RH acquires two companies as it climbs up ‘luxury mountain;’ to remodel all stores
RH (formerly known as Restoration Hardware) has made two acquisitions as part of its ongoing brand transformation and strategy to be a leader in luxury.
RH has acquired Dmitriy & Co, a to-the-trade custom upholstery atelier. The founders of the company, Donna and David Feldman, have been hired by RH to create RH Couture Upholstery.
In addition, RH said it has acquired Jeup, a to-the-trade custom furniture atelier. Company founder Joseph Jeup has been hired to create RH Bespoke Furniture.
RH also announced the hiring of Margaret Russell, former editor-in-chief of Architectural Digest and Elle Decor, to create RH Media, which it described as a content platform that will celebrate the most innovative and influential leaders who are shaping the world of architecture and design.
“Today’s announcements, plus our previous acquisition of Waterworks, firmly plant four RH flags at the very top of the luxury mountain, and clearly state our intention of establishing RH as an arbiter of taste and design in the to-the-trade, luxury home furnishings market,” said Gary Friedman, chairman and CEO, RH.
Friedman continued, “These brands and businesses, thoughtfully integrated and amplified on what we believe will be the world’s most innovative and dynamic global design platform, will begin to fundamentally change the landscape of the interior design industry.”
The acquisitions and new hires come as RH continues to expand with a stated goal of “building the world’s first consumer-facing architecture, interior design and landscape architecture services platform inside our Galleries, elevating the RH brand and amplifying our core business by adding new revenue streams while disrupting and redefining multiple industries.”
“Our strategy comes full circle as we begin to conceptualize and sell spaces, moving beyond the $170 billion home furnishings market into the $1.7 trillion North American housing market with the launch of RH Residences − fully furnished luxury homes, condominiums and apartments with integrated services, that deliver taste and time value to discerning time-starved consumers,” stated Friedman in the company’s third-quarter letter to shareholders.
The company has also expanded its hospitality offerings, opening RH Guesthouse in Manhattan's Meatpacking District. It is RH’s first-ever overnight hospitality concept.
[Read More: First Look: RH opens luxury hotel in New York]
In 2023, RH will open its first location in Europe, in the U.K. It will also roll out the largest collection of new product in its history across RH Interiors, modern, contemporary, outdoor, beach & ski House, baby & child, and teen.
“To amplify this historic launch, we will once again unveil a revolutionary new Gallery [store] design, as well as redesign and remodel all of our current Galleries,” said Friedman.
Looking further ahead on the international front, RH Paris is scheduled to open on the Champs-Élysées in 2024, and RH London is scheduled to open in 2024-25. The company also secured locations in Milan, Madrid, Munich, Dusseldorf and Brussels, some of which will also open in 2024 and 2025.
Third Quarter
RH reported better-than-expected results for the third quarter, with net revenues of $869 million versus $1.006 billion in the year-ago quarter. Gross margin contracted 50 basis points in the third quarter primarily due to fixed occupancy deleverage, partially offset by an increase in product margins as it continues to resist promoting the business, the company said.
As it previously noted, RH expects its business trends will continue to deteriorate as a result of accelerating weakness in the housing market during the next several quarters and possibly longer due to the Federal Reserve’s anticipated monetary policy and the cycling of record COVID-driven sales and backlog reductions.
Based on its current trends, RH now expects fiscal 2022 revenue growth of (3.5%) to (4.5%) versus its prior outlook of (3.5%) to (5.5%), and adjusted operating margin in the range of 21.5% to 22.0% versus its prior outlook of 21.0% to 21.5%.
“While we expect the next several quarters to pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift and shed less valuable market share, we believe our long-term investments will enable us to continue driving industry-leading results,” Friedman stated.