RH Q4 FY2024 earnings call

• The business showed positive inflection with revenue up 18% and adjusted operating income up 57% in the fourth quarter on a comparable 13-week basis. • Invested with a narrow focus and long-term view, creating desired products in inspiring spaces with bespoke services and restaurants. • Ended the year with meaningful debt from stock repurchases but had significant assets, including real estate with an estimated equity value of ~$500M and excess inventory of $200M-$300M. • Product transformation plans include launches like RH Outdoor Sourcebook in early February, RH Interiors Sourcebook in mid-February to early March, and a new brand extension in fall 2025. • Expanded platform by opening new Design Galleries, Outdoor Galleries, and planning for global expansion with openings in Paris, London, Milan, etc. • Manufactured upholstered furniture in North Carolina factory, recently expanded, with projections for 48% produced in US, 21% in Italy, and 14% total business in US by year-end.

The RH brand was the driver of growth in the fourth quarter. Revenue for the RH brand increased 21%, and adjusted operating income rose 57% on a comparable 13-week basis. There is no specific revenue contribution percentage mentioned for the segment, but the RH brand's performance was crucial to the overall results.

• Fiscal year 2025: Forecast revenue growth 10%-13%, adjusted operating margin 14%-15%, adjusted EBITDA margin 20%-21%. • First quarter 2025: Forecast revenue growth 12.5%-13.5%, adjusted operating margin 6.5%-7%, adjusted EBITDA margin 12.5%-13%, with a negative 160-200 basis points impact from start-up costs for international expansion. • Product launches: RH Outdoor Sourcebook in early February, RH Interiors Sourcebook in mid-February to early March, and a new brand extension in fall 2025.

• Tariffs on products from China, Mexico, Canada; potential impact on margins and costs. • Market volatility and inflation risk. • Depressed housing market conditions. • Potential backlash from international expansion and delays in store openings. • Uncertainty in how trade negotiations (like tariffs) will play out.

Q: How do you see the outlook for the consumer and the difference between legacy galleries and design galleries?

A: Gary Friedman said they focus on innovating and performing well regardless of consumer uncertainty, and both legacy and design galleries are performing well with no major difference in comps.

Q: Have you started taking price in reaction to tariffs?

A: Gary Friedman said they're not reacting immediately, have inventory, and are focusing on thinking, inventing, and innovating instead of panicking.

Q: Can you walk through what's embedded in revenue and margin guidance related to tariffs?

A: Gary Friedman said tariffs are part of strategic negotiation, and they believe concessions will be made, and they're in a good position with inventory.

Q: What about clearance activity and its impact on new customers?

A: Jack Preston and Gary Friedman said more markdowns in a down market lead to more sales, and member count trends relate to market conditions.