Daily News

From Home Furnishing Business

RH Reports Fourth Quarter and Fiscal Year 2023 Results 

April 1, 2024  by HFBusiness Staff in Business Strategy, Industry   

FISCAL 2023 HIGHLIGHTS
GAAP Net Revenues of $3.029B
GAAP Operating Margin of 12.1%
Adjusted Operating Margin of 13.0%
GAAP Net Income of $128M
Adjusted Net Income of $147M
Adjusted EBITDA Margin of 18.2%

FOURTH QUARTER 2023 HIGHLIGHTS
GAAP Net Revenues of $738M
GAAP Operating Margin of 8.7%
Adjusted Operating Margin of 9.1%
GAAP Net Income of $11M
Adjusted Net Income of $14M
Adjusted EBITDA Margin of 15.3%

Please see the tables for reconciliations of all GAAP to non-GAAP measures referenced in this press release. There are no adjustments to GAAP net revenues in any period presented in this press release.

The letter from Chairman & CEO Gary Friedman shares, “The launch of our new RH Outdoor Sourcebook, the most dominant and disruptive collection of luxury outdoor furniture in the market arrived in homes late February through mid-March with 14 new collections. The initial response has been exceptional, and we expect to gain significant market share in fiscal 2024.”

“The unveiling of our new RH Modern Sourcebook is scheduled to be in-home late April through early May with 30 new collections across living, dining, bedroom and bathroom including original designs from the Harvey Probber estate, one of the most influential modern designers of the past century. We expect the launch of RH Modern will further accelerate our demand trends in the second quarter and throughout the second half of 2024.”

“We are also increasing print and digital advertising across major home design publications in 2024. You will see our ads in Architectural Digest, Elle Decor, Veranda, Gallerie, World of Interiors, Luxe Interiors and Design, Business of Home, The Financial Times, plus The Wall Street Journal and T Magazine design issues.”

“As you know, we acquired Waterworks in 2016, arguably the most desired brand in the luxury bath and kitchen category. The Waterworks team has done an outstanding job over the past seven years, further elevating the brand and building a highly profitable business model that can scale.”

“Let me shift your attention to the expansion of our platform. Our plan to expand the RH brand globally, address new markets locally, and transform our North American Galleries represents a multi-billion-dollar opportunity.”

Our Platform Expansion Plans for 2024 Include:
Friedman continued, “The opening of five North American Design Galleries including Cleveland, which opened last week, Palo Alto, Raleigh, Newport Beach and Montecito, all with integrated RH Interior Design Offices, restaurants and wine bars.”

“The opening of our first RH Interior Design Studio in Palm Desert, California. We believe there is an opportunity to address new markets locally by opening Design Studios in neighborhoods, towns and small cities where the wealthy and affluent live, visit and vacation, as well as augmenting some of our Design Galleries in larger markets with additional design services in stand-alone Design Studios.”

“We will also be opening two International Galleries, one in Brussels, which opened last week, and Madrid, opening this Summer. Both Galleries are located in beautiful historical buildings that elevate our product and render our brand more valuable.”

“Unfortunately, RH Paris has been delayed until Spring of 2025 due to construction restrictions relating to preparations for the Olympic Games this Summer.”

“We are also pleased to announce RH Sydney, The Gallery in Double Bay, a five-story development with a rooftop restaurant and wine bar, received council approval last month with plans to open in Fall of 2026 in what we believe is the most vibrant and desirable location in Australia.”

OUTLOOK
Friedman concluded, “While we expect business conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our demand trends to accelerate throughout fiscal 2024.”

“Due to the extensive transformation of our assortment, we do expect revenue to lag demand during the year by approximately 4 to 8 points until we read and react to the new collections, reduce backorders and shorten special order lead times. Therefore, we will be guiding and reporting both demand and revenue growth each quarter during fiscal 2024 so shareholders and investors can accurately analyze the business.”

“We believe it’s also important to note that we are forecasting to end the year with an increased backlog of approximately $110 to $130 million due to revenue lagging demand throughout 2024, which will negatively impact operating margin and adjusted EBITDA margin by approximately 140 basis points for the year. Additionally, investments and startup costs to support our international expansion are estimated to be an approximate 200 basis point drag for 2024.”

“For fiscal 2024, we are forecasting demand growth of 12% to 14% and revenue growth of 8% to 10% on a 52 versus 52week basis. We are forecasting adjusted operating margin in the range of 13% to 14% and adjusted EBITDA margin in the range of 18% to 19%.”

“For the first quarter of fiscal 2024 we are forecasting demand growth of positive mid-single digits and revenues of negative low-single digits. We are forecasting adjusted operating margin in the range of 6% to 7% and adjusted EBITDA margin in the range of 12% to 13%.”

Note: The 53rd week of fiscal 2023 contributed approximately $50 million in revenues.