RH Q2 2024 Earnings Call Summary

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

Question: Curtis Nagle - BofA Global Research - Analyst : Great. Thanks so much for taking the question. Yeah. So just know with the inflation demand trends driven by all these new product launches coming through, I'm feeling pretty good about the product margins. And I think you called that out in the press release, stable, hopefully after the rest of the year, putting you, I guess, above the fray for a market that feels a little more promotional. What are your thoughts on that?

Question: Curtis Nagle - BofA Global Research - Analyst : Yeah, just with the inflection, new products, good margins. How are you feeling about the product margins for the rest of the year? That's the core of the question.

Question: Curtis Nagle - BofA Global Research - Analyst : Got it. And then just a quick follow-up. So you noted that consolidation of the contemporary catalog, totally understand the efficiencies. Do you think that maybe points to maybe the scope of the question being a little bit smaller than anticipated? Or is it maybe just more of a timing thing, or it's selling a very high priced set of products and market is still pretty choppy?

Question: Curtis Nagle - BofA Global Research - Analyst : Appreciate that. Understood. Thanks, Gary.

Question: Steven Zaccone - Citi - Analyst : Great. Good afternoon. Thanks for taking my questions. I wanted to talk about the product assortment because there's been a lot of newness. And I think last year, you gave this point that 80% to 85% of the assortment would be new. So I'm curious, are we at that point now? Or do you need more newness in the second half of the year? And just with more product newness coming into the business, do you feel like you're at the right cadence now or as we get into '25, you'll have incremental newness to present to the consumer? Thank you.

Question: Steven Forbes - Guggenheim Securities LLC - Analyst : Gary, last call, we briefly discussed, right, the idea of top, middle, bottom tiers of the assortment, the new collections. So would love to hear you sort of talk through how you think the collections are mixing into those tiers today as we all try to sit here and conceptualize like what the potential aggregate demand lift could be from the actions thus far into '25 and beyond?

Question: Simeon Gutman - Morgan Stanley - Analyst : It's Simeon. I wanted to ask twist on maybe what Steve was just asking, the confidence that this initial demand that you have here has durability. And I know Gary, you mentioned the vectors and the market share spread I think you have a lot of newness, you have catalog or sort of books. So you have reasons to be stronger than them at this point, and you had this coming. So how do you look out several quarters? And then related to Steve's question, when you talked about the different tiers or tranches, do you have enough product out to see how some of the initial product is trending? How many of those top third categories might you already be sitting on?

Question: Max Rakhlenko - TD Cowen - Analyst : Great. Gary, so you earlier walked through the importance of galleries. Can you provide an update on where you stand in resetting making store assortment. I think on the last call, you discussed being around 50%. So just curious, where is that now? And when do you think it will get closer to or fully reset just given the potential that it could have to the business?

Question: Max Rakhlenko - TD Cowen - Analyst : Got it. That's helpful. And then maybe we can keep this one for and it might be rudimentary, but where do you stand now in the promotion in your promotions and sort of winding down the old, discontinued products demand is picking up. So should we think that you're probably in the latter innings or how should just we think about it? And then just the key drivers of the product margin inflecting here more recently.

Question: Andrew Carter - JPMorgan - Analyst : I wanted to ask a little bit about the -- I think you're going to hit with your guidance here, seven design galleries this year plus the design studio. Are you in a position to hit that cadence every year? I know to international, you've reiterated today. And I know you're talking a little more about prioritization. Where do the white space markets kind of fit in within that? And are the white space markets still in scope for all design gallery types?

Question: Andrew Carter - JPMorgan - Analyst : Great. Looking forward to Newport Beach.

Question: Jonathan Matuszewski - Jefferies - Analyst : Gary, first one is just on housing. I think investors are trying to understand how the eventual recovery in housing will impact furniture category spend maybe across different income cohorts, so just wanted your perspective how you see luxury housing reacting to the Fed rate cut maybe relative to homes that nonluxury price points. Do you see luxury housing reacting more quickly? And if so, why?

Question: Jonathan Matuszewski - Jefferies - Analyst : And just a quick follow-up, Jack. Just on the international investment this year. It looks like the headwind ticked up a little bit. Just if you could contextualize for that. Is there a kind of any incremental investments that are being made in international versus what was previously planned?

Question: Thomas Bradley - KeyBanc Capital Markets Inc. - Analyst : Great. Gary, you've touched on international a bit and some other comments that you've made in answers, but I was wondering if you could just give us an update on how you're feeling about the trajectory of that business? And how you how some of the data points are coming in as you lap the one-year anniversary of some of these locations? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 9:00PM, RH.N - Q2 2024 RH Earnings Call

Question: Michael Lasser - UBS Equities - Analyst : Gary, if you look at the updated guidance, how much of the reduction was due to the market is not being as strong as you expected a slower ramp in demand in response to some of the introductions and changes that were introduced? Or is everything executing a little slower than what was previously anticipated. And then as part of that, if demand is shaping up to be a little lower than you had expected, could there be a benefit to the spread between demand and sales?

Question: Michael Lasser - UBS Equities - Analyst : Maybe I could reframe the second part of the question is when do you expect demand and revenue, the growth rates to converge?

Question: Seth Basham - Wedbush Securities Inc. - Analyst : I have one question, one follow-up. First, you mentioned in your 10-Q that your contract business is growing. I was hoping you can provide a little bit more color on the size of that and the momentum there and whether that's going to become more meaningful to the overall company at any point in the near future?

Question: Seth Basham - Wedbush Securities Inc. - Analyst : Got you. And then my second question is on inventory, which increased more than 20 percentage points faster than sales this quarter. You talked about some of the reasons why. But can you provide any more color as to how much of this is really for miles and other things, that would be helpful. And relatedly, should we expect this outsized inventory growth sales growth to persist for at least the next few quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 9:00PM, RH.N - Q2 2024 RH Earnings Call