RH (RH) 27 Mar 182017 Q4 Earnings call transcript

Company Profile

Participants

Cammeron McLaughlin	VP, IR
Gary Friedman	Chairman and CEO
Karen Boone	President, CFO and Chief Administrative Officer
John Heinbockel	Guggenheim Securities
Matthew Fassler	Goldman Sachs
Michael Lasser	UBS
Curtis Nagle	Bank of America Merrill Lynch
Bobby Griffin	Raymond James
Geoff Small	Citi
Adam Sindler	Deutsche Bank
Peter Benedict	Baird
Peter Keith	Piper Jaffray
Oliver Chen	Cowen and Company
Cristina Fernandez	Telsey Advisory Group
Janet Kloppenburg	JJK Research

Call transcript

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Operator

Good afternoon. My name is Suantal, and I'll be your conference operator today. At this time, I would like to welcome everyone to the RH Fourth Quarter and 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 may conference. you begin McLaughlin, your Cammeron

Cammeron McLaughlin

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

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

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

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

Operator

Guggenheim with Steve from Securities. first the question Forbes instructions] line comes Your [Operator of

Your line is open.

John Heinbockel

So, have learnings upon for Guys that Steve. touch it's in to maybe you new led -- prototypes. John galleries mentioned recent the Heinbockel in

what are that then size about thinking when particularly key in that learnings, the prototype, the about you the does it anyway to footprint merchandise cover maybe think So the what the your of the relates some use curation? new to alter of U.S.? of And you as gallery need ultimate

Gary Friedman

that. Sure take this Gary, is I'll

know, new larger developing galleries XXXX. you As we these in started

So a dramatically depth assortment. the to years breadth to a and relates our quite businesses The our into added been brand we're it extensions seven evolve as those brand. continue of have to and it business that seven business as and we over and years the and innovate brand new extensions and

to So hospitality. if think this as including over we evolve about you years, of adding this, number a continue

couple footprint. able the a most we gallery we've the a done in of So is study single businesses and and integrate study space investment really to last that productivity over all believe yield the been now, what productivity, years of now design will

it's footage just So and much efficient will less particularly a looks no it while is, this smaller, have -- more assortment square design. it the

designed big same was the to So component all we presentation, to than until We a to want markets. that a the hospitality do you it our really us it couldn't market, from breakthrough a the designed had it's of work see again one quite of majority gallery And our frankly Child in best it in would have that did know the or store letter, intent And then initially, become team, the whole expression that became highest gallery. ground, saw this were execute the in place much was saw the my a on the section and it fourth we the real will Baby put also added we and brand same RH not presentation view the it's once was honestly And that response million simplifies through as the floor the goods for not. actually will worried and you biggest to smaller becomes excess of on people businesses. what if And gallery. it draws organization rooftop, it look And $X integrated we at we is Palm yet or the like efficient it presented. is gallery Chicago, performing all our most of initial on experience. draws only business not today its the majority my -- in rooftop. the about where the it comments our restaurant question tested if real. of F&B rollout not the And to And year. people, could and of West do the of of a for And the we a of stores shareholders read tracking in probably up we the didn't be back we it's first the it. the rooftop. we restaurant F&B business, component the And It's we put has you the

we the courtyard, Chicago through of as up gallery. we energy pulls restaurant in we the gallery exposing like and middle So the through. to the how like how really lot are in the like how way that the products it and But really people a of creates rooftop walking all we really

been And We've best footprint new of of that to just of don't years. into So the learned we we've we will is And ideal there shift businesses any seven now the couple last big the working we things some over think nothing really lot five component, it’s for last it what the integrating the many prototype. but years a changes. is brand extensions, dramatically. foresee huge got so things it’s like the about

us we're going much this and capital a with position have return lot our capital. on puts to think we a time, in efficient better be our to with a So more

to the it's the serve years. pretty in market think the about majority And seven way. these now experience. in the first of will fantastic five a cutback experiment as nothing what this in an There So XX gallery, think we're on tremendous ongoing of we past is locked over

that's expressing really learned. So it, efficient what It's how to we've And we're best productivity about planning. is just design. of no less think there really the

John Heinbockel

what as up, percentage a think be And follow the then of F&B just will prototypes? new in you

Gary Friedman

sure Not yet.

to probably more. I probably say to I'd thinking the we’re anything. a third don't So about today maybe want But about commit way

John Heinbockel

you. thank Okay,

Gary Friedman

Yes.

Operator

Fassler comes Sachs. with next from Your question of the line Matthew Goldman

open. is line Your

Matthew Fassler

afternoon, much, and good guys. so Thanks

to between relationship the and I program. The want relates ask membership first the to question hospitality

So the draw have different membership today with whether of successful about in somewhat hospitality, have that the Can than more membership stores galleries? from had expect whether you in this than hospitality trend high hospitality seem into you stores the whether some frequency would this the you talk impact seen and you tie you membership past. to element other to of have a to

Gary Friedman

I they Yes, don't think really tie together.

we store that furniture, It And our that. that do have galleries. dynamic into right, think stand it's clearly and shopping incremental and massively you is driving a going traffic for is think I furniture if to ten infrequent, most F&B often about it's on back business, how a experience people it's redecorating, an new real mean, home. go I a years. remodeling based redesigning driven home And or might people it's need, furniture five a to infrequent, massively driven event or people by every home, a their buying a store

a visits. in of has what And So, we trying industry really they visit, are extended low you've frequency is we are long got have the visits. that dynamic to are do of when the we one,

If are they’re visits. enhance trying job and it's to that you what are we are doing design helping home, a do is your their visits multiple experience. And you and long customer really

they hospitality wine. than offer was lunch, have initial for So, right? of goals. And of experience home that more glass really a we We store, coffee, don't that’s present one our can leave them can

our and it but living do they’re lot just there in a and So come have the is, just when bedroom in life. right? bedroom, gallery, redo would rest a environment glass that my but redo we they inspired waiting a business that we just it a a goods doesn't it's in experience right why in, think because wine a chandelier furniture, of say of is some inspiring geez, room it the table I and And we $XXX,XXX business, look we and look for car, it where when a customer restaurant, say in our gallery, consumer about us present possibly beautiful -- I around driving I had we Could by the they artistic be see infrequency enjoying really might as people a setting of experience we or living of traffic driving our sit why don't inspiring and home. redo interesting lot was with room build our and them, the behavior a more and not not or don't honey, our while whole furniture of more than because it's by is room a and pretty but that significantly our traffic, people we for or goal food for the believe the have fashion. obsessing the come couch time by perception reason walkthrough about $X,XXX spend the a is at and could my make buying into galleries, And inspired foot we spaces and second we’re change dining sense, the what and understanding wish traffic, be

environments, we and days, inspiring places just get really inspiring -- so I our home think really most inspiring redesign. again that if a products, it of don't architecture, into of go see lot about And us because installation we we inspiring of

-- of about or really trigger kind a there to is as is And kind of so that. exciting to pull nothing think

saying and years I've all galleries and we of comment, here. wish I So, first got in architecturally now. anybody a to I clients before the home people I asked our The come And the and were point view, And until having looked by interior people few this. and are this believe into Houston, is in business and I've unique way back massively feedback number want these what for that. The live retail installation be are saying. to comment think have design did like that our to one been inspired something is right. then of was said there people biggest it to live teams galleries point wanted customers say, view first XX we from industry, think the say we I like from I when we in heard never and store, almost they when our

important points much that, tie frog that with so performance. get anybody's marketing it place And in people it build like programs It's piece effect it's of new out them allowed Gosh, don’t. leap begin it’s getting us I coming I be live smooth in that so it that really makes So come allowed feel -- to does operating into to so to or really highly like that’s these environment, meaningless membership, to we has simple this through business out behavior, platform membership want and and we me. things this. a and entirely other going love things the things operating to was a to to in make it's always us stuff and think and say, this of inspired many our We I’d and Trying goal most complicate that many an it doing don't to is that at loyalty building like are don’t people hospitality. company’s there's and and working, important know,

Matthew Fassler

Thank you much. so

Gary Friedman

We’re not…

Matthew Fassler

thank you. Oh sorry,

Gary Friedman

no. No,

Okay.

Operator

Your of the with next Lasser question Michael comes from line UBS.

is Your open. line

Michael Lasser

outlook? sales growth many be do going My achieving the Good to estimate to memberships first longer last trend of taking in membership, how how do memberships get a to $X the on billion from to are few that membership thanks a what lot did evening, questions. run perspective, you inherent months? have And to your $X my in long-term billion, is the for question

Gary Friedman

even that way. don’t think we Yes, about it

So, and $X gets billion simple think getting billion way and modest is to that transformation $X product there. thinking to expansion about real you estate about some to our

Michael Lasser

in because that are you from your coming And what think mentioned trends, membership letter recent membership. your your of how about sales XX% I

So…

Gary Friedman

Right.

Michael Lasser

It context been helpfultohave be on that's how trending? would

Gary Friedman

just Yes, that’s same, nothing…

Karen Boone

several months. for It’s that been way similar

So it hasn’t really changed significantly.

Michael Lasser

then ago, And few tweaks far months what's what a as your as top-line some to well? provided. Can Okay. the a versus had outlook you from the then of changed today and both on on you previously sense the as give for margins

Gary Friedman

outlook? what our Specifically of part

Michael Lasser

margins why a So lower, a revenue that? growth is bit going to little bit is higher, are be little

Gary Friedman

the we chasing much this valuable so to once-in-a-lifetime so incredible and and opportunity is And the and stay kind that, and back, that this industry. this not up, to and and to don’t or were extensions in see introduce and to Yes, businesses have peeling incredibly rethink build that platform as to fashion as bias and our And business of separates the with an get it��s month operating and the happens. doing. company integrated we so model are ground new And keep potential, just on and company leadership it is brand distance I've I in hard from industry into we decision to ourselves an building to model versus together we operating see done platform. restrain build It’s have going we’re the the collaborative that’s an we’re just a much beginning really from any month opportunities any so re-architecting product entire focused a other to or this. we rebuild of made we operating we've brand, a our just this pipeline from ever to right meaningfully. every a fashion know in enough the revenues this integrated of that -- now running, many the manage many that the opportunity new that this business planning we into and earnings as everything ago as in see -- said of guys, upside business work takes brand operating rebuild part half, leadership growth year platform, in functional gotten gotten and sit cross as we to I And we’re and this mean, are doing reset rarely low-quality we’ve for

capital And so focus the human I company we is we capital think need of it's year. financial the another investment the best to that and and think on

again and we be best is And I That’s made. why up pushed new XXXX said the everything businesses. architecture going no be of And investment the so and think there’ll cash. to ever year just it’s execution we

and made difference. that look all say, boy, back and we’ll that I think time the effort

Michael Lasser

bottom launch the in top of activity So the just to clarify, you rather about the more delaying on difference pulling business the the some lines promotional the line new of in mentioned? back is than of some that

Gary Friedman

have always really pulling don't -- it’s I yes, we to like back… just no mean, chase low But, quality revenues. No, we’re promotional said, we’ve going just not

Karen Boone

about as bottom and work it's on are noted York New think and tremendous So we release, as logistics the things with new been platform revenue Gary some the it's line operating the benefit architecting I It's and all more going exactly and But this was -- than reverse we that, the with we we're seeing both expected. of what two from happen we've all Karen, to is said thought seeing press DCs the then the on actually businesses. be far it's with letter even his so just we profitable you mentioned. in done closing probably last year in

that even took operating million you're XX% target XXXX -- guidance. that's though top-line sales margin to we X.X% lower XX.X% our much seeing where So that $XX have to X% to better in we in

and gains Of the benefit from we're all of of income this margin even better we're operating operating doing. seeing also some work has that course net tax but platform re-architecture is a because the just

Michael Lasser

helpful. much. you very so That's Thank

Operator

Bank of America. line next comes the of Your Curtis Nagle from with question

open. is line Your

Curt Nagle

thanks much taking Great, the question. for very

the guess like long margin, higher. materially So, it ago. I again. mean spoke just just time materially so from to put back what guys changed I just was up And curiously XQ of terrific going results look wasn't that gross you higher. December I And just we what guess did out And last in it it drive

Karen Boone

Sure.

whether does And our of Again of savings. at optimistic we year. those sales, drag from logistics because as that chasing going the margin XXX cautiously smacking thing beat the so the achieve and sales, product this of good lot margin just all gross not entirety and margin but a those gross Gary had part was happening to that with biggest middle of was the not gross just expansion margins. up of our all last happy kind with low we're really almost of basis the rationalization, not rent, is we time the that expansion. also So, And we're and occupancy, being quality mentioned, have were in closure having DC savings guidance, outlet such that's still pretty point is cycling better. fee But year's reverse transportation about just of the our

have we've a on So the based a lot things been well been of doing. going lot really of work

Curt Nagle

Terrific. then I just up that. guess on follow a And

the you chain closed, say guess sounds operating learnings how you early are you guys supply yes, early like and going? it it's or guess, DCs the feel now now operations, are new earnings about I I I And say. should what could So on model

Gary Friedman

two redesign. new of the stages architecting two again -- have of we're closed. early the of in we model the this Curt including right And just DCs DC network Yes so the

outlet in have a so more redesign, lot market math doing it's whether working home network model. and then around of and an happening that. re-conceptualizing we and that still a delivery, lot work which of of mid-stages reverse and early a still the there We're And our DC is of redesign and come as the to the in this, we're through logistics test

years to So, here. we've got work several do of more

And and measuring that that understanding and think year to how the optionality got about of really just is moves think what design everything understanding solid another differently. moves everything all and architecture. it I we've just and

apparel think a discovery stumbled business. think And then was Williams-Sonoma I and the grew was about as this into I when furniture got furniture and furniture XX% and things time. and and up the in Barn And into what -- was RH. went I I that. knickknacks I housewares and started selling at that into learned, gaps, up I I then Pottery to we And got XX% were I've the stumbled then here business we think we tested grew to and next and like came the at items business,

like companies companies best and same ours, against we their back did years higher in of my We’ve maybe companies and really And five and at hire items. big-ticket, and look you private model at in their they ours chain consulting there Williams-Sonoma And that. different they experience of experience career practices. and than Inc. Barn, no people Williams-Sonoma I that's we the at Sonoma’s and I of fact, supply furniture use or Williams-Sonoma the of supply for big of then become and my same got Ashley And the when some The come execute in with and my consultants early supply for companies life or their been at has really percentage I furniture chain, think is think that thinking at Pottery generally realized or right. But much RH, companies was a about a business [ph] do it. And lot they get they my serious at is some my insights here furniture. view is experience really think companies. this give that's kind their most chain. when national that chain, been build one and supply into all built our a they the So I experience four one don’t the

different ticket, my same I high at business. furniture like tops a fold and completely size, the So everything into you and break textiles the box velocity And completely days And in is women’s broke because, a and and of of size box damaged. here type bottoms transit get same with except it's very some the gap, men’s transit. say massively everything different went in Everything nothing different accessories, it's and can comes almost business, low -- everything just and difficult it's had in math. the

difficult different I the kind what scaled Florida, in in is nobody of players so, was challenging is historically we’re it. same And, California, anything of regional, a point was it that business of furniture in point it regional the realized supply different, all doing kind and chain view, we look kind really you national a businesses in everybody's doing at power And so ever is thing because the realized it and entirely model, of and you and assumptions realize and family view. built nobody the it’s get really once a conventional run and just when really a from was in you and cost the very is what execution the I math of and Texas national challenge when Northeast, is wisdom, doing regional that the all spike

ourselves it the people for And done that's we’re -- done the without functionally doing except the doing any and it, from any leadership that we’re have never consultants, entire out inside cross enormous taking from else. team. what's it so time it from without someone And

done The merchandising on as people more look whole -- it’s that’s growing are I the my to But it the detailed up still businesses my and we’re because know has differentiated just I learning do are we more we about news creative look level thinking I is with side, else, so, what new operating went is to. it, ever going reputation we’re we And I've platform. wind that career. excited to just we’re business completely than go. going anybody conceptualized better it good think unique and and think at nobody and And about mean, a on

focused believe a such to on this on such platform, and And leap architecture be frog So focused a right? a go huge everyone I huge and my time like that. odd unlock little cash, because to Friedman it’s it's rebuilding probably for I'm operating got going execution, of XX%

would going we designers and not XX% I we’re focus say we’re still my with a world. to it’s and But, XX% the we’ve product, time. more need So really of in that time, got still worldwide have product, the team artisans my call time the it best exciting of on

in -- world And are this. So will don’t model have lifetime we going operating when we’re done. I in ever the but to do think the to best our anybody try

Curt Nagle

Great, for thanks commentary. appreciate . much I it. very the

Operator

of Your next with question from comes Griffin line Bobby James. Raymond

is line Your open.

Bobby Griffin

thank and supply questions. evening Is Two questions quick with points. for there? the of probably taking my that’s merchandise you improvement chain one margins help me, you XXX outlook to Good for for buckets the and it next XXX kind of on us the the is it the margin or forecast understand gross and year the work from and mostly basis

Karen Boone

the say quarters about, I’d it’s and it transportation. is DC margins, rest is some three and of Sure primarily product

Bobby Griffin

standpoint. Okay. And getting transportation of you then contract the different transportation is from just the rates the or redesign a are outlets

Gary Friedman

right. the a it’s chain, no, redesign supply entire of Yes,

a So it’s lot it's the the things. outlets, of it’s DCs, reverse the it's logistics,

Karen Boone

the than that’s offsetting even UPS in there of kind contracts, our both offsetting of so actually and Exactly, is going parcel more are nominal increases industry up, we’re the this is some which business. those for Those freight just increases. is seeing ocean some

Bobby Griffin

think update those about question, quick you introductions our helpful. books can model? then appreciate in Okay, the just just that. I source that’s a on modeling we the cadence should of very this lastly year and us how And

Gary Friedman

both books tail two over second RH think year. we years for Interiors are -- test to you a to the Modern And contacts this I We’ve business a X And went again at year data books businesses a year your and from look then that know drop are book got to XX to really we're XX in. you've and we one we at Yes, went to RH you going we’ve down to as a the every got went catalog months. XX look like a typical we not on It's their long year. contacts.

data were people years second don't that went to There data test sometimes their often. that change affected three because five that to two when to necessarily data contacts by that we from contacts to contact. one back contact. we've contact. as from over that and now the home Our there opportunity our again looked look have at is is And is says to believe look And people the we enough an there you

two and RH you're year. modern will second RH having also to that So the benefit revenues having, half. see Interiors We by to us again we'll Modern that be second contact test this think in going the especially have and of half contacts that a second to in

Bobby Griffin

detail. of this I luck appreciate the year. Best

Gary Friedman

you. Thank

Karen Boone

Thanks.

Operator

Small the comes from Your next Citi. line question Geoff of with

line Your is open.

Geoff Small

growth comparable and Hello, Gary first well term from thank of longer the Karen X% to proportion new particularly that the gallery revenue brand my and openings revenue you target, come about taking want initiatives. growth level other of you're ask will for questions. XX% I to growth anticipating as as the

Gary Friedman

it somewhere new think businesses, to growth introducing and of we about of new will years be to kind extensions driven on cetera. comparable half will way it kind will et we've be and two between what probably, the one are third Yes, thirds to depending is And change got brand half store driven.

Geoff Small

the gross term Okay, potentially level, you low-to-mid-teens break And margin longer can operating margin that's down for please? on expecting helpful. between that SG&A target and improvement leverage the the you're

Gary Friedman

laid kind in think the letter. the Karen… levers We out I of

Karen Boone

prior doing. seeing to drag we’ll grow of a -- we start things not of I'd I as then in even of see work we that we've estate even seen architecture DC But from to even we're hospitality kind our this say gross out the related we were that And volumes efficient now the very in the just of cycle the unlike we have we as drag we've not put of But right these model. continue will have what bridge. see that specific it's some some opportunity and having been now SG&A. benefit year real But that say more occupancy with will more would continuing now and of stores big leverage more the benefit margin. things just boxes to gross more out this always as we as higher of open and We've have seeing margin optimization. inventory those

point architecture two labor versus third thirds, And the margin the say one savings this that seeing some at in So we're from is actually hit that gross coming we'll SG&A. some of it's I'd SG&A. to about tweak actually DC continue

on we as we'll this more work, split. have even continue thinking will refined that So how

Geoff Small

Thanks best the of luck the again first rest of and over quarter.

Gary Friedman

you. Thank

Operator

Deutsche of comes question next line with Bank. from Your the Sindler Adam

line is open. Your

Adam Sindler

so Thanks much. Yes, hi everyone. good afternoon

on So just XXX Gary the about some I we guess SG&A book in heard drop. about are answer leverage. when points back for you second my you first SG&A maybe of where talking and question potential outlook I XX that November either was Karen for to with XXXX, basis But or think

looks XX like basis talking about deleverage. to we're of XX Now points maybe

two? if wondering those the help bridge you Just gap us can between

Karen Boone

Sure, some we hospitality, make investments just as openings of the actually with want business we're then just this we some other people And more some we're some and the year. have about there year doing. continued and just thinking to is ongoing architecture store both about in last than investments with thinking process of this

thought a we from year. still but prior not not big it's flat it's then, roughly modest as huge it's still So it’s deleverage as

Gary Friedman

good Yes, in planning bonus a plan we're too, really onetime to this year. have because step up performance

Karen Boone

will XXXX little Yes, big well. incentive as modest as year last not modestly comp to is this year, jump it a from step-up the but be up in as

Adam Sindler

and thinking hardware the you've gave out about things on. we past, guys talk or obviously there years, things RH few way past brand a were know were business. Color sort just business is some and what like about side maybe way address? to know that. a us like in some the working know of when in then extensions, help the of would I about new about in you average these I you look the talked past Modern, the you of thinking about the the you some I Any sort thinking like conceptualize Perfect. cloud in opportunities And things of to and

Gary Friedman

need layout roadmap rest product Not point, don’t of to at we world. our this the for

Adam Sindler

thank you. Okay,

Gary Friedman

Thank you.

Operator

Benedict of from the Peter comes Your next Baird. question line with

open. is Your line

Peter Benedict

question. the taking for Thanks guys. Hi,

were additional some yesterday fillings provided revenue that around there disclosure First, mix. some the

contract not sales first down look two like half basis, if were does than larger the the breaks And kind of seasonality last one any I'm half I'm that affected first sure how curious on an there your just XX% the have other? So shipping. that the materially XX% year of that is annual is and between numbers? how may of in

Karen Boone

sure referring to yesterday. you’re when So, what not Peter, said you I'm fillings

Peter Benedict

that? help but it my filed were and to gave were re-conceptualization and further in -- I be mix home guys benefits on right help remind from would second terms it's be some over that do the are offline. a guess are just of that, breakdown some were question can revenue going the take letters that's key we'll delivery it There follow-up back we your of now. year, But just it forth deal will not half Where SEC. can just and guess big what we of us going going offline, I with when the that you frame the -- completed the you you us think first

Gary Friedman

more, on early working at get do and are we to we're over ready very the we we're it, we’re learning market lot that with share designing you. as the stages, a we testing, will Yes, testing

opportunity home. key is times enter articulated benefits we've think when many our I there an to customer's

place or experience customer's and it’s you you customer. when opportunities for look what like which home, your opportunity should are that secret what is the enter and there place are working the is tremendous the a So on

that on should to reduce can transportation We customer's capitalized improve reduce think reduce what damages, enter experience to look we So experience the think returns, is massively to opportunities there cost. and that handling and home. tremendous and opportunities we we that when like

these of going to are impact. be huge All

to. So think I we And one than rest we you be do have looked able again and the why ticket everybody So, of of basically people is a if benefits have the at the it everyone to another where not opportunity doing we because we way, might can higher way. else, right? have invest much other same it the industry, the

one So, ticket the today, We're average in probably scale we be period. average the furniture We're the and at and think only in price simple math the nobody if United points at build why only else the just sell selling we States something and able today scale country our selling orders. about has. high-end ones will what to at

an allows that else that nobody opportunity platform So to to us have a build can.

Peter Benedict

Gary. the bottom-line? much just pretty tax it you. helpful, I'm That's you change, to one on all flow Last Thank influenced letting guys your the are thanks, XXXX just it if curious plan or just at

Karen Boone

going really were and think investments changed. we hasn't on I our what focus to Sure,

investing and we feel the bottom-line what it’s the and for part flowing to strongly really that to think about are we So really in change. don’t most to needs continue

Peter Benedict

Thank enough. Okay, fair you.

Karen Boone

Thanks.

Operator

Your next the Keith from Peter of question Jaffray. comes with line Piper

open. Your line is

Peter Keith

everyone. point if afternoon, Chicago, West more as successful wondering early have sales you the of does is to the within I'm Hi, more substantially hospitality that lead a Palm thanks. successful store, same-store Good running well? in read on furniture ahead Interesting that

Gary Friedman

the store expectations. our is Yes, outperforming

Peter Keith

as would the that both well? And furniture be on side for and hospitality

Gary Friedman

we have we Correct, to we’re lift hospitality incremental incremental an lift retail revenues high the that based of translation hospitality. the of expectation additional revenues, get getting performance on the and the of

Peter Keith

Okay, very had but is maybe a on kind it’s that say BXB rolling to good. what little slowdown late first affectionately pretty seen been just backdrop, a have I little it’s of the as bit Curious seen think stock have broader second or if you’ve seems And in leads market drum, would you of QX you. then quarter, of to if from merged guidance? consistent, a that you overall volatility, what the it slowdown like furniture I guys a bit of industry on the here macro question weather,

Gary Friedman

not is communicated this we’ve really our of anything release. Yes, in outside what

Karen Boone

but with everyone We did have had weather, that. closed stores

Gary Friedman

have stores our disruptive and Yes, we’re much unusual the disruptions and and is and it hit clearly to expect the Northeasters markets might lives closed -- was times. us other of some in you the weekends as business

same and late of period a an being rates. rising we’re So, for we’re expansion understand interest the rising cycle in optimistic in and we’re time, of a cautious expectations we economic at interest rates the and

and I so, that in markets believe And plan perform positioned volatility again. think conservatively and creating a execute but the think that’s can we’ve -- got we we I again

not I convertible defensive where look So, and good bit thought nothing two last there’s three going market feel in thought I the so we the wasn’t economy, year, ago speculators is bonds, did the think relatively volatile on we more I mean, offense happened. can to is markets -- many be little recession play for the I years a reasons. how the quite as that similar we I a we’re But now volatile, to market

on of we’re control focused we’re on working contingency more based operate So, we what can where market just on and we’re we in have what in. plans position any kind and a here we

So…

Peter Keith

much. that’s feedback. very Thank Okay, you great

Operator

Your and Oliver comes with line next of question from Cowen Chen the Co.

open. Your line is

Oliver Chen

Hi, Gary.

future terms program the personalization intersection you do a years integration capabilities and unique as out in creation? thoughts terms the of membership build build overtime these of want of your our engagement was the in these on As to you five M&A What about question just what vertical and of second of of and really And and data. method membership big do community of membership program? reality your skills, are the value

Gary Friedman

go media the to you programs goods I right. the and of our not you’re social all right you with engagement and presented industry excited the is in goods have we value missed think that want. it’s the sell, priority value goods can lot the about don’t the you the have biggest been we equation right are the and and if goods they the way about to right of stuff -- presentation customer a equation, and you goods going the the about Because do people loyalty home. all point. of And It’s Our and all

that’s focus. where we And so,

was The done that. business chaotic was a and out smooth to foremost. membership mentioned first it’s we and strategy As

on kinds And so presented are how gotten the value most world where a best the the to world to at world that’s of product and today. still our to inspiring at business priority the and the the at want the the best world virtual presented augmented things forth. And the that Put ways about in that, have our glasses goods, the at and being best talk is on in equation we’ve the right we the we about all of pair you store disruptive also what’s in reality important way there all talk And of being investing And, lot of social of world people those this, at business crafty on to is crafty that walk on a the of is lot executing and that think so fancy of lot a the right in goods media, trends, has the changed. nothing about, they're then a that doing through of goods. right the best of And anything looking back. in value -- so a money, is product so lot a delivering and equation. this

positive or very that supply than a huge apparel it is that chain the huge other something think or be of part like I things negative a it's different ours. a business can from is business So in

I the think same be I we're not based the from most means. massive we organizations, XX other that able The bells are decision information XX with to were read used think of pace out we else absorbing in right change what's important how right a years data happening Doesn't extremely change people just I to won't following beings. of five to lot to increment human care years. to today. we times like X most you're we generational membership see coming is happening whistles think that all evolving thing happy But tell got the with like is And And The don’t all on it's know edit trends than in about a it. data. of day thinking. need, XX ago study data like happened we're big data, be of the measured is and and I are even Everybody the is us, to keep world and I that focus. overwhelmed even years a as data more we make year data the like So that's going it’s in the what -- decisions, about of people right and mean everybody kind data is. what big with I

have so we the products with And skills and great presentation.

you to be great valuable to are and very presenting focusing when make decisions. assorting, skills you data. those When data and think about think I think about going editing

Oliver Chen

And to of been think is there in Gary, you innovation you all will happening capabilities journey pursued difficult that's assets ways great kinds you’re the about part your also a capabilities. brands replicate. different and drive and And lot of some for value? be you as you've which to -- building and you about M&A do at creative others past Are of

Gary Friedman

our not of our our at top list not top what's of generated list. At focus. internally is the of and the It's ideas It's kinds all opportunities.

years don't RH. my think one of was in M&A look later now, assortment done that's like thing. XX I best we businesses think best that I'm I past to inside of I'm the own we’ve here business, that focused M&A business not list have if and you our on But business. years we going the years. an not at before now the I And team part waterworks we're Because brand list mentioned XX have say our for don't an M&A never, but the -- some to XX have space.

you never to we're say So setting platform us where could from kind be and top wouldn’t operating a do I could other so LBMH home. because three could on like so you capability much leverage for of expect never And I again years much now such the something kind platform of that materially. and prolific cadence it that on change gives that put brands an of this

hedged that. things up work but now and those the opportunities will and talked done. down and maybe there getting like get we're open first we right us about could focused let You But

Oliver Chen

questions of you're you Okay. facing about the or the more facing of about nature lot ones try this details if the I'm on you of harder you decisions you us the as And a chain what the network digitization ones and to contextualize that curious of kind the sure possible? Omni-channel decision lastly what which that you're are make best yourself. approach questions what's harder just kind the easier to challenging make can Gary, and build gave are -- the supply

Gary Friedman

it's think hard work. I Look all

a of people tell spent binder bucks none like will really million try They're themselves. usually of else. to couple Most and looks you hiring everybody and to this in So to it don't a and do. do have come give consultants easy. you what is some And

level we're human hardest and is So understand time the the allocating opportunity thing is. where into your And -- that and details get the a the business at that's It's else to capital nobody does. to see truth the up if pictures, high really to motor able the to bigger and high really you strategic details see get level be and opportunities the able been into the at understand will. the smallest a

speeding everything then thinking thinking things essential inside to and or all history our willing about of boiling is Cartesian up to you inside and to information, in and introduced And your faster, the doubt truth you a or our the outcome you principle methodologies be technologies thinking even pivot. talk, data, world just happen to and open that some have it’s until our most first can that lie everything there new own Because that be of is And to theory get a and everything all we up time we truth. it's but is new doubt doubting listen being the companies be new whether can there. of history are thinking. it's even you where inside faster to he and perspective down the company evolving Because for example history victims first present. can completely somebody's version framework Musk some that principle building talks of use Elon other basically and If and people’s service from and well,

what know when to so are understand in if of years talking my over that two chain about to are but -- about. I supply people about be I hour all a an stuff are talking really most going the And really sessions you We things in must moves right XX and in or rocket it's think was we're the of right not hard meeting science. even us. know and measure it's the going If you going deck. and if the we now for are last And strategy guess it We're moving career, that couldn’t do I -- around. people to understand we're to it it it like don't you we're for presenting

that I can So we out. think figure

Oliver Chen

for regards. comments, Thanks the Best helpful. very

Gary Friedman

you. Thank

Operator

with from Group. Telsey next the question comes Cristina Advisory of Fernandez Your line

Your open. line is

Cristina Fernandez

could the you a bit from Good the the have higher? the this quarter back other we that negative X% afternoon. lower year held fourth pressure before much that factors wanted how comp, fourth than I rationalization comp about was any of expected, the ask XX% versus and little being to quarter quantify can

Karen Boone

how think on, growth so getting of so people I'll just things breaks confused I of Sure, give breakdown one are that the that XX% a down.

consider week, As we week non-comp. -- the XXrd that extra we did

looking just had of include just most out where in sort were we at the as on So didn't comp with of non-comp. think wax, I were but people line of week people XXrd the revenue, but

X points, non-comp was points. is XXrd X So, then about week worth stores and which the item. was outlet X new The point contributed

leaves just that's So X% the comp.

this but something really so curate saying hopefully us been think because clarifies year. been that was contributing we've was So, year, couple item. last also I more been even that getting that a And on we’ve for questions has that

that’s hard feel XX down progress if the this saw year you something So in about most that even margin drag, really But inventory anything be and that year. last that’s we’re it in good QX was up the done something is efforts are inventory optimization versus to those up and it of but we against there. against that

start the year goes So will as dissipate on. to that

Gary Friedman

can't in drive living run for just that, many you not. one cash and kind like we're excited in we're think not retailers comps a have so down interested negative interesting down how stock and up I two. and have comps also about up really because dead or run had that With earnings everybody earnings some earnings, I operating tell goes less their XX% balance they they quarters like who Yes, times. we're of many

bunch family crazy we're minute friends so, a going and way, operating focused of and it And and spend margins model whole another great And a or by squeeze out try really on the not to a point we're have bunch on bunch money create take two. emails that promotions building down. go of not our to a last -- out make

I So, and mean, it else decline, you margin Street now everybody just or are right comp here. the it’s seriously comp are there us like compare kidding hard use. thinks to operating like because I earnings like and to but got we really really talk I'm lens about it’s Wall three That’s go, And we are a a good. somebody two sit not down,

Karen Boone

even And a comparison, membership. the prior I from real not think was we because do to pre-membership year went

looking just at QX last last helps But comp. not and with year the not was this relevant because relevant it it’s two that’s is that this year year rate So QX, growth clarify. anymore, that to completely from really is that’s XX% the two from models. different really more Hopefully to where

Cristina Fernandez

thinking have like exposure property in and where those a a there? think macro changes negative high some And your from they you’re my your from customer about states how second, question. of changes York I helpful. reform to the California, the impact markets then could you see the wanted have it’s high business sort do particularly you and tax, about of ask New When tax could to and impact on you That’s

Gary Friedman

how too impact for those it’s I to early think you out it’s going exactly us to tell customers.

to not it’s about mean, out, you’ve we predictors. it’s well you’re know saying the at thinking how stock known, we’re market think but I shake highs. is what I exactly We all-time don’t we’re know got it, like know still economic going relatively

we You’ve levels, on not paying got figure other to it are taxes taxes some smart out. enough higher paying lower people levels, on

that comments. the So the end was Yes, way. by my of

Operator

of Your final line question Research. Kloppenburg the comes JJK with Janet from

open. is line Your

Janet Kloppenburg

guys. on great year. Congratulations a Hi,

holiday quarter, kind couple a said about talk Garry, the you of always you it’s a… questions. Just when

Gary Friedman

can’t hear Janet. We you

You’re…

Karen Boone

bit. little a up speak Janet,

Janet Kloppenburg

about this the is Could restoration thoughts talk little love bit think Second…. there? what I a Gary, quarter, brand for opportunity a a bit not just about in the quarter to hear the about you but the comp much I have so of your conundrum holiday and just think it’s fourth

Gary Friedman

Yes. We keep ahead. -- okay, go

Janet Kloppenburg

Great.

Second…

Gary Friedman

way. at question better a the with am time, one by I

Janet Kloppenburg

Okay, go ahead. that’s fair,

Gary Friedman

Alright.

of you a back and As no because at kind at their dining out know, and that assortment, pulling keep store based up and holiday. and typical coffee mall editing the on the we’re think is any we year especially piles a of we holiday of time tables tables longer products detrimental

So, brand interior businesses we’ll exiting, back a the year, and more finally of transform as giving be and we’re lot platform. this we of completely exiting design kind

So, and holiday us, to fact in less the month will month smallest is become less in the generally business. December furniture important the

Janet Kloppenburg

all look of Karen, great. the and the you the the opportunity opportunity. you I deleverage about think only tax in also when small hand, amount with actually was and margin SG&A XXXX, because Okay, tax then, Gary impress Thank And for at you. ideas and that opportunity gross of of

for there investments? operating investments perhaps and percentage making was know greater I have much that if about thought cadence or respect and in you XXXX timing you’re and goal XXXX But as greater achievable. them how I margin get operating of how with wondered to because wondering about the margin of see we you. the XXXX, all and I then what thoughts to won’t improvement you I your I So Thank just and investments. the it’s a skewing the

Gary Friedman

in that going -- we’re be if to and projecting X.X% the that’s out giving mean we’re you I take again, we’re huge today XX.X% pretty Yes, I to of XXXX, opportunity. -- say to then mid-teens. think a guidance low to think the that and

Janet Kloppenburg

XXXX, mean, that’s all. XXXX I -- the that’s not between cadence I it’s just about and No, wondered

Gary Friedman

to depend pace work on of going to opportunities cover. going It’s the we’re the and

let we more we’ll you know as know So more.

Janet Kloppenburg

line, fiscal another that you natural closing investments made. question, some infrastructure of more be provide would opportunities ask or SG&A DC lower the XXXX nature opportunity me like could there are let there in something to on being Okay, while another that are

Gary Friedman

broader to we're Well, prepared anything not we're commenting not our release. in on comment on

anything be talking about that like it. So if we plans we'd on have

anything anticipate wouldn't like today. I that So

Janet Kloppenburg

a Okay. you ask the But more underlying lot largely And anticipated the and Gary, then guidance clearance full of heck could about business? of feeling quarter first strength we I year. business have know that? question just about you comment the last can How price because are one you a of

Gary Friedman

good the price full We about feel really business.

every potential of been level. as about excited we brand the as on we're the So ever

efforts. cycling transformative through just lot we're So of a

landscape to you funny at -- back do little into And look for QX just historical from think then understandable. you margin business the operating where if it about So is near think through look of P&L then view is here high quarter be. the of QX to is -- has I I if more the drags at But the model point halfway to four you could we're it if kind least still and going nowhere at and right. gets levels. an be we a is way And look in the you year. more back the through QX in probably right this a going us much and stand is think least it so P&L, QX the quarters

is be off crazy on So view. to But mean, environment lot how going on believe is I’d we're QX. from I the point a not does today, nobody QX, the everybody similar of world going wood looks knock if to an anything world hope I to economic

now. thing to it. you the that's if opportunities, we've last the are the that's in of and to months in you how our most XX%, told about year after And I believing year believe meeting. our much over day you I move is you just a okay, in they investor volatile reflection every what don't believe so how them. XX XX% went then think go of that's and believe you mean, I XX had not hours today. up a it we’re industry. then other up the stock people is a I and doing XX% you one biggest it The have we’ve where I here book mean QX And release had stock time mean, And our QX guidance. know lot full is, the at

X one When the told it’s to of going of XX they the tell all people to is didn't way here, XXX guys, XX% team didn't XX. and to telling believe XX. of so the course stock believe went to I our And And a and XX believe I got them. -- we're down from X went like no X to to believe we what you high

just what So that you believed. told everybody

we'll the good than about we feel the And at and internal gave little told what last how is guidance can and view outlook hard And and of see you we but moving of bit so several connect and quarters. And confident is better news the than can this what or dots. that There help wow, the news. more the our you key than the good parts, every XXXX. they news And you bad we see hopefully we to over have us. is look as the can really everybody obviously an of good yes, see. do people has that dots been the But dots And see what connect looks all today. it's could understand any a more the best to for happen connecting just lot to try least some as

margins. stock Oh because QX. margins at like operating God, X.X% went We margins I different. down, Everybody midpoint point X.X% like put stock Like was but in the run to do teams QX where record company it X%. like out and stock. fact for like for and the because that right the guided the made not And to stand to do the we're going year it. business view it's forth. historically so build really should so operating long-term just like we we QX going we're right XXX% and our almost was is this from we That at like we're to a reactive if be this And they of think worry going the anything on own business company didn't this about for we My volatile the I don't of prerelease operating saying just -- think or why tell and like for QX everybody

higher to kind middle not. So is a a had looks to do think fall and what before, margin that lot out, operating going it’s QX the that close of we you looks just the

one where it’s still So just to think now we’re are to honestly short believe have highest I on think positions we -- going of get going but the and I people start and stock. the

get a to but naysayers, you to short and you public when So subject going run squeezes that’s company. what we’re doubters be and

so to excited that, just build I’d this unique been never So, we just driven you confident tell world. something or truly and in

anyway… So,

Janet Kloppenburg

Well, to clarify, just the thank underlying guidance, business I wondered I you. just tone wasn’t the And what was. doubting

Gary Friedman

used to opportunity though. you set as just wanted up an to say, Thank I Jane. say I what

Janet Kloppenburg

a enjoy, Okay, Thank have great evening. you.

Gary Friedman

Thank you.

Operator

are There Friedman. now questions further Gary will call over no the time, back turn at to I this

Gary Friedman

on support and us world are you your all life those everyone you the around of our win I thank wouldn’t side. be to of for help of against brand people And to our to shareholders to all and are all your and thank want you and every and you. us who our day. thank stakeholders Thank well you this betting betting Great, who partners bring for

Operator

This call. today’s concludes conference

You may disconnect. now

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