RH Q1 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Forbes - Guggenheim Securities Inc - Analyst : Hey, Gary, Jack, Allison. Obviously, Gary, nice to see the business returning to growth here. So I was curious if you maybe can help us contextualize the success of the new collections as you see it today, realizing it's early. But can you speak to sort of how many collections are showing signs of resonating with the consumer? And what maybe some of the early learnings are around the designs themselves as it relates to sort of product expansion opportunities or sort of broadening out the exposure, right, of the designs to different pieces?

Question: Steven Forbes - Guggenheim Securities Inc - Analyst : That's helpful. And then maybe just a quick follow up. There's so many different contributors to demand this year and the idea of sort of scaling it as we move throughout the year. I don't know if you can maybe help us digest the visibility into demand scaling into the back half. How many sort of factors do you have a large degree of confidence around? How many factors or what percentage of the demand scaling is still sort of a large sort of forecast? You think about like RH Modern's contribution to demand scaling. Any way to sort of just shore up the confidence in the demand revenue build into the back half for investors here?

Question: Steven Forbes - Guggenheim Securities Inc - Analyst : Thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 13, 2024 / 9:00PM, RH.N - Q1 2024 RH Earnings Call

Question: Steven Zaccone - Citigroup Inc - Analyst : Great. Thank you for taking my question. Maybe to follow up on Steve's question, I was curious about the commentary on pricing. Gary, you've talked about it in the past, that pricing has gotten too high, and more broadly, the industry has gotten promotional. How do you feel about pricing now on the new product? Where are you seeing some customer adoption? And do you feel like some of the pricing challenges for the business are in the rearview mirror?

Question: Steven Zaccone - Citigroup Inc - Analyst : Okay. I appreciate all the detail. Hopefully a quick follow up here. But from a macro perspective, what are you most focused on here to see engagement in the category return? We've seen somewhat of an inflection in luxury price homes turn over. I mean, is that the key metric you're looking for here? Anything else you could steer on the macro would be helpful.

Question: Steven Zaccone - Citigroup Inc - Analyst : Got it. Appreciate on the color.

Question: Simeon Gutman - Morgan Stanley - Analyst : Thank you. It's Simeon Gutman. Guys, I want to ask about the gross margin outlook. And if I can segment it into two pieces, first, the new product lines and launches and then everything else. I'm curious if gross margins are roughly stable. And then thinking about the guidance and the torque in it in the back half, is it simply better sales and then better expense leverage or is there some variability that could still happen with gross margin of the business? Thank you.

Question: Simeon Gutman - Morgan Stanley - Analyst : Yes, that's helpful. And so I guess just related to that, and then I'll include the follow up. I guess I meant that there isn't some piece of clearance that has to occur with older legacy lines like we're through that part. And now the normal cadence of the business happens and the variability will be based on the mix of promotions with the current product. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 13, 2024 / 9:00PM, RH.N - Q1 2024 RH Earnings Call But we're through the worst of whatever clearance that you were trying to do to clean up the portfolio ahead of all these new launches. And then --

Question: Simeon Gutman - Morgan Stanley - Analyst : Thanks. I'll leave it there. Thank you.

Question: Max Rakhlenko - TD Cowen - Analyst : Great. Thanks a lot guys. So first, just curious, how much of the assortment in galleries today comes from the new launches over the past year versus the legacy product? And then when will we get more of the Outdoor and the Modern products inside the galleries? And then just how should we think about the evolution over the years as far as the new products being shown in the galleries?

Question: Max Rakhlenko - TD Cowen - Analyst : Got it. And maybe just a follow-up to that, but some of the books are being delayed or not delayed, but coming out a little bit later than you initially thought? And then 1Q demand was a little bit softer than what you thought. So just given how the business does remain somewhat choppy, and there's been a little bit maybe demand pushed out just given the timing of the Sourcebooks, curious to your level of confidence that you'll be able to maintain the full-year demand guide? And then just separately, it doesn't look like you stop releasing the outlet revenue. So if you could share what that revenue was in the first quarter, that would be great.

Question: Max Rakhlenko - TD Cowen - Analyst : Got it. That's helpful. Thanks a lot and safe travels.

Question: Curtis Nagle - Bank of America - Analyst : Great. Thanks very much for taking the question. So maybe just changing gears slightly, Gary. Just curious if we can get an update, I guess, on the progression and the timing of the Aspen ecosystem? And then the concept more generally, I don't think that's something we've talked about on the call in a little bit.

Question: Curtis Nagle - Bank of America - Analyst : And more generally the concept, yeah.

Question: Curtis Nagle - Bank of America - Analyst : Okay. Great to hear. And then just a quick follow-up. I just want to make sure I caught your comment correctly. It sounded like -- I think you said, Gary, that in terms of just new products alone that could grow the business, I think, 20 points or more, also -- or maybe 2x. So just would you be able to clarify just, I guess, kind of the range or just maybe I just misheard? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 13, 2024 / 9:00PM, RH.N - Q1 2024 RH Earnings Call

Question: Curtis Nagle - Bank of America - Analyst : Yes, exactly.

Question: Curtis Nagle - Bank of America - Analyst : Okay. Thanks, Gary.

Question: Michael Lasser - UBS - Analyst : Good evening. Thank you so much for taking my question. Gary, are you getting as much of a lift from the newness and innovation that you've been introducing as you might have in the past? And does it make sense to delay further some of the introduction, in light of how challenging the market is, because maybe you would not get as much credit now or recognition now from your customer given what's going on?

Question: Michael Lasser - UBS - Analyst : Got you. My follow up question is it sounded like earlier in our conversation this evening that you mentioned the consumer is buying more on promotion. So a, is that right? And b, is that persist? Does that change how you think about the path to RH's long-term margin aspiration?

Question: Michael Lasser - UBS - Analyst : Totally. Thank you very much.

Question: Jonathan Matuszewski - Jefferies - Analyst : Hey. Good evening, and thanks for taking my question. Gary, can we get an update on how the brand is resonating with the end consumer in Europe? I think, on the last call, you mentioned satisfaction with some of the momentum with trade customers to acknowledge a bit slower progress with the end consumer. So anything you could share in terms of maybe what your customer insights group is seen as it relates to brand awareness or intent to purchase or overall perception would be helpful? Thank you.

Question: Jonathan Matuszewski - Jefferies - Analyst : That's really helpful. Thanks, Gary. And then just a quick follow-up. In the prepared remarks, you mentioned a growing number of online furniture brands that ceased operations. We've witnessed this trend as well. Based on our observations, it felt like disruption was more concentrated at the mid-tier price points. So are you seeing super premium online brands in your space vanishing? Or was that comment more so foreshadowing disruption that you see on the horizon for upscale competitors? Thanks. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 13, 2024 / 9:00PM, RH.N - Q1 2024 RH Earnings Call

Question: Jonathan Matuszewski - Jefferies - Analyst : That's helpful. Thanks, Gary.

Question: Seth Basham - Wedbush Securities - Analyst : Thanks a lot, and good evening. Just to clarify, Gary, you've seen a little bit more negative on the macro than a quarter ago, but it didn't reduce the outlook for the year financially. Is that just because you see more benefits from some of your initiatives? Or is there something else?

Question: Seth Basham - Wedbush Securities - Analyst : Got it. That's helpful. And just a related clarifying question. You previously talked to peak inflection, our peak year-over-year growth, first in Q2 this year. Now, I'm not sure if it's back half of '24, whether you actually see the peak sometime in early 2025?

Question: Seth Basham - Wedbush Securities - Analyst : Helpful. Makes sense. And if I may, one last quick one for Jack. With the delay in the Modern Sourcebook, what was the impact on margin in the first quarter from lower Sourcebook mailing costs? And will there be any negative impact in the second quarter from the delay relative to your prior expectations?

Question: Brian Nagel - Oppenheimer Holdings Inc - Analyst : So I have a couple of really quick questions. It should be quick. So one, just -- and again, this is a follow-up, too. But Gary, you talked a lot about the tonne of the business and your leverage. You mentioned strength in Europe. Should we interpret the better trends lately is a direct reflection of the new products you have in the stores? Is that -- that's what's happening. And then the second question I have, just what explains the, I guess, the widening gap between sales growth and demand growth.

Question: Brian Nagel - Oppenheimer Holdings Inc - Analyst : That's very helpful. I appreciate it. Thank you.