RH said it anticipates ongoing challenges in the luxury housing market and the broader economy to persist through this year into next as mortgage rates remain at 20-year highs. Despite that, the company raised its low-end full-year revenue guidance. RH now anticipates revenue will range from $3.04 billion to $3.1 billion, up from $3 billion to $3.1 billion.<\/li>\n<\/ul>\nDive Insight:<\/h3>\n
The housing market influences the furniture and home sectors. Broad pressures on the industry are affecting consumer spending in discretionary categories like furniture and home decor. Wall Street reacted to RH\u2019s earnings with a 15% stock drop, according to Yahoo Finance, after the retailer warned of ongoing soft demand in the home sector.<\/p>\n
Late last month, furniture maker and retailer Mitchell Gold + Bob Williams went out of business. It was one of RH\u2019s suppliers, RH CEO Gary Friedman confirmed on a call with analysts. He said there was about $30 million to $40 million of demand with the company but that RH \u201ccan re-source it all pretty easily\u201d and that no meaningful interruptions are anticipated as a result of the company\u2019s closure. Mitchell Gold + Bob Williams expanded beyond manufacturing and wholesale into the retail business and it\u2019s challenging to do all three,\u00a0 Friedman said.\u00a0<\/p>\n
In response to an analyst\u2019s question, Friedman said he didn\u2019t see \u201cany real fundamental risk to our business,\u201d due to losing that company as a supplier. And despite industrywide challenges, RH plans to expand its commitment and interests in the luxury sector, Friedman said.<\/p>\n
\u201cOur strategy is to move the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of products, places, services, and spaces that establishes the RH brand as a global thought leader, taste, and place maker,\u201d Friedman said, according to an earnings call transcript.<\/p>\n
RH\u2019s Q2 results \u201csurpassed expectations on the top- and bottom-lines, but were more in line after factoring in sales and margin timing benefits,\u201d analysts at Wedbush, led by Seth Basham, said in a Friday note.\u00a0Wedbush said RH is still sharpening its value equation on current and future products \u201cafter acknowledging arrogance in its price increases during the pandemic, suggesting to us that gross margins may not rise much in 2024 even after lapping markdown-related pressure in 2023.\u201d<\/p>\n
Over the summer, the company opened RH England, a gallery at a 17th-century 73-acre estate.\u00a0The company said its interior design and trade businesses will drive the majority of revenue at the U.K. location. Wedbush characterized early performance for RH England as \u201csomewhat disappointing.\u201d\u00a0<\/p>\n
RH has also pushed into the luxury hospitality and travel accommodations sector with offerings like transport aboard private jets and a yacht available for charter in the Caribbean and Mediterranean. RH also wants to step into the housing market by offering RH Residences, fully furnished, turnkey luxury homes, condos and apartments.<\/p>\n
The retailer recently mailed its 600-plus page Interior Sourcebook. With 40% of the mailing in homes as of late last week, Friedman said the response so far looks promising. RH\u2019s Contemporary Sourcebook and Modern Sourcebook are slated to send in October and January, respectively.<\/p>\n
\u201cWe believe our inflection point will peak in the first half of 2024 as our new collections fully ramp and we begin another cycle of Sourcebook mailings, completely transforming and refreshing the assortment across the entire brand over a 12-month period,\u201d Friedman said.<\/p>\n<\/p><\/div>\n
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