RH’s Chief Executive Officer Gary Friedman describes his company’s path as a trek up the luxury mountain. Like any challenging ascent, this one takes a bit of faith.
Despite some supply-chain disruptions and a decision to delay new product introductions, the luxury home-furnishing retailer had a solid year. Sales increased 7.6% for the fiscal year that ended Jan. 30, an impressive feat for a company that saw revenue fall as much as 19% in the first quarter due to store closures. It is actually a slight bump from the 7.2% five-year compound annual growth rate RH saw before the pandemic year.
RH is confident that its top line can grow 15% to 20% this year as opposed to the 10% increase analysts had been projecting before the release. In an earnings call on Wednesday, Mr. Friedman pointed to the trend of city dwellers moving to suburbia, saying that this could be a long-lasting trend beyond the pandemic. Moves to larger houses mean more square footage to furnish, leading to more sales. That all makes sense, but it requires some unproven assumptions about people’s behavior going forward.
The longer-term growth story requires even more imagination. RH has its eyes set on the hospitality and home-building businesses. It plans to open so-called RH Guesthouses and RH Residences, with the first RH Guesthouse opening in New York City this fall and a second one in Aspen in fall 2022. Mr. Friedman didn’t offer much detail on the Guesthouse concept, except that it isn’t a hotel and that the company is “doing things no one has ever done.”
The other area of expansion is in forging a presence in Europe, with openings for RH England and RH Paris planned for 2022. In response to concerns that RH didn’t have enough brand awareness in foreign markets, Mr. Friedman said those studies don’t understand that its core customer—“the top half of one percent”—isn’t likely to be well represented in surveys.
