RH(RH) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company raised its revenue guidance by $43 million at the midpoint, reflecting a $14 million beat in the first quarter [10] - The high end of the guidance was increased by $28 million, indicating positive trends in the business [10] - The company reported that its guidance fully reflects the impact of tariffs, with no assumption of higher prices contributing to incremental revenue [11] Business Line Data and Key Metrics Changes - The company noted that its product categories are performing better than previously guided, indicating strong underlying trends [25] - The transition in the rug business model from a single vendor to a direct source model is expected to pressure margins in the second quarter [87] Market Data and Key Metrics Changes - The company observed no meaningful impact from market volatility on its sales trends, despite anecdotal evidence suggesting otherwise [13][14] - The stabilization of the stock market has led to improved customer behavior, with sales trends returning to normal [26] Company Strategy and Development Direction - The company is focused on creating a unique brand and operating model that is disruptive in the high-end market [48] - The company is expanding its hospitality offerings, viewing them as amplifiers for its core business rather than standalone profit centers [38] - The company is actively pursuing international expansion, with plans for gallery openings in Europe and other regions [100][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term strategy, stating that macroeconomic factors are inconvenient but not disruptive to the business model [54][57] - The company is focused on big value-driving strategies and is not distracted by short-term market volatility [76] - Management highlighted the potential for significant growth in the interior design segment, viewing it as a key opportunity for future value creation [115] Other Important Information - The company reported that 70% of its RHB top line consists of new products, indicating a strong focus on innovation [85] - The company is investing in improving its home delivery experience, expecting annual savings of $15 million to $20 million from these efforts [29] Q&A Session Summary Question: Revenue change in guidance - The revenue guidance was raised by $43 million at the midpoint, reflecting stronger trends in the business [10] Question: Market trends and volatility - Management noted that there was no meaningful impact from recent market volatility on sales trends [13][14] Question: Confidence in future guidance - Management emphasized that while they cannot control macroeconomic factors, they remain focused on long-term strategies that drive growth [54][57] Question: Impact of tariffs - The company indicated that its guidance does not specifically assume the impact of potential new tariffs, as its current exposure to China is about 40% [64][65] Question: Capital allocation decisions - The company utilized incremental debt to buy back shares, viewing the stock as undervalued [82] Question: Interior design investments - Management discussed ongoing investments in interior design, indicating plans to charge for these services in the future [115]