Dive Brief:
- RH’s third quarter net revenues rose 8.1% year over year to $812 million, the company said Thursday. Net income was $33.2 million compared to a net loss of nearly $2.2 million in the year-ago quarter. Gross profit rose 6% to $361.3 million from $340.4 million a year ago.
- The company said its total Q3 demand growth increased 13%, while demand growth for its RH Brand rose 14%. The RH Brand includes interiors, modern and outdoor and represents about 75% of the business.
- The company raised its Q4 and 2024 fiscal year guidance. For the fourth quarter, it expects revenue growth ranging from 18% to 20%, while for the full year, the revenue growth forecast is an uptick of 6.8% to 7.2%.
Dive Insight:
CEO Gary Friedman said during a Thursday earnings call that RH has “a multi-billion dollar opportunity” to expand its brand globally. That includes the company’s Waterworks bath and kitchen brand, which itself could become a billion-dollar global brand in the RH stable, Friedman said.
The luxury home furnishings retailer plans to open seven new galleries in North America and two in Europe next year. The new galleries are in Montreal; Manhasset, New York; Detroit; Oklahoma City; Los Gatos and Palm Desert, California; and Aspen, Colorado. The company also plans to open London and Paris locations.
RH also opened a gallery in the United Kingdom last year. Friedman said second year growth trends at that location were up 42% from July through December and the online business was up 111%.
“To put these results in the proper perspective, if an RH Gallery in the English countryside, with an estimated population of 100,000 in a 10-mile radius, almost two hours outside of London, can generate $38 million of demand in its second year, what can an RH Gallery in the center of Mayfair, the most exclusive district of London, a global city with a population of 9.7 million, do in its second year? We believe exponentially more,” Friedman said, according to a call transcript.
RH opened locations in Munich and Düsseldorf last year, and this year, the company opened in Brussels and Madrid. RH said in a regulatory filing that it also secured locations in Milan and Sydney. Pursuit of global expansion should give RH an opportunity to eventually build a brand with $20 billion to $25 billion in annual global revenue. The company ended Q3 with 71 RH Galleries, 38 outlet stores and 14 Waterworks showrooms in the U.S., Canada and Europe.
Although RH’s Q3 results met revenue expectations, “the industry environment remains challenging for RH, given high interest rates and [year over year] declines in home sales,” Telsey Advisory Group analysts led by Cristina Fernández said in a Friday note. “Despite this, RH saw demand growth of 13.0% in 3Q24, in line with guidance of 12%-14%, and vastly outperformed peers. This points to a slight acceleration from August, which was up 12%.”
Looking ahead, Friedman said in a letter to shareholders that the potential for increased tariffs under the incoming Trump administration are unlikely to negatively affect margins.
“We have been proactively moving sourcing away from China over the past several years with the expectation of fully exiting the country by the end of the second quarter. We are also transitioning products manufactured in Mexico and believe we can successfully reposition our sourcing with no disruption to the supply chain,” he said.
