RH Remains Stalled In Its Climb Up ‘Luxury Mountain'

Company Overview - CEO Gary Friedman has built RH into a luxury home furnishings brand with a net worth of $1.2 billion [4] - Friedman's leadership style is described as cult-like, with a strong emphasis on dedication and commitment from employees [4][5] - RH's long-term vision is to "climb the luxury mountain" and establish itself as a global thought leader in design and taste [9][15] Financial Performance - RH's revenues peaked at $3.8 billion in fiscal 2021 but declined to $3 billion in fiscal 2023 [9] - Year-over-year revenues for the first quarter of 2024 were $727 million, down 2% from $739 million the previous year [10] - Net income plunged to a $3.6 million loss compared to a $41.9 million gain in the same quarter last year [11] - RH stock ended the week trading at about $230 a share, down from nearly $350 at the end of March and well below its peak of over $400 in August [11] Strategic Initiatives - RH is expanding internationally with new Design Galleries in Madrid, Brussels, and Palm Desert, CA, increasing effective new store selling months from 12 to 48 [13] - The company plans to double its Sourcebook circulation and expand its Waterworks subsidiary into the to-the-trade market [12] - RH is introducing new collections in Outdoor, Modern, Interiors, and a second Contemporary line, aiming to lift the business by focusing on the top third of its assortment [17] Challenges and Missteps - The RH Contemporary collection, launched in June 2022, has been a disappointment due to overestimating demand and overpricing [16] - Friedman admitted that markdowns are necessary in a down market, which can negatively impact the brand's luxury reputation [18] - International expansion is still in its early stages, with limited sales reported and muted results from the Aynho Park venture [19][20] Future Outlook - RH maintains full-year guidance with demand growth expected in the 12% to 14% range and revenues up 8% to 10% [14] - Adjusted operating margin is projected to range between 13% and 14%, with adjusted EBITDA margin between 18% and 19% [14] - Friedman remains confident in the company's long-term strategy, emphasizing investments in product transformation and platform expansion [12]