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From Home Furnishing Business

RH Reports First Quarter Fiscal 2024 Results

June 13, 2024  by HFBusiness Staff in Business Strategy, Industry   

“We believe our investments in the most prolific product transformation and platform expansion in our history has positioned RH to gain significant market share in North America while building the foundation for our long-term global expansion across the United Kingdom, Europe, Australia and the Middle East over the next several years.”

First Quarter Highlights
Net Revenues of $727M
GAAP Operating Margin of 7.5%
Adjusted Operating Margin of 6.5%
Adjusted EBITDA margin of 12.3%

Friedman continued, “Demand was up 3% in the quarter, slightly below our guidance as growth softened when interest rates once again exceeded 7% post the hawkish Fed commentary throughout April. While aggressively investing during a downturn has put pressure on short-term results, it also positions us to capitalize on the long-term opportunities that present themselves during times of disruption and dislocation.”

“Those opportunities are beginning to materialize as a growing number of online furniture brands have ceased operations as the vast majority have demonstrated difficulty reaching profitability. We do expect the constantly changing outlook regarding monetary policy will continue to weigh on the housing market through the second half of 2024 and possibly into 2025. Nonetheless, we remain confident that our continued investments towards transforming our product and expanding our platform will generate significant long-term value for our shareholders.”

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

“The opening of two international Galleries, in Brussels, which opened in the first quarter, and in Madrid, where we hosted a well-attended opening event last night. Both Galleries are located in beautiful historic buildings that elevate our product and render our brand more valuable.”

“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 we’ve done in East Hampton and the Napa Valley, as well as augmenting some of our Design Galleries in larger markets with additional design services in stand-alone Design Studios.”

OUTLOOK

“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. As previously communicated, due to the extensive transformation of our assortment, we 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.”

Friedman concluded, “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 fiscal 2024, which will negatively impact operating margin and adjusted EBITDA margin by approximately 140 basis points. Additionally, investments and startup costs to support our international expansion are estimated to be an approximate 200 basis point drag for fiscal 2024.”