RH Accelerates Growth Amidst Housing Market Downturn
RH, a leading luxury home furnishings company, has reported a significant increase in demand despite operating in one of the worst housing markets in 30 years. In its Q3 fiscal 2024 earnings call, the company's CEO Gary Friedman stated that third-quarter demand increased by 13%, with November demand up 18% and December month-to-date demand up 30%. This growth is attributed to RH's industry-leading product transformation and platform expansion.
Friedman highlighted that the RH brand has seen a 24% increase in demand in November, with the introduction of its new RH Modern Source Book. The success of this new offering has led to market share gains of 15 to 25 points in Q3, accelerating to 25 to 45 points in Q4. RH believes that its collections reflect the level of design and quality inaccessible in the current market, making it a disruptor across multiple markets.
The company's contract outlet, baby, child, and team businesses are expected to benefit from this product transformation in 2025. RH plans to expand its contract business as new products become more widely available, drive outlet sales through returns of new items, and translate successful designs into smaller sizes for baby, child, and teen.
Financially, RH reported Q3 revenues of $818 million, up 8.1% from the same period last year, with adjusted operating margin at 15% and adjusted EBITDA margin at 20.8%. The company has raised its guidance for Q4 and full-year 2024, predicting demand growth of 9.9% to 10.4%, revenue growth of 6.8% to 7.2%, and adjusted operating margin of 11.5% to 11.7%
Friedman emphasized that the company's strategic investments are creating a level of separation in their industry, rivaling the most important brands worldwide. RH has made significant investments in its product transformation plan for 2024 and 2025, including the second mailing of its new RH Modern Source Book with 54 new collections across various categories.
The company's decision to increase its advertising investment by approximately $6 million in Q3 reflects its confidence in the new offerings. This move has contributed to the growth and expansion of both page count and circulation of the RH Modern Source Book.
As the housing market continues to face challenges, RH's commitment to innovation and disruption is poised to drive significant market share gains for the company. Its focus on delivering high-quality products and exceptional customer experiences positions it for long-term success.
With its strategic investments and product transformation plan in place, RH is well-positioned to navigate the current housing market challenges and emerge as a leader in the luxury home furnishings industry.
