RH remains committed to store growth — at home and abroad — despite headwinds
RH (formerly known as Restoration Hardware) is moving forward with its ambitious expansion plans even as it reported a decline in first-quarter earnings.
The luxury home furnishings and hospitality company’s net income dropped to $41.9 million in the quarter ended April 29, from $200.7 million in the year-ago quarter. Revenue fell to $739.2 million from $957.3 million
“As previously mentioned, it’s times like these that businesses tend to move in herds, pursuing broadly adopted short-term strategies that lead to mostly similar outcomes,” wrote RH CEO Gary Friedman in his quarterly letter to shareholders. “It’s also times like these that present opportunities to pursue long-term strategies that can create strategic separation and significant value creation for those teams willing to take the road less traveled and pursue their own unique path.”
Under Friedman’s watch, RH has expanded from a luxury home furnishings retailer with immersive destinations into a growing luxury player in the restaurant and lodging business. It also has a yacht available for charter in the Caribbean and Mediterranean. Customized Gulfstream G650 and G550 planes are also available for charter.
At home, the company plans to debut a new Gallery (“Gallery” is the term RH uses to describe its stores) design in Palo Alto, Calif., and Cleveland, and open a new location, RH Indianapolis (on a 178-acre estate on a private lake) this year. RH Montecito (Calif.) will now open in 2024.
In addition, the company has 12 North American Gallery locations in the development pipeline scheduled to open during the next several years.
RH is also thinking smaller, seeing an opportunity to address new markets locally by opening Design Studios in neighborhoods, towns and small cities “where the wealthy and affluent live, visit and vacation.” To date, the company has opened several of these smaller outposts in locations such as East Hampton, N.Y., and Yountville, Los Gatos, Pasadena, Calif., and on the site of its former San Francisco Gallery in the design district. The locations, which range from 2,000 sq. ft. to 5,000 sq. ft., have generated annual revenues in the range of $5 to $20 million.
“We have identified over 40 locations that are incremental to our previous plans in North America and believe the results of these Design Studios will provide data that could lead to opening larger Galleries in those markets,” Friedman said.
In September 2022, the company launched its first-ever hotel concept, RH Guesthouse, in Manhattan's Meatpacking District. A second guesthouse is currently under construction, in Aspen, Col. It will include the first RH Bath House & Spa.
Global Expansion
On June 9, RH will open its first door outside North America. The long-awaited RH England, The Gallery at Aynho Park is located on a 73-acre, 17th-century country estate in the Cotswolds. Described as a luxury destination celebrating history, design, food and wine, RH England will include three full-service restaurants — The Orangery, The Conservatory and The Loggia — along with three “secondary” hospitality experiences: The Wine Lounge, The Tea Salon and The Juicery.
“We believe RH England, The Gallery at the Historic Aynho Park, also represents RH’s greatest work, and will act as a symbol of our values and beliefs as we embark on our expansion across Europe,” stated Friedman.
RH’s global expansion also includes openings in Brussels, Dusseldorf, Munich and Madrid as well as an interior design studio in London during the next 18 months, followed by Paris, London, Milan and Sydney in 2024 and 2025.
Housing
RH’s long-term strategy also includes becoming a major player in the luxury housing market.
“Our strategy comes full circle as we begin to conceptualized 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-started consumers,” Friedman wrote.