RH Sales Slide as High-End Retailer Rejects Promotions

In a declining market for home furnishings, RH is targeting upscale buyers.

RH Chairman and CEO Gary Friedman said Thursday (Dec. 8) during a quarterly earnings call that the luxury lifestyle retailer continues to reject the discounting that is common in the industry. He said that while the company receives two promotional emails per day from many other companies in the industry, RH has not sent one in nearly two years.

“Although the stark contrast in strategy may lead to a short-term risk of market share loss, we believe there is a certain long-term risk of brand erosion and model destruction for those who choose the promotional path,” Friedman said.

During the quarter that ended Oct. 29, RH’s net revenues were down 13.6% year over year. In a shareholder letter, the company attributed this to increasing weakness in the housing market and tough comparisons to the sales boom during the pandemic.

To boost its offerings in home furnishings that target the high-end market, RH announced Thursday its acquisitions of custom upholstery atelier Dmitriy & Co. and custom furniture atelier Jeup.

The company is also continuing to build its offerings outside of home furnishings sales by adding RH Guesthouses, which provide a private and luxurious option in the hotel industry, as well as bespoke experiences, private jets and a luxury yacht available for charter.

“Our strategy is to move the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of products, places, services and spaces that establishes the RH brand as a global thought leader, taste and place maker,” Friedman said during the call.

Looking ahead, Friedman reiterated RH’s previous outlook, saying its business trends will continue to deteriorate over the next several quarters — and possibly longer — due to the macroeconomic headwinds. The company now expects fiscal 2022 revenue growth to decline 3.5% to 4.5% versus its prior outlook of 3.5% to 5.5%, according to the letter.

“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 said.