RH - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, my name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the RH First Quarter 2019 Earnings Q&A Conference call. [Operator Instructions]

Thank you. Ms. begin may you Malkin, your conference. Allison

Allison Malkin

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

Executive Chief today and me are Friedman, and Joining Gary Jack Officer. Financial Chief Preston, Chairman Officer;

the referenced the Before and today. the of legal our These we well and including federal in certain our affect today refer securities disclaimer actual you within differ forward-looking other release forward-looking detailed statements about number risk as make of results. of for our that will Please our as laws, involve start, are issued results like outlook we the factors uncertainties risks release remind a business today that would to materially. statements filings, I more issued matters for to cause may that our SEC press our that meaning could press a statements to of description

statements these also as forward-looking Please or opinion of of our any today, results may to the forward-looking obligation undertake or publicly non-GAAP that date new of our revision discuss call, adjust measures, revise certain release only results the note and no of we these reflect to our impact call items. financial which eliminate we Also events. the statements GAAP light future in during information this

press today's is Investor results website measures reconciliation call ir.rh.com. of the on financial the and A these of additional financial GAAP of find Relations non-GAAP will to measures these our available You in regarding information live at also non-GAAP section this release. broadcast

Q&A begin the to over session. call to the turn I'll that, our With operator

Operator

Haskett. with the [Operator line Instructions] from question Our of Chuck Grom first Gordon is

Chuck Grom

high-end about I in on it by the about It million, million. quarter, beat revenue think but Just $XX guidance. the like the first only a $XX question change looks you was

from to speak accelerated, tariffs wondering cadence assumption in in the flow a I'm Thank starting the It just stronger, that revenue prices you quarter. wondering top that speak versus it addition just then How stronger in line sounds curious sales core unpack change could for in you. the to the through anything quarter-to-date. the and just us much of but higher So, also can could if if assumption. is also to like if you to you release that,

Jack Preston

guidance. let the So me start with revenue

So it beat. was at at million midpoint, was $XX the it

you to the guidance midpoint the of high up again we're so end the by $XX million being at the up guidance and the So end, $XX taken taking mentioned year, at million. the million $XX high is

to reflects revenue. relates tariffs, due As incremental there prices guidance roll higher to higher your it our and through fully is to assumption prices the no tariffs that

the seeing that we're So in seeing reflection we're is trends a the and that business. of trends

Gary Friedman

This is Gary.

post. to our echo chance we've that. got a basically, me now see Let We're

the and kind RH half the think I saw to roll-in. and stabilizing. We on back Houses. starts market indications first our of market the business the come we've second of stock got volatility book early also The Beach quarter, in

of confidence as forward. in the many the underlying in we We business also trends look have

with forward look guidance to the confidence the us we gives what that that's So have.

Chuck Grom

deviation over changes be days? the by days to the just past then been XX have in just XX my follow-up that some impacted any would markets the soft in And say of trend

Jack Preston

It's Jack here.

to As no heard tell there it, because impact. we but the one noise mentioned anecdotes this that around shows just the watching was all meaningful data of we're you got I

nothing that So we saw.

Gary Friedman

yet. nothing Yes,

Operator

question Michael the our is UBS. with of from Lasser And next line

Michael Lasser

half? quarter then the raising with took guidance fourth it to and just down So this be - the it volatility Where in confidence with the you that underlying year you getting for you're are initially the it some quarter, this going the sorry back the quarter, down volatility you does took first fourth third quarter, is with you reflect reduced offered then business. in now with

Gary Friedman

can give that just I'm again? you question me sorry,

Michael Lasser

and down was was So guidance was it guidance brought initial and now brought - the established up. it's being

So in business. going confidence is second you lot to gives volatility it persist during the adjustive that that volatility of of What there's would a the half? not be

Gary Friedman

Look, market Nobody business. we can, the whoever's can't running control or macro issues.

peace we for So always for pray war. and plan

in I unique think stay the a our short us distracted brand not operating by noise for with created it's narrative the important the and is truly term long-term on get that best to focused model industry.

recession something tell are If happens, seeing we're today you falls the go what the what today. or a and can we different trends different happens. So something we into market or

think only it's it's I don't our the business, volatile. So business that

is market to increasing, of I and we increasing has meaningfully our the meaningfully revenues, increasing kind the that know business that margins mean be haven't You operating volatile. only profitability.

thing that's one consistent, right. that's So been

We any haven't really meaningfully earnings. lowered

to So numbers, beat movement you'd the and business had parts at create see I our model of look better because line don't volatility. and quarter at market in you think we our top earnings three think and trying of our we've every look a I some back the if years last in but, just added in volatility

I anything model. points to mean support we the think in basis XXX to believe highest you'd can't margins happens so We I our points do industry about see have environment. a more XXX the what operating basis that really consistently we today. macro improving business but

if eye business the have If on we for plans that. market is marketplace an we'll the certain that that expanding, stuff, is So, - things. for plans we contracting expanding have is do keep the we

we our matter no So try happens. shareholders for capitalize just what to

Michael Lasser

million It coming the you optimism or than… rest legacy from few been the of million. follow-up from My stores, year. quarters guidance next about around it from look for that stores of Beach Is over to you is around question for the of is $XX have coming $XX contribution as like raised your course new more the coming more the that from it House some sounds of launch RH is the the

Gary Friedman

Yes.

lost you details get careful be to in here. got the You

The The right, guidance, we gave one fourth Our in points market after quarter. day trends the reversed. business fell day. in XXX

So, We being Since change. revised saw for if XX,XXX our like consistently customer, over the right. guidance. the - gets markets definitely a rocked business, impacts Dow know you the that our the consistently trends market high-end it's been has we then

the I fourth the by and to not rocked got Dow I decided a was going act stabilizing with the - as the property house. buy the purchase is So market house, in piece quarter, property build not to Look, new people of of a database to differently. one and a and customer

the I'm stabilized, property the Now again. buying at market looking house building a and

are - more you if of well. kind are it try our then performing that galleries affected So those things break to down

categories the You more well. but through them are performing halfway like previously They so we're better performing would quarter, what guide in we our are we product guided, the second to and market expected know what have than they're performing right.

got stability We're than it the we like the pretty is So trends the more happy our the second it first the half with visibility numbers. surprising and not We've visibility that clear and more customer stock of are that to on responding have just quarter. much that's of quarter, there pretty that. second market good looks a on normal in the fashion in good those nothing is

Operator

Forbes Steve from with Guggenheim is question next Securities. Our

Steve Forbes

on maybe year update if delivery as you thus I some the on the the we Gary, through wanted can work the to far us learnings with start experience. of just the and way our of various progress home key here? comment test

Gary Friedman

learnings two-thirds very about million year We're $XX we are tests as our just the next one-third and roll happy $XX we started in year, what Yes. we've about numbers just now annual savings this million early in that indicated see we're on to early getting will here. based our of think and

which We the going think improve me, system, returns, you more exchanges, the directly impact we revenue. it be of there's been opportunities doing reducing cost there's level, a reducing out if positive think lowering that's to as lot and relates a - returning, service will a think to as taking that we're returns as more excuse Right. to about and we there big

so same uglier faint of in bottoms the came transit. size. part It not nothing of get rate, going in kind in if repeat have the our heart my business, accessories think and we buy apparel, traveled part size probably is would so to all like box strategy to the because the good I happier on most can goods it's and and be baby and and an the better customers, it's you for we the under-appreciated to fold customers women's in this the and things the we have but It's days brand tops had say customers all it for stick, industry, So of the if forth. ugly men's happier and and it's business are delivery and experiences and for we can more broken same back ours, it's all

the business opposite. Our exactly is

and get have boxes transit Nothing it and can comes damaged size in the up and home take into everything set customer's so break the on in and and so forth. we same plus and

just think mistakes. we savings exponential. make positioning cost. So all right more I exponential for there I really us and the exponential our of it's see is it luxury positioning our because in based us, market, There to on costs mean is

and the of If side higher customers it on the other have you're expectations.

it, a sitting that the the focus So more not outside part business percent the are We're like of leading details. business. passion. into experience. just into Yes, It's it now. what it's in-sourced investing of much we're kind we're more Most and with that we of

Jack Preston

XX% it XX%. could be

Gary Friedman

we XX% like insourced taking some about process the in XX% and were we and We'll more probably soon we're quarter. we're talk be what learning. upgrades. that, like in-home see. next testing We'll our We going the hubs. own total We've leadership with what made control We to significant XX%. and delivery at

think and in happening operating model. a the because customer earnings massive and and of yes, leapfrogging our frontiers there, engagement for confidential it's leverage but some just there delight we So, one next also big things just

really So, excited it. about

Steve Forbes

as then a up, And Gary. follow

front, in but about just on hospitality the past, the optimization. I expand maybe talked could menu Right. know this you we On

the the various of day right the You at menu New throughout locations. the about about parts at and York offering think sort success thinking other

profitability is relates as hospitality drive mean, there broadly? productivity opportunity think locations. do what to it's or sort thinking you different If it you about offering the I right the at of whether to

Gary Friedman

about think hospitality, right for Yes, to an core our is our not want you It think right. amplifier as business. core business, I

think the model really business experience profitable. how saying - think does we do to an we're you integrated total make how about the it the not and focused the of the it hospitality We amplifies model hospitality. - is optimize really it have on hospitality how do just don't So we with about and We right. customer most with drive

in really hospitality company, the real spring more working a six we coming on right. of we're a way all have things, new on year. we've We're So, at lot next still kinds and I got mean the this. Guesthouse restaurants,

I - so we tweaks model. have it, of There to we you have optimize And and silos, key, look are events tweaks will the real the We're other that as it's optimize today, model. to to don't integrated as hospitality at think think about look a the inside model and got menu we things. at an company RH because other things want under-sell that hospitality, helpful, but be will business can't optimization not in looking it like just these integrated to at

that god, bank wedding we're would $XX,XXX so events, the and can't to If say, a and take rooftops their but about the the curate trying right. do fit to the and or who we're for silos. or for to doing can have it some over all use to maybe right things my accretive their investment where those think of to want they our at you be the their really kind versus to people, business, permits day oh we and easy are create do New get in want $XX,XXX use $XXX,XXX and experience restaurant, many We've event York events so those you customer we to that hard wants

negative bigger make than of optimize if profitable business. effect it I a on could was might but that probably and Look changes just a lot make business, the I running it, more I'd hospitality the have

right amount as we're very That's in model. a we've we say six integrated as high you So just look really all we you it that do we're States level. now, kind really update at short have at I'd an in and happy time, across United locations restaurants, opened it meaningful to make of changes, really and how a we'll executing the of different but

really, high we our don't end any of in a executing restaurants and this We bigger is and I mean business restaurants. a do well really get X.X real operating, check any our that into seamlessly out this it mean city. I like level. get I a where I we really business and team execute complaints average other stars, think at bring mean much in against up have integrated

outstanding the so conserve New about price been million, million we're we restaurant $XX $XX easily to could the experience of for probably about it environment York XX% of York want just you shopping overwhelming it's it in but the take a there are maybe That right. can create we but the to for the and into to when think we in business, that on highest one and to don't be New couple million, going opportunities and restaurants create $XX a the volume customers sit rooftop I do New million our right restaurant often, side once York. tracking excited just forward, and that super of $XX the things

to to be integrated big there's rock customer not leverage that amplifying seamlessly careful, model. rock. optimizing the So and age a you it. about going like at business little got where our and is thinking the huge sets be It's The hospitality experience

Operator

Our Tami is JPMorgan next question Zakaria Chase. with from

Tami Zakaria

and solid my for quarter question. Congrats taking thanks on a

Since So sounded performance hasn't better weakness sales obviously, definitely housing. improved when but attributed cautiously you your then, time, is that in the all and than market market spoke and much, last housing stock expected. really the you been high-end you high-end

the decoupled and like your sort So on of these model? you've do real driven factors macro or you reduced estate of dependence some feel operating improved of yourself by strength

Gary Friedman

we've is leapfrog at operating that's model many versus rest of a created think high in a model peer of we no the end we look with massively got advantaged and and brand - we've think we think and Yes, disruptive the cases an the the marketplace. marketplace, significantly

compare to correct of model to customers. So a our more in look people us really lot in the targeting at different think brand people who right. our you A got context, really of business I are

the is at high end biggest the disruptive. Right. of share of expand the we're The but most elevate is we're elevate market really where brand, continue think biggest brand. creating disruption we and the market brand we just very where to the the Not

a where just a point shopping people, County blocks today, reference legacy Gallery So if have add us have I tell that's you of we center a in sit three we we from Marin that BabyandChild we gallery without store million in somewhere small to million that and little in we in close $XX $XX million. do $XX over legacy center in a million, that do around BabyandChild, with $XX

is is Sausalito If the and is square you boutique know there square home get near Santa size about country really of Napa, is the to call Rosa Santa up first which the average across of their stores think Rosa Sausalito Sonoma Gate about and high you that it in wine kind and to that end the kind market, XX XX,XXX to Bridge from city about of part is feet X,XXX feet. Golden

- don't that fits any gallery different. foot square X,XXX look though of is middle we kind assortment a else. our almost than and that that of the Even anybody massively marketplace have Right. today, we in Today, differently in the

construction. know It our marketplace, Someone we times of and would opens Gallery those XX,XXX somewhat and many fall. a customer other which under competing website on have people for the who our is us this when between so difference to high-end for in were transform click this to RH

brand so us the all years into is sudden massively of goes and the that independents. conversion indoor guess so going to to see outdoor XX three and experiential XX,XXX on to you're My a and makes forth, right foot disruptive over square because with competitors a hospitality and next our XX,

design so, showrooms the high-end to some disruptive or without strategy entirely interior the is in high-end and real It where stand our when don't also centers, makes massively you with resale where the got you've customers access trade, dependent. to have us an yeah, back, not designer license

there stock what's on whether so and at our entirely the the high dependent it's in from marketplace, happening growth marketplace. but not the so Our market slowdown or Whether housing in forth it's impact an or profit is and model volatility. tariffs a end, expanding

of business or just are All they disruptive investor they're RH. when right or those you Right, you're inconvenient model. think right, or long-term are you are an inconvenient today trader strategy not trader, so about making and an - but control our to and around if things traders marketplace can owner the

we we XXX anything If the to the owners just focused model on of of aspects control in and you can't to from - we be traded think doing no are things without we and what's volatility so and like and the our to inconvenient it. we're look disruptive doing news do happening stocks can rewarded put so we time, do we to like our long-term There's and side people at what our about, is and can't do things many like will within any news can that. that's we but quarter, can't marketplace what be XX kind the business will not - over greatly rewarded and think about who stay how strategy, can we investors greatly

strategic not things are control things want let attention for aspects XX, go is - The the all and what tariffs happens XX have that doing. things things go to of kind of half we market in, that are not things to narrative, the the and They but All narrative. somewhat all that they inconvenient react not pay we're prepare to, we distracting. to We to from those things, not down, stop everything.

people businesses, of patients that's why, It's the the the kind a impatient to, me. my become voice they questions. sometimes just, for have think, here you of and focus Right. in in by some I company same the but right to of react team lot There seen the tactical distractions, is distractions my a and of we you've things let hears

don't big value, about talk moving the table. we rocks rocks, you the not big the the little create little because When on around and rock

You of on on you big focusing don't them. rocks identifying landscape deal the focusing just, look by by you kind sometimes the want value with the the know, the stays overwhelming rocks and people to trade same, most big can way,

of little right and you on move changes that volatility our if rocks, see big you rocks by in not can't They our of that's keep getting the enormous effort over and why will the the margins things by little. control better. organization, and a focus, The operating come, enormous keep more lot less we table you other focus a but they improving control one think than expanding, and the all over are earnings of whole face have tilt an can and that I take

else hang we're We're why and with here noise. is to operating the mostly I In level the the are low because little get where the market focused operating questions to big stability. expanding - backwards trying hundred margins margin or trying not our the basis going mean that's everybody on we're several sometimes points. that have sitting impatient edge, in by distractions by on That's I are rocks. a a

So, organization that focused most to greatness, we people my because this like we're want and honestly get to here, - you noise guys do. important not really what's we on can the lead sensitive distracting to in not stay lost team I'm and

Tami Zakaria

goes and China if tariff. us your and transport risk of to as What's is that guidance current remind being is of products my your about well percentage follow-up through. exposure helpful you always terms that the question about the can sold? Does in contemplated embed Gary, as really that's so tariff

Jack Preston

Tami, it's Jack.

- the three. resourced of round in our three China product round most mostly from So is

And have tariffs talked and So we modest with we've same the be way react assume second address so I and would amount given would there that missed? just in amount around specifically question, to we done then, three there included about guidance, and as would is the but in four, it - going be included, a that's round not change, was it's a sure the it not left. that's small I'm materially

Tami Zakaria

products of current China you to in us terms remind Could Yes. sold? about your exposure

Jack Preston

purchases It's XX% was of China. about XX%. in receipts That's the of Right. year our terms last for goods, about that from

Operator

is Mike next Our Deutsche with from question Bank. Baker

Mike Baker

down no but tariff So said then correct and guess dollars a I think questions, couple you about in come bit? will other you rock up that assume try at prices through follow-ups the me are if thinking but you these to of plus that and then on you, of hopefully, I'm thinking little flat I what implications sort but units little going words you're which impact to the on had would increase or planning through - passing aiming margins you're I a revenues, the cost are passing are wrong, profit also you margin aren't the the keep

Gary Friedman

play knew I'll out Yes, we I it but right, our mean, we wish how exactly give logic. would you

product. logic gross stabilize Our on to margins level keep of to try intact margin kind to a the is with

So - that lower a not think tariff. we entire and but if about right, the get price, you renegotiated the price

piece sales. level know - at two-thirds of the then let's who's merchandise take I that get you and half changing price tariff product of not of X% just balances that XX% but we're don't increase your with balance you that X% a margin and on you anybody and the the to or then discount, getting take take

units imply any impact. would there that less sell going market and that are to think that So we right won't we don't be so

and forth. we don't to so unit, cost of model to we don't that have deliver business, There's of so the to of a We that bad, you receive impact, unit less don't have take on slightly don't a the because unit, unit. dollars same out and but to have right. to unit, a have that ton it's we that buy We and returns bit have that sales shift not have unit on have don't to

or but one it's that units out of out different through the price the way that of the the by normal a through math it's play $X.XX go course, they up, goes could the same model So play cup raise whether Starbucks or same be no model or increase macchiato yes, they flat anybody's coffee go could revenues stay in right, business. tariff would math. just and and a the

Mike Baker

If could follow-up one I more.

but your can how market, pretty trade which like appreciate of by strong because market, it probably some seem as to certainly but business be just issues, down in the great month movements of it wasn't business at didn't the impact magnitude in stock it your great was did stock a but we you think impacted as it for in function of market short-term one a the May, wasn't Is October. I day. much not May, and of end sounds the stayed the XXX points probably in

suppose I weakness your trends. is before sales level way a some look fair to at Is there start stability So that see of it? you to in

Gary Friedman

Mike. Correct,

I the way at right think look to it. that's

think was December. Dow worst December December, in the in It was I I Right. history. with the XX% down worst think

the moving to XX,XXX from a a down You you impact. here of volatility bouncing XX% or about December. to deal. market families - there Dow their in that Mike. between have going is so not XX,XXX I - have on and know little or huge to That's That's home XX,XXX and think it's small don't and vacation everybody holidays, might market probably It for XX,XXX. with the impact want big in is the the

when and are how market - XX% a our - net that's tied to most XX%, the people of have of but, but You depending right move have XX% might severe moves their if really history, the worth move to that a high markets. in get drops, a you meaningful on spooked most and have so people XX% meaningful based a XX% on little kind big worth up almost is is with most net of the move.

estate it's that the whether so whether or real in you're so public market or not, and REIT a investing the entity. be And markets financial might

to got I bad So the drop we business moving like me. point The XXX the to if guided in to stock going public volatile, impacted because fact was hold before that could I numbers, much what we're that's I my so playing our letter get we that to mean but down, longer carnapped just our I is markets get the game. and the Right. to surprise the knew day, react but no was day head happen don't, timing inconvenient, at would expect wish up XX% We you adjust we next a it's it, got and it.

sucked things. So don't it's, we get into those

confident on big why create value going basis focused points It and next we the the margin, Is Could sight a inconvenient. fundamental very to driving that's XXX that line a company feel strategies moves by five to yet to get operating and recession are delayed to over leapfrog XXX the it somewhere going it. it's in We another have It's the clear could. years? model? we're or not, that of to stay of strategy

the constant, of but it's the ship the a in just you We if we and sailing Okay. It's storm out convenient. to will no through stay the traveling and seas, it's the storm, a on not or it's our other it's side, going are storm are fact got course come sale inconvenient, comes out to difference the right. fundamental you're around you've to where sale not

storm of recession stock is market, in of correction not We've bounced every The market A correction every We've a back the back from not every them. single of single is not the bounced a in one recession constant. A market every from constant. constant. them. is United the a States, history one

Yeah, different, there but and then we change of the different. markets, by back XX% markets your history you that's don't, down that data lens. coming is So said going never of there like kind other is

all new things you. we not that these focus let focused just got inconvenient, Stay right, for the So happened on - things there noise, to be the on that prepared focus and are are short-term of other you and things episodic distract and narrative. kind just them don't those

Operator

Bank Our America. next Elizabeth question of with from Suzuki is

Elizabeth Suzuki

allocation just into talk this from about Can and buy shares? decisions the you back what out some quarter capital debt taking liquidity specifically to revolver went utilizing the

Gary Friedman

was really debt through some undervalued. the out back didn't buy the shares We use stock to buy to back the took We incremental shares. revolver stock,

different than the three years. no last So have we over

on shares we undervalue So believe just we and or market math. the market to volatility try market, the again, our it's in capitalize

If we how long the of and in and we stocks just money It's for what we're what the price you the and will we'll do buying the debt we're stock and investing. going years. the math the worth think think years and hold stock what for math on be and what three back be cost borrowing is of just of how five the debt the much

allocation. capital just that's So

Elizabeth Suzuki

the RHB just new one kind of of core launch or one, top look a there a if that through product of... some is, all more tool a of line this And all then the other that is of is line from product quick product It as case not new marketing how to the which significant is much portion and we catalog. always is is looks, platform

Gary Friedman

XX% new products.

think I XX% new products.

Operator

Fernandez is Telsey Cristina Group. Our question from Advisory with next

Cristina Fernandez

wanted expecting accounting. amount looks that ask adjustment back half? a the the it some Is the should takes even It about and like anything margin for I the margins second in bit it's there the know on as gross lease of for quarter to quarter. for and to you're guidance looks recover with like the we second gross the down year-over-year, puts

Jack Preston

So there second that are the occurring dynamics quarter. in two is

one the about transition You our In drags rug talked is we may quarter in second the our business business. model. those recall to the of

single vendor going source direct were model. a from to a we So

it up. As all that

of the the margin Coast. you at margin, to that's you're facility and last year, the on QX there at inventory that end we and going then some through exited the in lower through reflected DC East in there we So recall, a sold sell pressure may see inventory as a down down of at and

That what's is just and was become QX and that outlet had facility sales there there the biggest an the stored had the expected. that logistics reverse impact. in with of is see accelerated acceleration we've inventory basically sort biggest - of in you - that the impact sell-through some QX what QX, we've has That's of

on not a So in those two gross dynamics are what's QX. bump seeing weighing margin

Cristina Fernandez

in seven to bit XXXX. a follow-up, still seven a two to open delayed next XXXX stores in think year, you're as And and can stores seeing you five but

the level I what of stores, can of store complexity that your that you gives guess achieve you higher openings? Given confidence

Gary Friedman

prototype like in We've our many now construction, moving under four have engineered many and that's are from what looks those how lot much markets of prototype Dave, we our prototype. learned simple. is now the of new more confidence under to prototypes. We and We've We new a We've in schedule, know aspect but timing construction today. have it. the one on just

The model our because real it about aspect pipeline, kind think the of are. just estate if we other where is and you of

these now a we much a home kind and development are view so, performer. community, of can shown today and of of point like kind creating proven have We the is from design consistent have desirable We model more building for them do much interior certainty a volumes of we because we're the deal day anchor to that stores it's modern we're and more that much we bigger of that look right, and out out a more galleries the for tenant. attractive, certainty

you're put at Right have the real center hospitality very everybody for normally needs to now is accretive traffic. all or traditional have developers because, we to and prime a do lifestyle so shopping hospitality we relatively tenant allowance are - give money, to doing a estate have to street - proven what up center, big a and developer or you're concepts. secondarily, doing matter developers no hospitality strategy developer if even And a then and

that's incremental They are all and There they concept generally roof and give have that now estate. center, real hospitality don't better, the deals these we we - the on better of a them just new have the away robust deals. no to real Street We're of stores getting the more floor have capital pipeline - ground estate and much to our bigger is dynamics, we and shopping build because side. concepts or a give a on

said at So that's think right. said - I seven XXXX, in least why we we

on least if we So seven, lot than today more we map. have a at said the seven

In fact, could in open XXXX. today we have XX that stores

open could And in and that so seven have XXXX. we stores

sit big XXXX, if and we've two Right there delays, all okay some these but there as if out many got say and and delays development shouldn't at there are at of projects. five. we know least we be are So fall

will two sudden XX if XX mean feel the XXXX and what and out XXXX. to we things happen, could we're XXXX about - So, know and force gives open Today good seven on building wrong. to fall five put parking from really right. all it an study confidence. in go and going as something seven Anything that I buildings, XX of other open as can XXXX, least be not but XXXX. in open of or environmental and in the we're at but the five impact goes of that's guidance can I sudden We odds that XXXX XXXX, could fallout out in us all but

and how those XX. just two, We two, XX, prototypes Yeah. those, four, three, six, a - have up five, seven, XX, many one, count me the of XX, lot pipeline their XX, eight, one, in we let have those nine,

XX said, XX of the are So I just prototypes.

never happened, right. that's that's also changed, So

Operator

question Capital next Brad Our Markets. is KeyBanc from with Thomas

Brad Thomas

you markets us hoping your on thoughts research gallery and first Gary, when overseas? your I about you give international some latest was on opening an might of update have

Gary Friedman

good. is We're excited. really Timing super

in in XX expansion cities. estate to on are cities finalize great the global of on Europe a of XX two after tentative we've of Yeah. they're two lots XX Warriors of for like right say in done I'd us, and us Game leaving almost at look win the how have we trip plane. and are X real many We to locations, us deals got Oracle, Europe

feel over-share about and we we're working I'm in kidding, but saying getting - okay. I'm I'm don't know Don't we're very can a off, say waived become so, Europe, anything, an get seeing it's say on time. let's say strong long just been we've like and Yes, for a sorry. XX quite I locations, couple, excited they

locations at how versus control through looking want do with much to in we have speed do to We're to in trying to China want us much partner how South We're America, just with that the and in East. capital Middle to We're go we very active want locations Australia. people use. and other people's

very anticipating but it's to come, for trip productive more be So us. to we're going a

Brad Thomas

the being to about potential cost And about a returns talked How the open think overseas? big. and Gary, you've we opportunity should store very

Gary Friedman

buildings, more won't prototype be as rich, much historic just we Based probably I our than be questions. now, so doing work see be center don't don't more we probably as more think probably shopping the materially to for as going we there'll are it more traditional. base different on Except Good be kind as current development, it's of Yes. because model. unique Americas

of to from a it's going We to a you opportunity, do the of the going to think the but development we some to we point I be neutral. we cases, of think with So, as we able about say think billion think billion view, brand, right. global in there, deals it capital size but mean about we're $X think when relatively be could be in $XX

I So mean conservative. super that's

American-based don't if back are don't If through see as right us luxury people view. you look the because We things market view if famous our what just here. things we have centric kind really up see and company. the global of that cannot perspective America's the you very really things really global of but Americans look think businesses dumb quote. a is see are. and they back really at an own you step We and head clearly see stand call have and, sometimes tend think our Anaïs we world own landscape We the you say whole grew high-end we for you globally and in we are. to U.S. I and a as We Nin the see We world that like

will not brand. It mentioned. it's be those their U.S., or at We're their companies that business brand. building of XX% outside that LVMH is believe about, U.S. will today. look where Hermes or expansion, we heading. or should differentiated about only That's biggest That's kind We massively become live global real brands of and I the of of business Carrying most XX% world you the talk this home in dominant we're Janelle When opportunity of brands, it's premier global or why like the elevation That's like the is in is. other where about

a I believe if looked as I So billion long then at the North models looks demographic on the model, the billion like because America, you they our $XX we than more no there's and do term, believe that $X be high-end should on like be we do and spends able I reason be can exponentially believe which we in model more home is to apparel. if other if shouldn't home on it what even

home and homes. have the they more those use, even how have you and as So Louis Chanel and want but bedrooms residence on buy high the brands Loro they to individuals, people's - multiple four so ultra whatever and get second you and they into twice homes forth, they three Piana and see their Vuitton average many has exponentially and as homes you'll when you on into primary homes get to so walk spend worth might and net

going long-term don't any and shouldn't. don't take have I reason longer, these and we just should at think to look going It's trying do I like go So there's a I is good lot mean the or we survey to it XX XX it I ago companies lot a ago. of says this years look we're is us news to have different. experience, but years learn, XX weren't

completely speaks in we're the a the communicates different Everybody world. English. on platforms. Everybody way. communications same Everybody's Today, same

the not So the invisible. value is about high-end it's biggest in expansion even farther much, internationally is we It's and live the home brands. miles development like That's single and long-term of is RH, ahead, there. different U.S. we're that's is much almost world think because strategy world in we and global why creating ahead we're the global internationally, of the it the

more are So we internationally we think we domestically. be disruptive than will even

Operator

Basham from Seth is question next our And Wedbush Securities. with

Seth Basham

interior what investments charge changes here update recently letter, on if your services an was still made mentioned My and questions around you design, you've you in hoping could might provide design think interior you I these one day? you and

Gary Friedman

announce, to investments, Yes, meaningful can and that's in leapfrog we'll our gallery future, make built here retail inside good and a we're kind we embedded really see galleries design on RH if think not-too-near New you've where of is galleries moves really - like the where embedding have not out really something it's question. we but focused first we it the from probably continued only actually the some time in to a We're will new a it's have, seen you offices. York, there

see The the offices, look in designers and there. consumer can the see interior

presentations We you in of in our will and where the new have have and meetings galleries. see private building we design presentation that rooms can all

and design offices. interior You firms, will embedded see

happening the make York So big a what's that's investment with We that expansion presence interior see service a think architecture. now architecture, the bigger like you'll taking we and an of design even for it even presence. and becoming design it of New design, see businesses think bigger interior and us in can we landscape we interior really most

interior Barclay kind like these by design that of designer, They're can't you have has not and go businesses and they're architecture, online have research right he see, to is businesses somebody landscape architecture consumer-facing offices, you your things that. walk interior who offices, like by to

because we become none consumer businesses think Design. I whole these are could starting mean with we of facing. a long-term So services - we're Interior platform, this

the it the people so all it interior if also that They're a it, we amplifier we a you what because and design any firm. in. we kind are as relatively business more more massively as of get long and actually we've scale cost margin business think too done that about it it there but scale. actually perceptions about a, to mean, and It's is if a so any can and massive research, the numbers fragmented business good hardly world-class Yes, XX,XXX million and or or people that. interior huge designers, think something are average firms have is less XX% X firms, with build it's like eight volume an of to think it's opportunity have a interior too it separate of design much business takes again, like I of

you business becomes other each integrated right. can ecosystem renders more our and design that of Right render we about even all architecture. Interior talk and you businesses and long-term, think retail think architecture part of it this can more landscape valuable, valuable, about when about

It's facing that great galleries we about becomes rooftop big and gardens, so here long becomes and have nobody good. about there we free. are design anything right, with better There our interior just parks great about interior and and is statements the building look, There idea think a point whole that You exactly statements design of that's we architecture charging values think like not of and statements perceptions landscape term, first great architecture. yes is the statements. consumer it step platform a much services there we're where are bigger about are gives quality architectural these is you

significantly we we and professionalize, as started design. better move where a So for as get there we charge here, we interior will we to model

engage period be with might where complementary we There you. a

forth the so we and have get it do services design what and So firm. the to might on best we run like a industry, to and in so the we understand help you can talent and

customers We even because charge really seriously. like our I have charge for we take it. that, to don't it don't don't people the mean for it

opportunity. huge, huge They term, so and forth, seriously so don't your but take time so long and

driving more our render integrated brand. other all a amplify of our portfolio design that interior valuable and RH big whole is of and strategies One ecosystem and each render value services and of long-term part become the

Seth Basham

by designer. right sales now a And of follow-up, just your as what percentage are supported

wondering think what out that's just in the I update... past. given was I you've the done

Gary Friedman

I mean any I to want and else anymore. gave just Yes, told don't I other too you to here. competitors. it - because going has we to the don't already off what given off, do there actually and I've reason you to too pull doing it Right already right I anybody there. we're give don't I have, know gone what more. don't metrics, we only important pull know want start much it what is will to if don't I trying give I I've to right the want Like giving I can print know too anybody excited but if be we just of think chance we're don't

Operator

Chuck with from Grom Our question is Haskett. last Gordon

Chuck Grom

hop in Jack if that convert couple just the control re-fi and Thanks under to guys letting wanted back I levels follow-up excellent for a on to comment wondering that's due a just coming then again. me were you as inventory think days the for on. of

think how progress the Just year. we should throughout you levels, inventory as about guys

Jack Preston

Sure.

So on on it's day the and a going it the due from Saturday, re-fi falls to as we've so which said and through borrowings revolver business on business repay first obviously cash - the are hand Monday. on we

bare on purposes level on will XX-Q filed rest. when need see to and draw just it's books the So the then you'll cash go tomorrow. There's we are, we down excess that the for minimum and will the operating

you've the call, on So seen moves then plan we've on give and beyond improvement turns based last I've in seen the made, our as we inventory simple but and the don't continued guidance, the that's just operating mentioned our moves - that, to inventory specific you've all enhancement platform.

and slight to in in saw face if improvement So that's very expect to sort - enhanced terms we slight calculate continue. financials, - inventory I just slight QX just that QX, of would you - the of the of be versus

in that. So beyond in cash but assumed not inventory certainly giving direction our flow free specific our some improvement we're guidance

Operator

question last Baker from Bank. Our with is Deutsche Mike

Mike Baker

even to as Is about to though Is in I change the your quick presume operating there as because of think there? just just interest profit guidance more cash it. been increased Just free right come a be one one. as guidance that we'd range, else that missing that's and something the going The well way didn't Chuck may is to on flow I also for sales expense.

Jack Preston

No, correct. that's I think

just expense as noted I and up were you our we under XX interest you went see, as our by XX, XX about If income was incremental. guidance operating just

remains So perspective from flow the that cash it and free same. wash a was guidance

Gary Friedman

for interest brand talking forward in Great. to you Well we business Thank our and you. everyone to you quarter. next and your thank look

Operator

This does call. you. today's conference conclude Thank

You disconnect. may now

RH (RH) 12 Jun 192019 Q1 Earnings call transcript