8%. As of Aug. 2, the company operated 51 stores.