RH shakes off housing market doldrums as luxury furniture demand accelerates

The news: The worst housing market in 30 years isn’t hurting RH’s growth prospects: The luxury home furnishings company expects sales to grow 18% to 20% YoY in Q4 as consumers respond positively to its brand reinvention and new product assortment.

RH’s bullish forecast blew past analysts’ expectations of 7.2% YoY growth in Q4. However, Q3 revenues and earnings were weaker than expected—in part due to the brand’s reliance on clearance sales to purge old inventory.

• Revenues grew 8.1% YoY to $811.7 million, short of FactSet’s consensus estimate for $812.2 million.
• Earnings per share of $2.48 missed analysts’ expectations for $2.65.

Behind the numbers: RH’s namesake brand is seeing considerable strength in Q4. Demand was up 24% YoY in November and 30% YoY thus far in December, which the retailer credited to the rollout of its modern sourcebook containing 54 new collections across the furniture, upholstery, lighting, rugs, and textile categories.

RH’s determination to transform itself into a lifestyle destination is also helping it gain traction with consumers. Its investments in “the most inspiring and immersive physical experiences,” which combine retail with hospitality concepts like its RH restaurants, are enabling it to stay top-of-mind with shoppers and positioning it to accelerate sales once the housing market begins to thaw.

• The retailer’s newest opening in Newport Beach, California, has over 90,000 square feet of indoor and outdoor space and includes a 270-seat restaurant with views of the Pacific Ocean, two wine and barista bars, and an interior design atelier. The location has the potential to become RH’s second gallery to generate at least $100 million in sales.
• RH is planning seven store openings in North America next year, most centered on locations with a high concentration of affluent households, as well as two international galleries—one in London’s tony Mayfair neighborhood, and another on Paris’ Avenue de Champ-Élysées.

Our take: RH’s ability to outperform the rest of the furniture industry is a reflection of the considerable efforts the retailer has undertaken to elevate its brand, which helped it pick up 15 to 25 points of market share in Q3.

The company’s investments in new products and immersive, high-touch retail concepts should keep that momentum going in Q4 and into 2025.

Go further: For more on the state of the housing market, read our Retail and Ecommerce Q3 Earnings Report.

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