Restoration Hardware Holdings Inc (NYSE:RH)’s COO, Ken Dunaj, is set to leave the company this week on Feb. 19. According to a securities filing by Restoration, Dunaj is stepping down so he can pursue other interests and spend more time with his family. Perhaps that is to show investors that Dunaj is not leaving over any disagreements. However, the exit of the long-serving COO also adds to the uncertainty that already clouds the company’s future.

Charged with leading operations, Dunaj’s responsibilities included overseeing product sourcing, inventory management and customer service among others. He’s held the COO position since 2006. Over the nearly 10-year tenure, Dunaj has created a highly experienced team around him. Those managers who used to report directly to Dunaj will now report directly to CEO, Gary Friedman.


Baird Equity Research analysts have weighed in on the COO exit at Restoration Hardware Holdings Inc (NYSE:RH) and they see the move deepening investor concern about the company’s near-term outlook. For the many years he has been around, Dunaj had won the confidence of investors. While he leaves behind a competent team, his exit is likely to dampen the expectations of many investors, thus further putting pressure on the stock.

It is worth noting that Restoration Hardware Holdings Inc (NYSE:RH)’s share price is down more than 50% since Nov. 2015 and down more than 40% since the beginning of this year.

The exit of the COO also points to a possible disappointing 4Q2015 earnings. Restoration is due to report the quarter on March 24, 2016.

Glimmer of hope?

Despite the turbulence, Baird is of the view that there are still glimmers of hope in Restoration. For example, the firm says that claims of Restoration could face extreme financial constraints are exaggerated. Restoration has nearly $1 billion of liquidity, which are $400 million in the form of cash/investments and $600 million in the form of revolving credit that has not been tapped. Additionally, Baird sees multiple growth drivers in Restoration, including expansion of the product line.

Baird has an outperform rating on Restoration Hardware Holdings Inc (NYSE:RH). It has a price target of $92 on the stock.