• Clint Engel

RH reports 23% jump in 1Q revenues

CORTE MADERA, Calif. — Luxury home furnishings retailer RH posted a 23% jump in net revenues and a smaller net loss after a year of marching “into hell … for a heavenly cause.”

While the company sees sales growth accelerating from here, market conditions and growth initiatives have led it to dial back its earnings guidance for the year.

Net revenues for the period ended April 29, increased to $562.1 million, up from $455.5 million for the same period a year ago. Comparable brand revenues increased 9% on top of a 4% increase last year. Physical stores accounted for 56% of the total, same as the previous year’s first quarter.

The 85-store company’s net loss for the quarter was $3.4 million, or a loss of 9 cents per share, down from a $13.5 million loss, or 33 cents-per-share, for the first quarter a year ago.

RH attributed 12 percentage points of the 23% revenue gain to its acquisition of Waterworks and higher warehouse and outlet sales as the company “accelerated inventory optimization efforts.”

Last year, RH moved from a more promotional business model to a membership model that it believes “will enhance our brand, streamline our operations and vastly improve the customer experience,” RH Chairman and CEO Gary Freidman said.

It also redesigned its supply chain network, allowing the retailer to pass on building a distribution center that was going to open this year. And it was the first full year for new businesses — RH Modern, RH Teen and RH Hospitality. RH also updated its Source Book catalog, rolled out Design Ateliers in its stores and added the Waterworks business.

Priorities include “transformation of our real estate; the expansion of our product offer; and the design of our new operating platform, inclusive of the distribution center network, the in-home delivery experience, plus decision data and analytics to support long-term growth,” Freidman said.

RH also will invest in its RH Hospitality business, even as store openings slow. It plans to integrate cafes, wine vaults and coffee bars into stores opening in Toronto, Palm Beach, Fla., and New York.

RH is expecting revenue growth to accelerate and operating margins to expand, but “we are taking a cautiously optimistic approach to our outlook given the uncertain macro environment in addition to the many initiatives and investments we are undertaking,” Friedman said.

Friedman said the company understands many of its strategies go counter to the strategies of many in the industry. But he added RH is “building a brand with no peer,” creating a customer experience that can be replicated and taking control of its content “from concept to customers.”

He said RH’s team of people has become a “team that is willing to march into hell, as we did last year, for a heavenly cause.”

Hooker Furniture
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 4/29 2017 2016 % change
Net revenues $562,080,000 $455,456,000 23.4%
Operating income $6,896,000 ($11,475,000) 160.1%
Net income ($3,370,000) ($13,470,000) 75.0%
Earnings per share ($0.09) ($0.33) 72.7%
Clint EngelClint Engel | Senior Retail Editor, Furniture Today
cengel@furnituretoday.com

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