RH (RH) 6 Dec 172017 Q3 Earnings call transcript

Company Profile

Participants

Cammeron McLaughlin	VP, IR
Gary Friedman	Chairman & CEO
Karen Boone	Co-President, CFO & Chief Administrative Officer
Steven Forbes	Guggenheim Securities
Oliver Chen	Cowen & Company
Daniel Hofkin	William Blair
Matt Fassler	Goldman Sachs
Atul Maheshwari	UBS
Geoff Small	Citi
Peter Benedict	Robert W. Baird & Co.
Janet Kloppenburg	JJK Research

Call transcript

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Operator

Good afternoon. My name is Ken, and I'll be your conference operator. At this time, I would like to welcome everyone to RH Third Quarter Fiscal 2017 Q&A Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like Cammeron now Relations. RH to would McLaughlin, introduce Investor I

Cammeron McLaughlin

you. you fiscal third call. thank afternoon XXXX joining conference Thank everyone, RH's for Good us for Q&A quarter

Officer; Friedman, Administrative and and Gary Chief Officer. are today Boone, President, me Chief Joining Executive and Karen Financial Chairman

factors to the of Please as reflect adjust any to the light matters we referenced description results of detailed our release also release that well results our are as to press impact more securities start, could obligation disclaimer undertake discuss this to and our statements revise for certain forward-looking that refer involve the issued filings, no for and the our these note meaning actual forward-looking results. in today, the would uncertainties or federal within a as today. our a including may to statements our of cause publicly measures events. I date Also risks and certain Please SEC these statements or outlook make These we results call forward-looking revision risk to affect remind forward-looking during call statements differ press of may financial items. materially. non-GAAP the new our the GAAP will number Before release of information other of statements laws we which our about today that you business like our issued legal only in we of today future opinions that of that of eliminate

of of release. non-GAAP in to website GAAP also at With over question. broadcast these this A I'll today's first on call relations information reconciliation that, ir.rh.com. financial additional find financial take to measures section our it press investor regarding measures the operator and available turn of the our is live to results non-GAAP You'll these a

Operator

Securities. from comes Steven question from first our Forbes Guggenheim And

Steven Forbes

start with corporate to giving Maybe current afternoon. outlook question rates. like the a Good high-level tax for

general delivery So, home Gary the around if tax of you idea or the to right the the to you can Would business outlook that really for roll-out at investing or of the environment into a margin in to Day not over just of your may are the accelerate in invest you you the lower initiatives that hospitality committed right right environment thought process willingness drive share see. long-term. discuss that kind Analyst margin we and would provided proactively business margin

Gary Friedman

The that operating question. we next and margin of Sure. continued our year enhancement home including of the aggressively delivery. investing into for Well, good that's think about the thanks redesign guidance chain way is a its supply inclusive pretty

investing we depending faster consider So, on tax. would the

evaluate enhance and given I will I some consider redesign that year think supply it to But on gets lands specifically all investments. that it'll inclusive delivery. where I optionality and think if of depending open past guidance about and including obviously and think committed about think think guidance that what us up chain home significant things. continuing our And to we've we're guidance next I some pretty I more very the is to then it for

Steven Forbes

starting think still gens that you and differentiated house how also a awareness a just about where think maybe question scenario us XX or then Can maybe brand you that? to have for in follow-up awareness it remind to the how a about the not as is continues brand even brand right footprint a the right too RH cohort penetrate of necessarily next today quick legacy And here. is evolve goal evolution you as guys discussions can here. may about early cities store then current store as you plan And the in to that a larger you many right in Are XX? have XX high-level from are or

Gary Friedman

Sure.

take Let first me on the one current goal.

Karen Boone

there and smaller a Valley. in smaller of gallery Napa well Napa Next sure the year billboard we the three for three have It's plan one the as and the is in Valley. then larger in

Gary Friedman

of Sure. And the as XX of evolution think then about we a than to awareness larger XX. kind having and brand footprint

expression that shopping evolve a happened dramatically career think back creating such parts generally runs a brand to and new that we smaller who as time current think was XX in to dinner was yards and Beach, chance a at a of and to the had over real you it those that continue expression you theirs you're to beginning the to Palm the The to when legacy And the company then the business to of I happen unveil experiences. came in a day is think it marketplace, and in of our investors our it it lunch I think other had of that new enhance Palm brand years a It's experiences a with I in same believe you Day some gallery that center, it over on dominance the there of were built think the brand stores physical was different you're and a to was the of opportunity shopping legacy whenever if experience. where current comment of our market tipping friends frog. I the a our almost us a went point the see improve expression RH bigger hard at that's and is the think were I on home. RH these and new than and market. wanting that's and for us. brand leap in I look hidden my bedroom or and other conversation that away impressive of continue Beach redo successful brand from real retail you no kind had perception for create been their And commenting I our Investor their one and the to company the into with out that's just very will these

think in maybe a going the think to I the tipping and today investing brand we're and or have into and maybe that quite and luxury offer. RH can services as experience the shop find our we about that perceive don't yet of capabilities people point we that So, the and perceive depth the we're design don't assortment don't breadth and us

going smaller. I brand really going point is galleries. really be that new known, our to And market meaningful tipping we to the a positioning these in when there's think of think gets continue as I generation bigger get not next the

and the first my I XX. XX career we at can with Lester. as XX think can the thought today anybody days was and when and we conversation have joined have as think, stores history Gap there or Howard So, most think be and I I remember if -- think at whether Williams I or had Williams-Sonoma number it was and big Williams-Sonoma early discussion get look I we of it first the XX I and I've what XX I don't back Chuck of could that and never have XXX The was stores. is Sonoma

the saying about to just happens number that so, we're exact RH. be And

the going so, is the But there's don't I RH think I that and successful XX we're more as brand and to size today, are not that think market higher XX have do on our that services is brand our the becomes scale understanding do XXX assortment to offer. list that and target are that think I that in and we building. the not Now, the not included awareness or

what see the I bigger natural growing today and than think will of brand maybe I or of evolution we that's I market think course business. a get the think

me stage brand to think at years still if be. operating Williams-Sonoma think I And And what seen and to we're could by at are it the are $X how today X% here Pottery [ph] you team nobody clearly, Phil we said that to Barn. ago, anybody XX XX% that. we're we and trying the ask trying it. margins. same big know with build have saw knife could don't at in that it I a I XX would Gap sitting blown or nobody at we've billion do, make saw if or the

evolutionary a So, that and businesses through. natural go that's process just think evolving I growing

You the grows. market just,

correctly. You brand kind of building create a market if you're really the

Steven Forbes

Thank you.

Operator

our And Oliver Cowen. question line Chen of next comes from from the

Oliver Chen

that you're the you about what see evolution strength What's versus want. Hi, your to about had of and merchandise horizon stay how Gary a inventory thinking for the a for question your thoughts breadth second longer do terms about margins and assortment the you're question right the main margins. and evolving? regarding you. and ROIC customers And sure rationale was and planning the depth versus how thank time making merchandise on to We relevant in innovative breath what's just optimize yet Thanks. depth thinking over

Karen Boone

Hi to Oliver. it Gary. Karen then turn I'll first the this take we'll is and one

last merchandise the we the margins are On XXX that year. from up

other indication and so quarters XX.X% still into that are based into have XX, some I rationalization and that comfortable we given we as lapping or do carry key wouldn't We can guys from in of and basis it that plus the some items feel that or that we QX But there. next future year. XXX improvement of that even take on point XXX-XXX necessarily margin, with XXXX, you the so guidance head quite you XX% we've see then

feel prior comfortable XX% further back we beyond that. we longer-term that getting we've So, opportunity that those very to in had that upside and do see we're range, highs even

Oliver Chen

Thank you.

Gary Friedman

Yes.

and and evolution for balance me the your best the we think take versus of how about breath was the I the question. question The depth. depth do breadth assortment, innovation the what's Let

revenues and say articulated XXXX I that going right. on to as focused year think ways, execution, XXXX be executing If are introduced in of many and flow businesses reset inventory in introduced think year of and the we membership new operating and platform XXXX, once decrease we're in with right. about, going I'd have a we our new cash to spending architecture architecting kind increasing about the of and capital optimizing and no earnings model, cash hospitality outside new by that

would not say. So view, long-term a I that's

think asked like continues year think be day, you XXXX, how I do it of cash. to a to me XXXX the looks me look and lot execution, XXXX, I the Gary said other about Someone architecture and

executing space sheet basically buying in and half flow is the current the focus And back. our We're see in of platform innovative opportunity architecting one of think and in business. lot I the will be believe I core operating of stages we retail. of the took the what early of of structure in optimizing on fine-tuning because of we important our on a optimized balance and the our cash most risk company

look slightly building XXXX but lot now be path and shift down to back farther So, growth. a like focus because will tendency the of XXXX, our our we'll will different of kind natural

and is its core one things well. demonstrated one of think that with strength of it I this of that the team the we do can business we've and

to to -- and by the light some very and to on chain DC us kind redesign new on We way fifth of about to are can. with network and capital give it rearchitecting supply still very innovative platform. assortment I lot can that going talk competitors. people RH are So, be its chain stopped then frankly our supply we've the be for architecture that much a and dominant much it two we a asked a We the and are as a capital had opportunities innovative that usage it and assortment too you you'll to a that how with model moving supply build We in doing inventory the reset many a in chain two new design we that home other RH core also got new important has we've quite We've going well building of you think and project and rearchitected could and avoided furniture away believe the we the to was more now business supply we much we inefficient be have we that was of within reset grow stopped. have because about was moving business capital Georgia. and chain, model and efficient on whole the previous we're in DC's a DC and thought using think to grow DC revolutionary turns about the network the in focused We're opportunities some supply and But brand can Savannah grow highly a space. too ideas won't and forward room see, chain. got outside that things just we new previously

I Development much growth We I and stay within up really our so leverage and And think of you'll she's comment I and RH initially and building think we and business start I the there Eri Sandra merchandise joined assortment announcements augmenting RH, our Brand. think tendency us that kind the like opportunity open the as much new huge me communicated about they're who core great she's Like customers leadership gives reach expand ways RH help. much to think capability agency think what us There new president opportunity New and here Chaya that I Business on brand this hence is excited opposite aperture at her believe in helm that of to us new to around bring today the focused and we're in is can grow open our both and area. the market. like how business. having vehicles we creative the and see with here is so multiple can President for to to in in and the that a are the me opportunity is up so Sandra

that accelerating we'll significantly more and you'll start in a that optimized platform. operating XXXX So, see on to efficient I and new accelerate be

for was a how plan about as talk continue and to of that what's to we it get really XX we forward. and us into year kind you'll So, take start for we breather growth to us think accelerate hear next good to going

Oliver Chen

final question. just Okay, Gary. a And

and the up platform that accomplish extendibility opportunities you've thoughts organic and versus building. platform engagement the and to As want in your aperture about there you the M&A you capabilities what the of development? of look, for about customer lens and lens how through the you On What and on the think you're thinking are the Waterworks the through and successful as done deal the brand? the

Gary Friedman

I and market. the the by building think the mean and was brand And the in interior bath through helps more engagement ways, a valuable relationships end its think space RH a with the I of architects, right. lifetime many the today, best render far at its once and I Waterworks opportunity Waterworks the high in through brand designers was kitchen the of in home. in their in position market process and

in me on for quite important opportunity So, thought was to there. that was a me very looked lifetime merchandising once sat a Waterworks capitalize. And architecture and was strategic years ago the the honestly, you at rare and with and architecture XX to it if we here company

organic That kind there. So, growth. with I long-term. said, being really for say internal the a presents our waited I work opportunity for bias long team just to talented about today the And excited the time is opportunity we're would that of

if day, and the door are kind We another optionality us But asked number when It's someone close me and when architecture thing or the I that make opportunities brand almost someone want again, treasure think probably you the in we of to before best other you buy endless, another optionality. he lifetime. another you see brand this I we like all we asked to not have We think might the buy you to trying said can might they ever choices. that not like possibilities and or the business do right. treasure saw that are of do merchandising another me our do

I robust. we we're meaningful at of us if that a to and the start amplified. have with really that in opportunities we say RH front you when peer to I in about America no think that look like so they're internationally, And know You brand building think North

locations opportunity at the just looking business amount brand. look those our and of We at a customer over you we and in at is If think spend countries. the to the that opportunities and it ship just huge look of Europe lot there market a studying to and we internationally, time London

we're lot in many said the brand we've great the in internationally, We're the We point of expanding we It's have get approaching a East, focused in quality a Mexico. tend deal Middle brand expanding expanding about have overtime the big that South seems looks And and it the grown expanding America, growing in looks that the brands if the us, rush, on on times. back. it other door in try all brand brand funny, no the brand no have brand so good, not to you start they think control the got way We we is control reacquire an competitiveness knocking We'll as to enough our important price you network been as China, tempting. are retail some people is say money But developing XX just thing, their the brand to of at and you look in they'll study how to ones control. to a more so been, almost else so years. much enough, get, pay and building really It's to markets how important out when into having of with brand where we've your quality and brand. brand and you a be people new it than actually less yourself, control control I've into word. and then about think going distribution giving to we brand careful really get less our Control their control here execute somebody erosion. hard of their

at team it tried anybody with be course able this they a organic brand, been for and of Now, XX. I've And so to of be XX And I the with we're a pay do general we to soon, years by here doing to another And going comes development been what for augmented M&A. copy money look to think at this growth when be of today will us an just think just and like time more than never Waterworks that M&A we exciting RH about this to XX But don't I brand We of and if I will like say will to to doing even long years if lot a me many look building is want opportunity doesn't up, and as had internally. don't yes, five, everything. I on most in outside look probably place it versus a this home think more our bet anytime need brand furnishings in that dominant themselves. look going sense marketplace luxury them is it.

Oliver Chen

Thanks Thanks Gary. Thank you. Karen.

Operator

And our Hofkin from Daniel from comes next William Blair. question

Daniel Hofkin

afternoon. Good

Just shared at some longer-term growth Analyst and Day with that that guidance revenue your you of the outlook. the XXXX comparing

But it. You've say be that think on would a things, think touched additional X think extensions? main you X some areas or kind it What higher of product XXXX? it bit be be you of would brand it was the XX-year the to little biggest would that international, year to be are would longer-term store help just be some What I'd longer-term relative comparable range you growth about growth would domestically average. like weak going XX I of over curious the on period would to next from the X, to it do

Gary Friedman

years. the the its said, the estate. And expansion that several been our the and past -- two product I continued key growing architecture like our Well, are business offer It's brand see they our to at it of that think of strategies have of over real of kind two us probably transformation continue Sure. looks through RH the brand value product of services. driving things to do my and kind platform we expand longer the through and through that. career rest to today least We robust really the again growth the take probably really

I we about wealth most what in part coming there Dave London, lot real estate the think a obviously and and right. think could one international Because growth reaches see location of mean wasn't really our for the top of of about business. of And everybody London, the it business. the gallery interacts with over really London, see were transformation direct international, we London real of were capabilities a you a real looking in we gallery launch in to offer were that was platform So, just, and the with in about and we key that coming it growth Europe and RH the part really because gallery from our on I team from I London at right.

very so, from of it parts business be from itself is whether Europe environment. other And London Middle Paris the business which a right Moscow, from business East, and retail and robust

store to we the at the and early say legacy leg together I'm talked the that Palm. So, third Like that you the think a years little while is up say tipping of last gallery deal, at when had numbers kind big awareness It's, road far always the I'd of been offer that. that tipping do When see is and see and is you a differently about us see $XXX,XXX the How what was We look modest, the leader we can how just that had point in our like brand Williamsburg. we, for the, initially its But we investor we can what's our brand in interior is been becomes team what and and and close for it's and and the that look business the response important had interior for design nicely. the an home that Palm early point something. brand here? a, again of design big but the we I point, the in do that gallery differently we and but middle nervous think about it And were the and I the think job and transaction our we've was back people gallery in is our good right. right. and If made Tampa, about of back so just know to discussed doing day, amazed from. talked about ability particularly putting Willowbrook how interesting But Beach, strong at brand. was West really comped the services building another how we were I've about $XXX,XXX earlier draw that today market. couple really had right of this okay, gallery I gallery we the -- Texas out

just transactions. And these just to starting think people differently. so, we're see us bigger seeing And are I

so, year the brand about value at how that worth do the And early stage the galleries. of X you you this to point X, do how a just is building tipping you design start brand. position X, think of about awareness, of really that as these We're value points think

growth other so really few product awareness we're lever the advertising it's transformation digital forward can lever increased little optimize We always and want, holding of the if are ways brand Those continued Right to our awareness. bit. invest to model and invest We're brand testing we a more advertising in print brand. expand the but the driving circulation in really now, books? look if can but those as the advertising? And Can the step are we real back a we things, farther pieces, want. we we're of trying the estate, offer we expansion of our the of on our that pull

be real think international to And business. a on we're So, is there. I going early then

we I think to it's much than going ever thought. be bigger

Daniel Hofkin

Great. luck. Garry, Best it. appreciate of

Operator

questioner from And Fassler our comes at Goldman Sachs. next Matt

Matt Fassler

Palm. the back. at terms that their talked a Analyst also to to you delivery expectation delivery willing getting into interaction Meeting not Appreciate the of time really what [indiscernible] about Thanks consumers many is you're delivery up our you're more I as spoke But the time execution in in a know I of few of how of if that consumer effort as with the sense your se. get per the so offer their tonight that. the as insourcing association and I know integrate about they much. have the Delivery, well stepping from terms believing West lot can in marketing product message membership by in weeks commodity. a you misunderstood on them what can And RH?

Gary Friedman

I Yes, think as better. again we execute

And we say look do. is not think we don't be we design we about don't work, to ourselves, believe it. there a do products experience in way we that work the galleries of will great sources we I going the just invest the in the we when about invest we And in tremendous great our we our building. present and [ph], we marketing, group to what bias create and the about talking the and and is and think to marketing service in the we it's those market, to our again, have interior talks our work create, we're it's about truth do a create, the because that important world We the continue offering than clearly word work I mouth truth have do and department, you right truth more bring the is web market. we more create, service deliver, we products we have in much right. brand a talk The

And how allocation capital thinking go here, through so, about we right. might just

our our there. marketing it's catalogs. more connect to marketing don't more but about catalog $XX the work, million And media is digital more But goes look for to somebody for putting ads ads or to million we're $XX put this and work we talking ourselves. our spend out million really like money social into on more run like, And all or print more I'd more $XX or

day the a Instagram many. Like to XX Instagram that the with most their bakeries of in eat awake Chicago. that. proposals last proposals cafe in country. I yesterday a go don't let's the Arts XX most store. marriage middle letter if in of the how café's By at in and going and Arts in know in read it furniture of middle in we is of in just cafe before X store Café the store, we're the Like the I it. X how a end you the morning, a the marriage out about furniture in year, As inspiring you had that seventh Club country By Instagram, the posted came the our furniture the way, that café and think think middle

make right. can't You that up,

the so, to just do And kind great we work to will think work great as our put it's and work we continue do bias of out I there.

and Like do way, we direct go of We in a don't work to think, business out continue there. to it? to talk going a Yes, to we quality a will will. we will talk don't the so but revenues, we it's over perfect right. we time just humble delivery, When bunch want chase about get try home build we we low about want and high-quality to

read will. talk will than it the from it we you galleries. our about website, hear source will our open. about different new our Of you no we We Will galleries course, be on book, in that about course, people? it Of other

on doing our when we mean, have focused work. open capital But I work. so our We great pretty opening them. interesting is events more we celebrate

Matt Fassler

many in quarter up are I you of that talk the coming and quick about largely for of clearance has how that. are and margins role you. played Thank I could. revenue very the the a if them you standing? the from outlet show merchant A Karen activity through perspective still the follow-up know would Can

Karen Boone

Yes.

we XX right now. stores So, we XX, have about have

was actually of by I if about one there year we'll basis $X that outlet million. end growth a outlet within more you point because open was the revenues at were number the XXX drag look actually, think up and

growth revenue a in be. about point past of than were and could and So they kind the lower of have the margins been that's

that where do think So, we that's have some margins still when future, better area working in another the outlet we'll the inventory. are through of we

in as of down we having although not them actually temporary and the long-term, point be logistics number we're we model, outlet stores these one going far sitting would open we changes any to As because the in thinking were DC's close longer. inventory the stores at of

about talking and and to more or we're straight turn going from going whatever, straight go to quickly to is bias return gets been our dinged wanting outlet. we've So, to that in it as the it's exchange

doors we outlet through more more that boxes, inventory. So, need turn to

those up our are ones were delivery So, keep, down then closer some and locations they so we might to of won't temporary them centers. we that open home close

Matt Fassler

so you much. Thank

Operator

And question Michael from our comes from UBS. Lasser next

Atul Maheshwari

This is Good Michael evening. Lasser. a in Atul for taking lot Maheshwari question. filling for our Thanks

question third your to quarter relates first my comp drivers. So,

how your the modern contribution So other was it by book really driven and any really to and there of were drivers? significant was source what much

Karen Boone

of is detail on We we give details the give are which outlet real But a out Yes. parse and things specifics point within of the is don't just is comp and X% the then that new the lot six. a in comp, the growth that then we actually estate comp not non-comp.

Atul Maheshwari

fair. Okay. That's

Karen Boone

continue modern. to We be very with happy

So, with we're still very It still a it's incremental. runway great. grow happy has business. of lot it's happy, doing that to and think Still

Atul Maheshwari

fourth the on follow-up question your quarter. a And for I guidance Okay. have

years. volatile we've So, few in spending that been seen pretty holiday the past has

So, your how could have in this expectations and sense trends us the you're point or line you above provide tracking been in of quarter? at whether recently

Gary Friedman

So, the question is.

Karen Boone

holiday. Around

So, I think…

Gary Friedman

you Well, right. deemphasized assortment, holiday last years holiday our over the we is know several

decor. interior and from ultimate is a emphasized the interior holiday our our assortment or detracted that design we've assortment to whether as the platform leading goal stocking country. believe it was true gifts platform We the holiday luxury really positioning in design and of kind position legacy stuffers businesses the As the knickknacks

We our of part smaller layer frankly. little a last and bit gifts been quite a some has décor a year than holiday added more of So, business.

we go some of seems anymore. [ph] always location But do doesn't lot we that it like just and are just of it of are relevant the have some through a because malls, fit are shopping come its assortment We to have pre-standing a holiday in lot less and still to for you still It gifts. traffic to larger gallery still in fits location. our that customer have a malls the

typical less most quarter business we're So, retailers anymore. the impacted like not in a holiday the We're than by volatility others.

banking as our the new is to our not operating past will business next how out. post-membership. see model. as too our sales Not have with earnings seasonal everything pre-membership see to not quarter some smooth unfold our performance that and and you you'll graph and and but QX But it Our it, sales we're unlike we fourth and like showed that movement business in to you on start and have year the our that on we to begins dependent start

confident feel we So, about the put numbers out there. we

to I sales revenues. business. to said low-quality kind We're with of quality revenues. and my dollar going the optimize going not low in profits gross think versus on growth. focused chase it's We're the We're margin bias notes running that we're try business to the maximizing for

even and basis this about The If point points two when with margins worth you math being hundred margin directly one think about margin is sales business we several quarter past about just you think up if up merchandise the really dollars. our X% being of think think the way of about revenues points. you

when growth hundred than X% with growth is think that. dollar of our basis And business margin up merchandise you so, our about points several margin higher being growth significantly

are lens not And our very be win high that's the still, about be victims the going over sitting who the with of right. to business business. with in the high, and week company positioning XX% that We're we're It stock float to short and term at players changes other looking active long-term almost people so, ourselves forties. the short When here a we at think were week. how our They out. let in stock we're of momentum or looking to might

margins operating historical margins margins next their margins over to to years. the expanding with guidance at would Most top for the guidance of operating We've the look high So, put company out we way for you the the have very the our our the very eroding. for in XX% up of the comfortable operating QX. going which heap several our are feel people put us at We with them you set sector. who there are X% operating had if comfortable by XXXX, long-term and see

Atul Maheshwari

you. Thank Okay.

Operator

Citi. Geoff the comes Small from from Our next question

Geoff Small

that Hello, and the Gary the of was and XXXX high-end X% some Karen. that for Thank of to you can conclude for achieve color if internal XXXX taking on specifically my lower-end? wondering range questions. to allow would I you first operating provide want to I you variables you external the circle margin target XX% back with to

Karen Boone

Sure.

gross in assumes and end certainly with margins we've So, [ph] closer happens that is we negative of kind really that that guidance the or the the low not the of something the gave things speaking can't SG&A economy that range both we control. we would to be

changes there's But factored come could sort tax in open occupancy that such. delivery things really, benefits when not or and nice some lift some hospitality, get and of model. that of depends like of rate from the have stores and new of of obviously old timing stores and level We volume because on investment we new home savings

we're So, out whether control I changes certainly we can things our of or otherwise, make pivot macro sideways necessary. things the control focused on if all we'll think or go as and

Geoff Small

add existing open also model you. helpful. level. I your reach DC's what locations? revenue square to that or you up when planning Thank That's additional simply if curious to and can And Are and level of was two-distribution center support, you your footage

Gary Friedman

the Yes, how business, that's grow really depended on we right.

growing business special-order hold business right. a is recent growth the thing a our stock that's is our inventory, of can't we parts our the just business big of inventory. really our one of and special-order biggest some the don't positive and of One We business to

using as So, as about platform as design you interior platform. we think continued again our designers to business an interior this

wanting in As reflect unique their point their style. have own you view to think homes people of about

order our and in it's is position and despite more of will Our we we to turn think that sense it. inventory ahead how special continue - significantly just grow think for just there we built about efficient is business it,

existing and expand square the platform going to ability grow just we're likely if add for expand a to got think the So, we footage to we most and in the way. we've several it, simple just needed platform itself some years on

So, -- that be in we in the market expenditures have providers relates partner Obviously, control and making we're I we will articulated, going capital it's not going there, we're level and a people luxury and going the distribution as with new -- home forward of I I built middle to network. model expect no play center that's for to think XXXX brand delivery service and as and really home we're that anytime the for anything that we home to we business of the from Investor Day, go big we deserving delivery. think to in and either simplify or in it beyond. at operating we more networks themselves really and -- that our see home there quality a exist think into that's models investment built will built we invest of we delivery existing to take model out view, of the really point future We'll delivery part are so whole that that to significant as and is at level that build control our our

Operator

comes Peter Our from Benedict Baird. next question from

Peter Benedict

thinking I the But the over and the Back mean what guide just here is takes really on so compares need in we to there I fourth third similar greater and third probably did anything in quarter, revenues. we guess the quarter? you I bias prevent appreciate quarter would the fourth -- curious, for that that about to any the I'm acceleration quarter, discrete think the here CBRs as to about the in profits CBR fourth an seems puts relative something quarter be imply to

Karen Boone

the Brand acronym talk -- [ph]. similar was

Gary Friedman

with I CDR, to that? don't Didn't but add we -- know anything -- Karen, want to CBR.

Karen Boone

a as think if QX when business Gary us just -- accelerate guess for that holiday mean go it I that might that's the say would I that is no, you Yes, us not I you just for to mean the one QX -- business we case isn't big -- holiday mentioned. had just thing I from would the but

would you why would big know ramp it's that for think don't to a reason So it I can't of expect any I be but I accelerate, reason. think any going similar up

Peter Benedict

efforts? reengineering, things the think as think Thank chain now? the chain, but guide guess terms in what we be to Then, just next shifting over to should XX I home I achieved we if sitting to we're supply how -- next and of the you. guys obviously get call; are DCs where maybe mean, months those we you fast about going the you X so to posts, year delivery have would have year, you're supply on the trying from some forward a should main we

Karen Boone

They two centers. distribution the biggest just is the have plans is forthcoming achieved those ones we two that are done the one and of it's other closing things the and

out when another one of So to could facility costs kind savings 'XX. occupancy that down be in from probably business other further fixed about the about think you candidate that's spoken still close come to of going there the we've frankly, the that and and is that

back that's DC think I footprint. to with made a that have through the in just and are right we're have just So outlook is or XX% is frankly, already logistics there. that come and DC do the done -- really lot reverse been networks markets last it of and progress we what goes not on then, savings XX% we've just that there extent that's And the really that

not a all touching the achievement. been labor goods charges has huge transportation So having and and those

think that the done, I to on that's left. we've think and about we've going thing how is delivery and already what's come to things that about so is talking what we're experience be So keep those that the home are the like; big biggest going

Gary Friedman

outlook margin emulate that's necessarily will, of is of some home in optimize to I'd and architect possible there turn that in just think upside business savings product our is align look if think delivery the the the returns of like business and the most and times. we architecture to the outlook as thought architecture, architected least outlet not about continued logistics opportunity we X reverse amount to then logistics that today; in way outlook the our it's highest ways it the the outlets there in and or architected right all optimal at so huge the and footprint And the home business phase are design network, we delivery reverse handle business it's delivery and places the home the with Yes. -- we the there. and say and is, and how

the we can start from be So on piece; the year more market in after first clear get I delivery the real we'll start next data Bay the second that Day to at metrics test go or now, we a I -- think than huge need and where area quarter and we see the more when and of learnings we here to will tell how the the may go, know in to it of more shared the few opportunity think with year numbers home tell just fast we have learn get and we but the of indicated us we may us test Investor we're to more and just the you early a measuring it opportunity. faster, the that it's indications we some

in regional versus or own others, of it's higher cost think project with whether those as about else, you Bay, average on significantly coast, our moving the the a pretty our unique delivery goods, versus think have are you more about business, you you versus goods transportation business others mean, into transportation, -- what of with are our players, chain product I-Brands coming [ph] the how right; more control bias our supply transportation -- long-term the do DC from and fares -- others, about a how to you and transportation we're out the and forth, the some coast, are businesses east to back the is a percent even business. we and on everybody than former our think do of markets we're X if mean goods if how have lanes other network, here, trucks opportunity, still whether we home us we if way early right. trucks really coming optimize partner you ticket percent do take across and west design of DC our are right, of coming have of you network; just control how the the control I And you to we in going or key our about parts the our to about goods I think what optimize on think So partner

$X can chain ticket, average architect and just are about average billion, different a to scale, the and So we with that supply scale the business you you to think other think have game billion think model. have we going our about order, the the $X play if have so of cost right; you about we exceeding different they because playing the don't people opportunities or a have soon, they

sofa $X,XXX sofa? compared you're about quality you're can how a to into and delivering to right. talking if If $X,XXX that selling built delivering you much Nothing $XXX you're sofa, a

-- you with do math that's everybody If we're else like think the about have, we you can our the model we almost the and we out and scale market why it focused that's why that there. believe on math entirely differently just with says our and that's than

the just able the into doing invest much So we look you're can't best that in will to the other quality like like you that opportunities quality, and going invest what we people selling an see $XXX going the be sofa. to when we forward, $X,XXX we to like that have what like, are math ability indicates we not

Peter Benedict

any question. year this cadence that's off? changes should are the last my on of sort that your mailings just you. is the question Thank we source plan, aware last and there relative next book My And be year of to

Gary Friedman

Yes.

us As business and our more as just constantly a month a assortment we it source as furniture it's and years, at December furniture -- of to shifts X peak evolving book if for from or was typical December, big a very is the or of more plus all, the business retailer mean -- goes in we you month, look are our that not big the business that vacation, -- the out cadence right. actually at holiday if January big on with we of you business direct, as keeps character big a last a whenever is followed more the market business shifts you because like changing our I strategy know, XX -- online it's changed companies,

books, things; have going January we as books continues at how and books times not; Sure, you're this we'll in we some marketplace says all plans you to them, as followed we see estates time, about think change -- we year character to we're it's and right. things evolve. testing it's year, -- the and source test and business the then to those long that we're and the continue books and books be test wisdom market, two do notice books unconventional once everybody of it is size going is out going you to whether things you we're are have the of digital, really to of books, our when the the to going so we going put and then book define monthly, of shared up moves, different and I've books do in the our every is to our of mean relatively in are books therefore a about works source back unusual like in think of we're so thought rug business whether have and guess things lighting the we learning's the some whether we're books going a and we that. year, do surprised to it's of those going crazy, book real of you'd floating business everybody stores source to so whether test lot to or company, because to are year books short-term, we we to -- And changing do we test business the sharing, like mail or us already X sometimes if But we're our a the source I different change moving still business and would continue it's key X things things go parts XX it's further most like from separate a test books curious change if book, evolve, used a different XX furniture went doing, source all the to told were if we And to mailing even critical that test about a what share build bundling and kind big own being do -- of to and linens of do everybody book, category, January. breaking who you test constantly work the source have our to right, our sometimes time, just see doing so January, radical of whether year; with to into I the confused their big we business and We're year, down when or every the people books, almost a other continue or out own book, a test and when you're went of some and to be are dominance, constantly we like just market you. X around with into nature are we then we mailed and to don't conventional books that

Operator

is question Research. JJK final our And from Janet Kloppenburg,

Janet Kloppenburg

at idea the timing fiscal quarter end, that the them 'XX call of have just will my an testing be of upgrades but you been see first will maybe can year, of the lot be us thinking -- maybe about me the answered should end well, don't I year and how end you the delivery summarize, Gary. questions the give how next unfold there? is I the if know or We let in A will

Gary Friedman

redesign be our will the the and delivery distribution we'll we and the the improvise, just redesign we it. be right. we'll to architecting learn, about chain and and logistics been continue testing evolution as that, like all architecture about talking next think feel things in I and overcome, I efforts center and we've it reverse working to of part year our supply now redesign the home through and we'll Well, and adapt business be shifting are talking And

So…

Janet Kloppenburg

contemplated -- have in point high you what that XX% outlook? delivery just and And there, I how should X% the operating about that margins? Yes. we I'm -- to with wondering, quality mean impact on that touch what -- have like think customer; should

Gary Friedman

Yes.

Janet Kloppenburg

a pressure So service level should to higher providing how should of we operating or you're it be because margin bit about a this think that?

Gary Friedman

as contemplated relates learn think and plenty our -- homes, reducing just be selling as -- returns it go We that of it, long-term plans we furniture's the think to architecture; the us experience, and we're investment seems testing and we got in going to they opportunity will stick so we and to like we've -- operating plenty go. mean, margins, actually to Delighting it -- having get and and an and accretive our to also think in; like we enormous augmenting door I exchanges, in and customers' me. about open let the right, our customers

home. we're in piece and experience, sometimes now opportunity reducing -- solving by a to selling send weeks So days minutes. issue I in the there cancel to black and with with home, maybe we ability into there opposed while transfers gets service other call hole maybe don't -- into we a it as if it furniture is create just it's or over maybe if reducing we send it to adjust almost exchanges, third-party, an dealt is in reducing just it customer with fix maybe handled of center, opposed a the goes in them, goes as that delivery rates, the the the a problems the And team, mean different returns, people

architect closer today, not the running XX we're And architect a are for years we're the we we're backend for just running to business home the business today, business the ago. running for to delivery the going to we're going so lot get customer,

Janet Kloppenburg

set extensions that And for your and assuming the or or some is new concepts revenue year of as range I'm of there be know well? and RHS have Gary, about during when you a year, see that launches out I next lot new wait a ideas you will concepts;

Gary Friedman

It's and wait a see.

sure we than I if if you it's are. it's of be been we've shaking get for we head, we'll are see right, can When make years, a things mean everybody little their -- to we teams like course had things, watch I all think the likely never so to we you is… I see yes, we're so But right. mean head, when one and here more right, here once people say their say yes, got likely, less concepts a ready, we've second few webcam, working out you shaking there

Janet Kloppenburg

three next mean year. I in have signed Well, we've two for traditional to of stores one you that now on; thinking structure them more structure a lastly, rent about just or those process fair are that it's have opening those said right I or exciting maybe deals year leasebacks you Karen of or may think you're And are deals? emerge think next

Karen Boone

one it's of put probably about Those are up the kind opportunity some capital or those. talked Investor we actually put wouldn't we've where those XXXX. we've have up until the mean, funded Day pipeline we be do first in rent for all leased one's first traditional but the [indiscernible] -- developed I now put of up structure put and capital, the we've that the to we that a of are but the deals, the don't one's leasebacks at sale capital,

Janet Kloppenburg

an to opportunity there these transition be that structure? overtime But leases to would

Gary Friedman

to The new move more that structure. deals are going towards

Karen Boone

have we mean and is going been mean one point were those this in -- the we're an I give Portland know, do three talking those that before the to but to there point time, sale talking and three guys you open, that you early for those then of monetize, [ph], them I -- things could at evaluate New course our Nashville of of sees don't and to more Portland, we'll are some year do an probably plans have York, we and New opportunity. we Nashville been to opportunity those but will we've so if about leaseback and York this at on have change opportunity we we've them details as two on a

Janet Kloppenburg

you vision the openings you each guidance? your of margin would And to hospitality it of included strive how will some have do for hospitality new think or the about lastly, in sort -- the that in gallery within you galleries; than just Gary, and new operating what's Okay.

Gary Friedman

Yes.

of saw to in I some did be of is minute right. We construction the I volume be under designed. some in it's less, in not ways were one's Toronto, they going you it think construction determined -- be market, actually mean and -- the on the be bolt-ons, of have under we these Palm than just everywhere we more last kind opportunity hospitality were Beach, there able in have and we to think might and will necessarily not were

success we when saw traffic that in impact to around the Chicago so we quickly said where and the to. And pivoted we was hospitality on and weekends the the reaction hospitality saw the we the then the saw the having overall gallery, we believe of and the add lines could gallery, the the and sales block we and incremental performance of

all the location for so the to to the opening is the put you think Palm said, caresses of it's steel-in-glass three. So we now it's as this now and a and benefited on great mean F&B a is we store, an facing and both we we café I have a what's way we the beef well-known do a so it. tell a experience, on handle we would historic an skylight, have great interior the little Chicago to top And open had location what's we joined we and put now got Chicago a we've roof mean kind we test neighborhood restaurateur in in front exciting place up back roof of in several it we have Beach, we café it took we kind on partnered great a the us, passage café with of store front Toronto, and be side, to because bolt RH to I could it got we we building, has then, Hospitality And to to that café, I have street those and over, how be which figured that. able courtyard we built wildering and -- delay out we roof loads we be [ph] a of of we months in of Toronto the facing steel wine do and that integrate and its the Chicago structure bit, knew we we courtyard had only exterior has that have really And that this central about under benefited structure truth bolt courtyard created Sodikoff to how the very the -- kind mall and ceilings, of great and courtyard almost and it. by put just incredible Brendan as President

breach quite And numbers; bar and wine a phenomenal up the at Toronto we know and to would Chicago in was And would Palm the bolt restaurant is and didn't the out, to Beach, so a come, success. you we we into which exactly comparable frankly, if know when initial went look there are the anybody months the what frankly and went really quite how expect anybody weeks play would there. in that when numbers roof onto

the is team direction I So team a about -- the team I quality still built deepest compulsive menu's is operator has have a he bravo builder. and the mean Brendan chef; great he great he obviously just mean, as he a space, and says, really one not in he that operate obsessive, about he does anymore, as meet is doesn't and for the so because hospitality to of execution; all thinkers chef I his really just but the off is hats such and

just I knew to we're us fact it's of if and So and ratings, it's I -- two Yelp to have restaurant. cafes nobody think Brendan the two wine at it's me, time yet when you think in in short or of Palm and opened go -- like you look well the bars, Like box Palm we've and we holding I X-star kind don't know got unbelievable. Yelp expected Toronto mean if [ph] active a to restaurants upto restaurateur a X-stars. go hands I very cities breadth Beach all and is like that [ph] team how don't packed as to you Beach, amount about that many that people in their

the have it's views high eat we believe roof on you beautiful middle be think we one our the box we're of less hits wine wonderful with to about we're in we're Chicago; downtown modern lot because has think a Portland, I Chicago so of like restaurant, the -- around great flows of like views the with thing so be New beautiful to in that. it get park, restaurant, Freedom an say so then have hits foot really and of joke our this box, not just cavern space rooftop courtyard by opportunity building day amazing In did a York do designed excited on beautiful York a park that rooftop from And it, to a don't and it's rooftop, XX,XXX park glass the I this to designing pantry Nashville, the with the our going rooftop of you middle hospitality version I York So it's a going it in characteristics where this to see it Portland. like And green. and second be lot destination spectacular. skylight of York I into the will New square the we and it's more of of downtown. than and about building this will the first going district, it's that the really New all way, and light and up team, into them we have be but ground you this have natural and is Tower got buildings, [indiscernible] the have get so built New is capacity to that or in central the

Janet Kloppenburg

to But anyway, it. looks best it beautiful. luck for great season. happy anxious holidays a see Yes, and quite I'm of

Operator

for our the turn over the call I'd closing Gary session does conclude Q&A now to day. This like for Friedman to remarks.

Gary Friedman

and effort partners Great. one put to to and day; our Well, as the about be interest of persistence kind your and life appreciative that the into in and extremely the quest continued We're most not and every the continue values more around of thank excited and the proud be each our brands of team our world bringing vision business we for passion people the could really working and world. for or of our outlook we and admired here. in the you journey our everyone future our

we So look talking holidays. forward thank you, you and to to after the

Operator

This does conclude today's call.

for You may now very your much you disconnect. Thank participation.

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