RH Price & Performance (RH)

Please also note that these forward looking statements reflect our opinions only as of the date of this call. And we undertake no obligation to revise or publicly release the results of any revision to these forward looking statements. In light of new information or future events. Also, during this call, we may discuss non GAAP financial measures. Which adjust our GAAP financial results to eliminate the impact of certain items. You will find additional information regarding these non GAAP financial measures and a reconciliation of these non GAAP to GAAP measures in today's financial results release. A live broadcast of this is also available on the Investor Relations section of our website at ir.rh.com. With that, I'll turn the call over to Gary. Thank you, everyone. Well, welcome to the new world. When we're at least at this moment, inventory is your friend. I I I was gonna say maybe I just shouldn't read the letter, but heck, let's go through it. And we'll kinda improvise, adapt, and overcome. As we're reacting live time with all of you. To our people, partners, and shareholders. The important work and substantial investments we've made over the past two years are now resulting in meaningful share gains and significant strategic separation.

Positioning the RH brand to expand its leadership position across the luxury home market over the next decade The positive inflection of our business continue to accelerate in the fourth quarter revenue up 18% and adjusted operating income increasing 57% in each case on a comparable thirteen week basis. Outperforming other home furnishings REIT businesses by a wide margin as the most prolific product transformation and platform expansion in the history of our industry continues to unfold. Our industry leading growth in the quarter was driven by the RH brand, fourth quarter demand increased 21% demonstrating the disruptive nature of our product transformation. While demand softened in mid December after mortgage rates spiked, and mortgage applications fell 22%, Post the Fed signaling rates would remain largely unchanged this year, the RH brand demand stabilized at up 19% in January. While we expect a higher risk business environment this year, due to the uncertainty caused by tariffs, market volatility, inflation risk, we believe it's important to separate the signal from the noise. The fact is, we've been operating in the worst housing market in almost fifty years. For context, in 1978, were 4,090,000 existing homes sold when The U. S. Had a population of two twenty three million.

Contrast that to 2024 where 4,060,000 existing homes sold with a population of three forty one million. And it illuminates just how depressed the housing market has been this past year. Despite that fact, we are performing at a level most would expect in a robust housing market. We believe it's a result of investing with a very narrow focus and a long term view. Or what we like to call an inch wide a mile deep. Elevating and expanding our platform by creating the most desired products presented in the most inspiring spaces in the world. With the spoke interior design services, and beautiful restaurants that generate energy, engagement, and tremendous awareness of the RH brand. While also serving as a profitable customer acquisition vehicle. Our intentions and attention to detail in everything we do and in every house we turn into a home. While we ended the year with meaningful debt, mostly due to our stock repurchases of 2,200,000,000.0, We also ended the year with incredible business momentum and a meaningful assets. These assets include real estate that we believe has an estimated equity value approximately $500,000,000 which we plan to monetize opportunistically as market conditions warrant. And excess inventory of 200 to $300,000,000 at cost that we plan to turn into cash as we optimize our assortments post our product transformation.

Inclusive of our plans for significant growing cash flow from operations, remain confident in our ability to make the necessary investments to continue our industry leading growth while paying down debt and lowering interest expense. Now let's look at, shift to our outlook. Based on our current plans and the uncertain macroeconomic environment, we are providing the following financial outlook for the full year and first quarter. For the fiscal year twenty twenty five, we're forecasting revenue growth of 10% to 13%, adjusted operating margin of 14% to 15%, adjusted EBITDA margin of 20% to 21%. In the first quarter, we're forecasting revenue growth of 12.5% to 13.5% adjusted operating margin of 6.5% to 7%, adjusted EBITDA margin of 12.5% to 13%. The above outlook includes a negative 160 to 200 basis points of operating margin impact from investments and start up costs to support our international expansion. Every act of creation is first in active disruption. Pablo Picasso. We have worked hard to destroy the former version of ourselves, are in the process of unleashing what we believe is an exponentially more inspiring and RH brand. We believe the important investments we are making during this depressed housing cycle are creating a level of strategic separation in our industry that rivals the most important brands in the world.

Our product transformation plans for 2025 include the introduction of our new RH outdoor source book, featuring the most dominant assortment of high quality outdoor furniture in the world arrived in homes early February with eight new furniture collections and exciting new textiles offering plus a significantly improved in stock position to start the season versus a year ago. The introduction of our new RH interior source book arrived in homes mid February through early March. Featuring 42 new collections across furniture, upholstery, lighting, rugs, and textiles. As well as an additional 15 new collections launched on rh.com. While we had planned a higher amount of new collections for this book, due to the rapidly changing economic outlook, We believe it was prudent to delay some of our introductions until later this year. The launch of a significant new brand extension in the fall of twenty twenty five that we believe will meaningfully expand the market size and share of the brand. This new brand extension will include a new source book, a significant website presence, and two freestanding galleries dedicated to the new concept. Our plan includes integrating RH Couture Upholstery by Dimitri and Co, and RH bespoke furniture by Joseph Juke into this new brand extension.

Enabling greater exposure and market reach versus standalone concepts. We'll be sharing more details of this exciting exciting new venture during our first quarter earnings call. As communicated last quarter, do not expect a negative impact to results related to previously announced increased tariffs on products from China, Canada or Mexico. As it relates to reciprocal and other tariffs that will be announced and have been announced, today As we've done with prior tariffs, we'll be working with manufacturing partners to mitigate mitigate the impact to both our margins and to our customers. We believe it is also important to note that we have been manufacturing upholstered furniture in our own North American North Carolina factory for over ten years. And have recently expanded the facility doubling our capacity. We are currently projecting that 48% of our upholstered furniture will be produced in The US 21% of our upholstered furniture will be produced in Italy, and 14% of our total business will be produced in The US at the end of this year. Now let me shift your attention to the expansion of our platform. We continue to open the most inspiring and immersive physical experiences in our industry and some would say the world.

Spaces that are reflection of human design, a study of balance, symmetry, and perfect portions. Spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality, spaces with garden courtyards, rooftop restaurants, wine and barista bars. Spaces that activate all of the senses and spaces that cannot be replicated online, Our plan to expand the Yaris fan globally address new markets locally, and transform our North American galleries represents a multibillion dollar opportunity. Our platform expansion plans for 2025 include the opening of seven design galleries, two outdoor galleries, plus two new concept galleries. The seven new design galleries are RH Oklahoma City, [indiscernible] and RH Montreal, the gallery at Royalmont, both opening in the first half of this year. RH Paris, the gallery on the Champs Elysees, RH Detroit, the Gallery In Birmingham, RH Manhasset, gallery at the Americana, RH San Diego's, the gallery at University Town Center, and RH Palm Desert, the Gallery On El Taseo, are all opening in the Second Half Of This Year. Additionally, We Plan To Expand Our Brand Presence In Greenwich, Connecticut by developing a multi building RH design ecosystem. Inclusive of the existing RH gallery at this historic at the historic post office a freestanding RH outdoor gallery that opened last month plus a new concept gallery in the former Ralph Lauren building on Greenwich Avenue opening in the second half of this year.

We also plan to expand our brand presence in East Hampton this summer. By opening a freestanding RH Outdoor gallery and are exploring plans to further enhance our design ecosystem with a new concept gallery in the near future. As previously communicated, we anticipate an inflection of our business in Europe as we begin to open in the important branded building markets of Paris in 2025, plus London and Milan in 2026. All with dramatic and brand, building hospitality experiences. We believe post each opening, will begin to have the scale to the necessary advertising investments to accelerate our growth in Europe. Every moment has a lunatic fringe. Quite appropriate for today. Theodore Roosevelt. America's first Nobel Prize winner commander of the legendary Rough Riders, medal of honor recipient, recipient. Promoter of the conservative movement, leader of the press movement, noted for his exuberant personality and ranked by scholars as one of our greatest presidents. Theodore Teddy Roosevelt proclaimed in his famous speech as if the born it is not the critic who counts. Not the man or woman who points out how the strong man stumbles. Or where the doer of deeds could have done better. The credit belongs to the man or woman who is actually in the arena.

Whose face is marred by dust and sweat and blood. Who strives valiantly who airs and come up and comes up short, again and again. Because there is no effort without error or shortcoming. But he or she who actually strives to do the deed who knows the great enthusiasms, the great devotions, who spends himself in a worthy cause who had his best knows in the end the triumph of high achievement, and who at his worst if he fails, at least fails while daring greatly So his place shall not shall never be with those cold, intimate souls. Who know neither victory nor defeat nor defeat. While our ambitions are not political, maybe they should be, They are personal. We remain inspired by the progressive thinkers unafraid to push forward new ideas and fresh perspectives. It's a culture of leadership versus followship. Innovation versus duplication, enlightenment versus ego, It's believing none of us are smarter than all of us. That we need all the brains in the game and the egos out of the room. It's about thinking it till it hurts. Until we can see what others can't see, so we can do what others can't do.

That's how you transform a money losing restoration hardware store and have Toro Mall in Miami. That did $2,000,000 in annual sales into an RH gallery that does 44,000,000 in the exact same space with the exact same square footage. It's also how we'll transform that $44,000,000 legacy gallery into a hundred million dollar plus RH design compound, a yet to be unfailed multi building design resort of sorts. In the parking lot of the same shopping center. Over twenty years ago, we began this journey with a vision of transforming an nearly bankrupt business that had a $20,000,000 market cap and a box of Occidental laundry detergent on the cover of its catalog. Into the leading luxury home brand in the world. The lessons and learning the insights and intricacies, the sacrifices made, and the scar tissue developed by getting knocked down 10 times and getting up 11 leads to the development of the mental and moral qualities that build character in individuals and form cultures and organizations. Lessons that can't be learned in a classroom or by managing a business. Lessons that must be earned by building one. Are we part of the lunatic fringe? If it means, as president Roosevelt said in his speech at the Suborn, that our place shall never be with this cold with those cold and timid souls.

We know neither victory nor defeat. And put us in that arena. Onward, team RH. Carpe diem. Operator, I'll now open the call to questions. [indiscernible] Thank you, sir. To one question and one follow-up. We'll go first to Simeon Gutman, Morgan Stanley. Good afternoon. This is Pedro on for Simeon.

Thanks for taking our question. My question is how you see the outlook for the consumer?

It seems we've seen a slowdown in consumer sentiment year to date and the housing market is not seeing a turn yet. Last year, we saw early signs of an inflection, but now it seems things have delayed again. So could you give us a bit of an update on how you see things developing over the spring and the summer season? And related to that, how are legacy galleries doing? How much of demand growth is coming from the design galleries as opposed to the legacy galleries.

Okay. Let me break that down. So how do we see the consumer? Yeah. I mean, unfortunately, we, you know, we don't know those individuals exactly. And don't talk to them in any kind of personal level about how they're doing. [indiscernible] saw the recent news, you know, just we are ready to break for this this call. And yeah, look, it's the it's the one of those times of uncertainty. It's one of those times where it it's not so much I think, you know, what the consumer's gonna do. I think it's how we're gonna react the consumer environment. And what we're gonna do. And so I think if you you know, look at our history, which is is my twenty fifth year you know, going on twenty five years in the company. We thought we saw it all until today. So this is the new one. But, you know, we we have a a history of really performing in times of crisis. And thriving in those times and, you know, have the ability to improvise, adapt, and overcome. You know, we, at our at our core, we are innovators. We're not duplicators. We're leaders. We're not managers.

We're visionaries, but we're not victims. So you know, whether it's a you know, confused or conflicted consumer environment, because of high interest rates or new tariffs or trade wars, or you know, military wars. I mean, there's there's always something. [indiscernible] yeah. So, I mean, look. We we feel confident no matter what the environment looks like. We you know, I just articulated in in the letter that we just yeah, we just anniversaried really the the worst housing market in fifty years since 1978. Having we do versus everybody else, Very different. What's our trends versus everybody else? Quite different. You know, so maybe that's a better question for everybody else who maybe tries to talk consumer and see how they're feeling. We focus on our work you know, and try to you know, try to create the most desirable products into the most inspiring spaces, whether they're physical spaces, digital spaces, or you know, print experiences. And I think we do that better than anybody in the world. Yep. Now the game's changed somewhat. But I wouldn't wanna compete with that in any environment. So and leg legacy galleries, is design galleries, they're all performing well. Yes.

So not not that much different in the comps. I mean, there's, you know, some places that obviously might be doing better than others at different times for different reasons, but, yeah. Yeah. We're we're happy with all the galleries We're opening more galleries. We have new kinds of galleries. We have, you know, design ecosystems, design compounds. We've got a lot of things coming. So yeah. Tariffs are not here we come.

We'll take the next question today from Steve Forbes, Guggenheim.

Good evening, Gary Jack. Gary, your initial comment, I think, was inventory is your friend. And so we'd love to sort of hear you expand on that initial thought. Especially as all of us, right, sort of try to do the exposure math to Vietnam, Indonesia and India, Just sort of what should be the parting message here on sort of RH's ability to sort of mitigate, migrate, and derisk the situation that was just thrown at all retail operators. Sure. Let's start with the inventory. It's your friend. You know, going through the you know, this you know, this kind of massive product transformation we've been going through You know, when when you're making big changes, [indiscernible] your assortment, you know, it's, you know, not not normal newness. Right? And we we introduced hundreds of collections over the last couple of years And, you know, you you wanna create the right bridge. Right? You wanna not sell out you know, legacy products before you understand what's happening in new products. You wanna make sure in new product, in a you know, in enough cases where you feel it's gonna be in the top half of your assortment, you wanna have that inventory.

Right? Because furniture, you can't respond to know, quickly. So you know, we knew we were gonna make you know, about a hundred million dollar insurance bet on inventory. You know, on the front end of this. And, you know, we expected trends to be better. We are you know, expecting our comps in the housing market to kinda come back. Know, I mean, I think I think everybody had a sense that inflation looked like it was coming under control and interest rates were easing and that '25 would be you know, would be the next upswing to the housing market. You know? So, like, look, we were all wrong. I mean and even at the Fed, they're almost always wrong. We said so. Yep. Being wrong is all part of you know, invention and innovation. And you know, going somewhere you've never been and moving into the future. Right? So so I think, you know, while know, today's tariff news were was Yes.

Somewhat shocking. You know? Right? I think if we and I think most of us were expecting okay. Maybe we'll get 25% tariffs, but you know, it's it's all logical. Right? If you're if you're the current administration, if you're Trump, if you read the r of the deal, I mean, look, He knows how to use leverage and he has leverage and and he you know, you don't have to do too much work to find out, well, where did all the manufacturing move to from China? Well, yeah, it moved to Vietnam, Indonesia, Cambodia, and other countries, you know, and those manufacturers moved and made investments. And built up operations and [indiscernible] you know, it's devastating for people that invested, you know, big tons of money to you know, relocate. But you know, there's you know, The US has leveraged today. I don't [indiscernible] win negotiations, not blessing. So, I don't think you know, you know, I think my view is I don't think these tariffs are gonna completely stick. I think if you're if you're these other countries, you're gonna start playing the few cards you have. And you know, they'll they might to pull up. They might try to play a few cards.

But you're either gonna implode as an economy in these countries or you're gonna you know, you're gonna balance you know, you're gonna balance the trade economics, and I think that's [indiscernible] I think it's just a little shocking because we've never seen an administration you know, in a leader like Trump. I mean, it's impressive, quite frankly. You know, usually, governments you know, move like glaciers. You know, and he's you know, quite the opposite. You know, so you know, exactly how it's gonna play out, I don't know. I don't think it's time to overreact. We all believe that China was gonna be a a long term problem and and you know, so you know, moving out of China, was important, you know, Now it looks like moving out of China didn't make a Right? So that's why I guess it did because there was another tariff on China. Yeah. So, you know, look, if if Yeah. But I think I think, basically, [indiscernible] game has changed. And now it's it kinda doesn't matter where you go.

I mean, except America. Right, and and The US. Which, you know, we've been our facility and expanding and doing other work and, you know, have other facilities in Los Angeles and things like that that we you know, that that we we acquired through acquisitions and you know, and America can make furniture and that might be part of it. And part of it might be these countries you know, acquiesce to some of the demands. Which are, by the way, all spare demands in a lot of ways. Right? If you just look at the math and look at the numbers, [indiscernible] yeah, it's it's kind of I mean, else has a bad hand. That can you know, it's not only is there leverage but the information says, hey. You know, it's not fair. So I I don't you know, I'm not critical of any of it. I actually think long term, it's gonna be great for America, quite frankly. I think it's just you know, it's cut the world off guard because no one's ever moved at this speed. No one's you know I mean, we're seeing a new kind of leadership which, again, in many ways, I think is impressive.

So [indiscernible] forget what anybody else know, personal views are on you know, form you know, I'd say look at the content. The content for America content of the decision for America is a really good thing long term. [indiscernible] from that point of view, mean, is it gonna be messy? Yeah. But it's messy for everybody. Right? And so these these are the times where where we survive. You know, because I think we can outthink others. We can outsmart others. We can out create others. We can out innovate others. You know, I let's see what went on. I'm gonna quite frankly, I've you know, on the phone to Jack and you know, I'm in my car and and you know, he's telling me what happened and I just started laughing. I thought, okay. Showtime. This is this is when we thrive. We're at our best in times like this. You know? [indiscernible] yeah. So yeah. So it's it's exciting exciting times. Yeah. It's you still have to compete. You know, the the playing field is the playing field. Yes. Nobody of any scale is not sourcing out of Asia except for maybe you know, Ethan Allen. They have a smaller percentage.

Yeah. But you know, I don't know if they don't really have our platform and capabilities. So I'm I'm not too not too worried about any of that. I mean, I'm I'm more excited to get off this phone and get to work. You know, it's exciting times. So you, Gary. Then just a quick follow-up.

For Jack. I think the company has sort of spoke to the return of positive free cash flow in 2025. Maybe maybe all this is influx a little bit, but any way to sort of help us frame up the free cash flow outlook inclusive of how to think about winding down that inventory excess. Yeah. I mean, we're we're just not gonna have a lot of receipts coming in at really high prices. Right? So start there. You got a lot of inventory. At really good prices. Yeah. We've gotta kinda rethink some of the newness, you know, maybe the new concept you know, that I wrote wrote about might get delayed, you know, until until we have some you know, clarity. But it also the investments get delayed and the complexity gets delayed. So I I don't think about that at like, that's gonna hurt the business per se. I mean, we'll just focus in other ways I just I think, you know, a lot of the goods and development are coming from countries that have, you know, prohibitive tariffs. So again, it it could all change in 30 days. [indiscernible] You know, some of these countries could go from 45% to 25%, which is very manageable. 45% is much tougher.

And and the ministry administrator knows administration knows that. So I'm actually glad if this wasn't a death by a thousand cuts. Right? I'm I'm glad it didn't go, uh-oh. It's 15%. And oh, okay. Hey. It's hitting. It's 25%. Hey. It now looks 35. Now it's 45. And you know, because you don't have clarity. I I think what again, I applaud the [indiscernible] The intention, Yeah. And and the logic. So I I'm again, I'm just excited now to you know we're we're we're sitting around here. We're not scared. We're smiling. Like, we're kinda like, okay. Let's go. It's know, it's it's a new world. It's a new day. We're at our best in times like these. I yeah. I wouldn't wanna compete with that in times like these. Yeah. No one is gonna outwork us. No one is gonna outthink us. No one is gonna out create us, out innovate us. You know, it's so just in general, I'm not too worried about it. I don't think our business is gonna process. They like, inventory is our friend. I I I get 2 to $300,000,000 of inventory, my competitors don't. They might have to do some ordering.

At very expensive pricing. You know. And we we, you know, we can navigate through this really well. You know, in the short term. So know, I yeah. Feel pretty good about this year. I mean, I we gotta get into the details and you know, there might be some some polls here and there. But, again, there's you know, there's always another move. Right? You know, there's there's just always another move in in times like these. And so I'm just excited about finding the other moves. You know, way before any of our competitors do. So, fun times. Thank you, Gary. Thanks, Jack.

Thanks, Steve. Up next is Michael Lasser, UBS.

Good evening. Thank you so much for taking my question. Gary, have you already started to take price in reaction to some of the tariffs that have already been levied? And when do you start to take price in reaction to what was just announced in the last couple of hours? Thank you. Oh, I don't think we're gonna do anything. Right now. Like I said, we've we've got inventory. [indiscernible] We're well positioned. Like, it's not this is this these are the times when you wanna do less and think more you can do more. Right? This is not a time to panic. Not a time to react, It's the time to think You know, invent, innovate, and, yeah, develop you know, compelling vision for for times like these. But I I think it's again, you know, they we saw yeah. We've seen tariffs go on, go off, go up, go down. You know, like, it's gonna move around. I I don't it it is not just [indiscernible] Right? This is you know, what did they say in the movie thirteen days, you know, when he was talking to one of the advisers. You know, this is you know, you know, the Cuban missile crisis.

This is you know, this is president Kennedy talking to Gorbachev. Right? These these are signals. These are moves. [indiscernible] you know, you gotta kinda motor up and see the whole board right now. You know, you gotta kinda understand where everything might be going. Did we anticipate this Not at this level, but that's okay.

It you know, I have more of an edge now. I don't like being caught off guard. You know? So yeah. So now we're we're just gonna kinda take some time, you know, Don't move until you see it. You know? So we gotta take some time to see it. And then we'll move. But we you know, we've got a lot of inventory that we own. That's a really good pricing, that's a really good margin. Our business has a good business trend. You know, is the consumer gonna stop buying tomorrow? I mean, is this gonna be like you know, two thousand eight, nine housing prices? Or yeah. Like, I I don't think so because I don't think anybody really understands what's going on. You know, at a very deep level, I think it's gonna take take a while to digest. Know? So the housing market was already bad. Is it gonna get worse? I don't know. I mean, it's never been worse. In my lifetime. [indiscernible] it get worse? It might.

Is that terrible? I you know, no. I mean, it can navigate through any situation. We're in re we're in a really good position. You know? Yeah. We we gave guidance that was appropriate for the moment. Maybe we would have been even more conservative had we known, but that I don't know if we would have because I don't know how much impact this is gonna have on us even if it stays in place all year. Not sure yet. You know, when it takes some time to analyze it. So, that's it. Yeah. Got you. My follow-up question is on your point about guidance, you might have been a bit more conservative. Had you had the full benefit of insight into all the policy. [indiscernible] With that being said, should we interpret that as a signal that we should go to the lower end of the guidance? And if that's the case, would you think about the need to raise capital or utilize some of the assets that you have at your disposal? Thank you very much. Yeah. I mean, I wouldn't go yeah. I don't I don't think I'd go below the guidance that we've given You know, not today.

You know, like, I yeah, I think there's a lot of things that can be done and a lot of moves lot of moves that are gonna be made at the government level Right? Around the world. And you know, a lot of a lot of things are gonna be made you know, at the strategic level. Know, with with you know, governments, countries, at the strategic level, manufacturers, and retailers, and yeah. People are gonna get really creative. That's what they do in times like this. Yep. Yeah. Human is you know, we're not the the biggest or strongest, but they were we're the ones most adaptable to change. Right? So, you know, change is kinda right up the rally. Right? You know, so I I mean, if I was someone who's managing, like, some business that doesn't innovate or invent in you know, they're kinda grinding the wheel and you know, forecasting 2% for this or that and yeah, you know, like, they're gonna have a harder time figuring this stuff out. So think we're good. And we don't we don't need to raise any capital. We've got, you know, we we I think we're in good shape.

The the cash flow is gonna be strong this year. You know? And we have you know, we'll see how the real estate market is. We we've got real estate assets we can turn into cash.

You know, [indiscernible] So we I mean, we just turned one of the buildings into cash. We had a a building. We had an accident that that was purchased for 10,500,000.0 or something like that. $1,010,500,000.0, we just sold for 27,000,000. Yep. Yeah. So yeah. And so, you know, were gonna build a house on it and the housing the construction cost in Aspen became prohibitive. [indiscernible] didn't look like a good investment. If someone buy this old house, for almost three times what we paid for it. Yeah. So you know, our JV partner and and our side decided to monetize that. You know, we have 32 properties, I think, in Aspen. 31 now maybe. We have you know, galleries that we own. In different places in The United States. Yeah. We have Cleveland, Detroit, you know, but many others, you know, several others. RH England, we have the guest house in New York. We've got That was so the prep Yeah. It was an Napasota property. We we you know, so we're we're fine. We have assets that we can turn into cash. If it's appropriate, You know? But it's not know, we're not in any kind of fire cell mode.

You know, we're we we have you know, this is not like a company that's doing you know, five to 8% operating margin going into [indiscernible] something like this. I mean, yeah. We we have a lot of levers we can you know, slow down spending I mean, I I guess I can talk about, you know, no. It okay. Never mind. [indiscernible] No. Sounds good. Okay. Alright. Scott waved off anyway, Michael. Nice. Okay. I it was nice talking to you. Thank you very much, and good luck. Okay. Thank you.

And the next question is Matt Reklinko, TD Cowen.

Great. Thanks a lot. So maybe just following up on the guidance question. Can you just walk us through what is embedded in your revenue and margin guidance as it's related to tariffs? And then just any onetime costs that we should be thinking about as you reposition your supply chain?

Yeah. I mean, what what's embedded is what we talked about. Right? And so, you know, that the China, Mexico Canada tariffs, you know, we we yeah, we what we knew before. Basically, what we knew, I mean, get out we think our guidance is on the conservative side. But you know, what you should be modeling to rearchitect supply chain, like, [indiscernible] come on, Max. Can you hear what he just said? [indiscernible] I said, it's not a time to overreact. This is yeah, this is Donald Trump talking to every other president or prime minister around the world. Right? This is high level strategic negotiation. You gotta think about who has the leverage here. The US has been yeah. You can yeah. You look at the numbers, you say, The US has been in a disadvantage not really treated [indiscernible] You know, does it have to go to a complete balance No. But, you know, just because of the trading balances, I mean, it's like a funding, you know, the growth of other economies. And I think that you know, the administration saying is we wanna balance that out. You know, we don't wanna pay for everything. You know, we don't wanna be the only ones investing in military and protection know, we wanna have more more fair and balanced [indiscernible] [indiscernible] Policies.

I you know, it's it's not it's not this is the move he made and this is it. This is this is the first card he's played globally. New part. Mexico and China are our neighbors. You know, Yeah. And that I'm not Mexican China, Mexico and Canada. And, you know, I'm trying to you know, that that has been the single place of tariffs. This is now a global negotiation.

And I don't know. I I think I would predict that there will be concessions and this I don't believe it's gonna continue at this level of Nate for longer than we think. But I mean, it can't be good for the other side. Right? It's it's really can't be good. And so I think we've got very smart administration negotiating at a level we haven't seen any administration, at least in our lifetimes, negotiate. So I'm I think, you you know, it's not a time you know, it's like they say to our team. It's a don't move until you see it. Take your time. This is a this is a chess game. Not a checkers game. Got it. That's helpful. And then just can you provide any color on the quarter to date demand and just given the volatility in the stock markets, just how we should think about the impact that you might be seeing And then just how should we think about the excess backlog and sort of the demand that's been quite strong that we've seen over the past couple of quarters. Flowing into revenues here.

Well, we we said we were gonna only give demand for last year. You know, like, wrote that pretty clearly. In the, you know, the earnings letter this time last year because of the product transformation and the dislocation between demand and revenues. So we've now anniversaried that. And so I gave you kind of a you know, a look at January. Right? And, it's you know, from a from a demand point of view, because that was still last year. But looking forward, we're not we're we're no longer gonna give demand. We'll give revenue guidance, which you know, is generally directionally in line with demand. Know? So Mike, change from quarter to quarter. You might have, you know, some things that ship you know, cross quarters somewhat differently, but it's usually not a big disconnect. So And, Max, I would add as an example that in q four, the the gap narrows. So Yeah. With q four, revenues on a comparable thirteen week basis, '18 and q four total band grip. Growth up 17. So you know, that that that, in essence, normalizes the backlog. Piece that we were talking about and and supports the the point that Gary just made.

Yeah. Thank you, Jack. Awesome. Thanks lot, guys. Best regards.

Thanks, Max.

We'll go to Andrew Carter, Stifel.

Thank you for taking my question. Good evening. So quick question on kind of looking at the controllable cost outlook here. You've got I think by my math here, got I mean you got up 7% to eight You've got revenue growth of 10% to 13%. Is our product margin still inflecting, so is that going to be a majority in gross margin or we're to see a lot in SG and A because you've lapped the investments? And then the second question around the timing, there's more of a disconnect on cost growth in 1Q. Is there anything related to that? Is timing around the advertising investments or something like that or delivery Just anything. I'll stop there.

I'll I'll I'll I'll comment. I'll turn it over to Jack. If he wants to level the detail, you're looking for, I want you to come work on our f c and a team. And so you could help us with all the modeling. But I let me let me know. I can talk about ad cost and, you know, some of the some of the changes. I mean, I think as Gary pointed out, we we've mailed two books in q one. So between the outdoor book and the interiors book. You you you have an expense there. Yeah. It's for incremental over a year ago. A year ago where you just sort of had the outdoor So so that that's you know, we always say that the quarter to quarter differences, you know, there's a lot of that variability that's driven by the ad costs. So you're seeing that. And then and then as far as whether it's happening in gross margin and s g and a, Look. The guide speaks for itself at the operating income level, and I think you know, we don't guide those pieces. But there's obviously, you know, positive factors in both lines.

I just can't we can't speak to the to the magnitude just based on, you know, how we're how we're guiding in our approach.

Fair enough. Just thinking about more of a high level, you kind of set it today, but like do these tariff announcements against like your competitors where you're going premium really create anybody that has advantage? I know you mentioned Ethan Allen earlier that has some domestics. But if you consider like your true competitors like people and you have a lot of people coming out of Europe, you have some niche here. Are they really at any kind of cost advantage here today that you have? Or just any kind of help with that? Thanks.

No. I don't think anybody's at a cost advantage from us. I mean, we we're buying at the biggest scale at this quality in the world. And and we can do that because we have the biggest platform So when you think about a lot of the you know, higher end people in the business, I mean, they're relatively small. Because they don't have a platform. Right? And many of them are you know, selling wholesale. They don't control the platform. They may have a few stores. But you know, no one's got a platform like ours, so no one has the buying power that we do. Or, know, can take the risk that we can and negotiate the prices that we can and so yeah. Again, the the playing field is is pretty level. Right, at least in North America. You know, And and for people that are you know, European based coming to America, that's that's not good. Right? If they're especially if they're manufacturing based business because they're a % tariff So, you know, we we can just there's a lot of moves we can make. Right? We can move more upholstery. We could look at bringing up you know, you know, wood furniture operations, I you know, I think the most difficult one today is, you know, is peak furniture out of Indonesia.

You know, Indonesia is the capital of premium peak know, sustainably harvest [indiscernible] In the world. And you know, other countries, it's a little dicey and and it's definitely not the same quality. So that's why, you know I mean, forever that I've know, all my life in this business, the best quality the biggest key key resource in the world is in Indonesia, know, that's that's a harder one. To kinda navigate out of. And but then again, we're kinda the biggest and the best. So if you want realty furniture and you don't want you know, some people are like, doing mahogany. Mahogany is not gonna last outside. You know, it's like much cheaper wood. You know, they're doing acacia wood. They're doing you know, rubber wood, Niata wood. Eucalyptus wood, I mean, all nice trees. Don't get me wrong. Just not great wood for outdoor furniture. If you want it for [indiscernible] three years or, you know, you know, maybe five years in a nice climate, three years in a rough climate, yeah, that's great. You're just gonna keep buying new outdoor furniture. It's look like crap after a few years. [indiscernible] why we don't sell any of that stuff?

You know, but, again, you know, that and I I can't see anybody doing anything that's gonna hurt our position in the market. I'm just you know, it just may mean the furniture is a little bit more expensive, but it's it's [indiscernible] The tariff? Yeah. 32 of it. I mean, we we dealt with yeah, those kind of tariffs out of China. I mean, you know, you figure out how to be more efficient. You figure out how to work better. You know, humans I like to say humans without deadlines are useless. Right? We're no good without deadlines. We're not good without pressure.

You know, it's why the great athletes perform in the in the playoffs not necessarily their best in the regular season. Although Steph Curry did have 12 threes and 52 points last night. I was happy about that, but it's getting close to the playoffs. And it was against one of their their rivals. Right? So you know, you see, like, you know, we're kinda one of those teams. Like, we're great in the playoffs. We're great under pressure. And humans generally are better under pressure, you know, but you could you're gonna see who's really good. In times like these. So we're excited. This is like a exciting time. I mean, I I'm not worried about god, are we gonna be okay? Do we have to raise money? Do it now? Like, we're good. You know? I mean, I do not think this is gonna be you know, it's like bring the whole economy down. I I think, you know, that's gonna be pain. I you know, told everybody I know and I think that you know, when you you kinda saw where this was going that that look. There may be pain for the next twelve to eighteen months or yeah, twenty four months.

And but I think the the second half of this administration is tenure here is could be a booming American economy. So, you know, I think the key is how do you position yourself for the other side of that? How do you you know, how do you navigate correctly now? How do you optimize your, you know, your business? And your sourcing structure know, just all all aspects of the business. And if there there will be better times and better days. So there always are.

Thanks. I'll pass on.

We'll take the next question today from Thomas Bradley, KeyBanc Capital Markets.

Hi, thanks. It's Brad Thomas. Gary, I wanted to ask just about the international side of the business. And wondering what you're seeing in terms of trends there. Wonder the degree to which you worry about any backlash about [indiscernible] And how you think about, you know, the openings you have this year and what risk, if any, there might be inside the liaison. Thanks. Yeah.

Those are all really good questions. I mean, yeah, I was just talking to my wife last night. Like, hey. If this really goes sideways or you know, I mean, if he he had solved Europe, sure we're gonna get it. Italy this summer? [indiscernible] you know, if there's gonna be some kind of weird backlash, I we were all thinking the same thing. It's like, okay. Or I mean, mean, look what's happening to Tesla. Like, you know, like, it's crazy. Right? I mean, you have a a world that alive on the Internet. Right? And like, tweets and messaging and social media and news and you know, I'm sure this is gonna create create noise And I don't know. You know, I it's I I think it's it's communication is really key right now. You know, messaging is really key right now. I thought it was interesting, you know, how Trump was holding up the big sign with you know, this is how much we're getting tariffs. Right? And you know, we're just trying to balance this thing out. I you know, I think, hopefully, that you know, that image and that time will get to people in other countries, and they'll also put some pressure on their governments to kind of you know, level the playing field.

I mean, you know, again, we you know, I'm just thinking out loud with you. You know? Give me a like, we we've been thinking about this. I think I think we underestimated the size of this move but I'd rather have this happen than, you know, you know, four moves to get there and a long drawn out thing. I think this is gonna get us to a conclusion much faster, a much clearer conclusion, There's there's now kind of a it's a global negotiation. It's not this country now and what's the next country and where are we going next. It's all laid out there. Right? It's completely laid out there for everyone to see. So everyone in every country I I don't think they were making up those numbers. I don't think the administration got a bunch of you know, numbers that true. I mean, I hope not. I mean, that would be a whole different issue. Right? Like, holy cow. Yeah. Like so but I I think I think it's I think the move is a well played move. It's the information is out there. The logic is out there.

You know, the you know, the the intention, the desire, is clear. It's not that this administration wants tariffs They want trade balance. I even think they're trying to get complete balance. It's just way out of whack.

So you know, will there be some backlash? I'm sure we're gonna read about stuff and American businesses with ticketers or somebody throws a fire bomb through a window somewhere. I don't know. That's just the world we live in today. But as it relates to us, construction delays, things like that, I I will they be any different than building the kind of buildings we have? We always have construction delays. [indiscernible] yeah. I I I don't know. But but that none of that is gonna make a big deal. Those those are all on the on the fringe on the edges. I I don't think the backlash is gonna be a big deal. We're we're not doing that much volume out of Europe today anyway. Know, I hope things you know, I hope things kind of get more more clear and you know, the world's kind of a more balanced place from trade and from you know, conflict in by the time we open Paris, [indiscernible] we're all planning to open during the Saint D'Oche, which is one of the biggest home shows in the world. We'll be you know, all the most influential designers and other people will be there and yeah, it's time when everybody goes for all the antique markets and flea markets, and we were gonna you know, open in Paris that week and so the world could see you know, the design world could see RH Paris and I hope there's not pictures up front there.

I hope by saying that, I didn't all of sudden trade. Pictures up front there. It's a long way off. It's not, you know, it's not happening in the next couple of weeks. So but now, you know, right, we yeah. We're giving you our best insights here. Right? This is I I have no script in front of me. And it's probably a firm grasp of the obvious.

That's very helpful, Gary. And I could just ask a follow-up on on the topic of clearance activity. That's been something going on as you've been transitioning the assortments. How should we think about clearance activity going forward here?

Yeah. I think, you know, think about clearance in in relationship to the economy. Right? In in in good markets, you're gonna see less clearance. And bad housing markets, you're gonna see more clearance. Not just here, everywhere. And then we've got you know, another layer that will what this relates to you know, the the amount of new products that we're bringing in You know, we talked about the you know, product in thirds. Right? Top third, middle third, bottom third. You know, that's how we you know, we communicate here with each other. You know, is this collection to be in the top third? It's the top third, it'll pull the whole company up. Right? If it's gonna be in the middle third, yeah, if it's in top and middle third, it'll pull you up a little bit. Five middle third might pull you down a little bit. Instead of bottom third, it's gonna pull you down. And so, if you bring in you know, a hundred new collections, can you They're gonna be in thirds. Right? There's gonna be top third, middle third, bottom third. Bottom third, you know, you're gonna you know, rank against all know, all the other assortments, not just against all the newness.

And, you know, if you lift the whole if you lift the whole thing up, if everything lifts, you know, then there's gonna be some of those things you would see versus markdown. But you're also just gonna keep I I would have thought we would have been transitioning through more of our sales collection sooner. But I thought the housing market was gonna get better too. And so the housing market actually got kinda worse. You know, for a period there. Right? I mean, interest pay spiked and mortgage rates [indiscernible] [indiscernible] And I think that, you know, so probably a yeah, a good chance the housing market slows a little bit from here. You know, as people digest this information, I you know, be interesting.

I don't know what kind of day we're having today. We can give you a live read of our business now. I'm getting thumbs up. It's a good day. Okay. That that's not demand guidance. By the way. But it's a thumbs up. You got a thumbs up. My team, give us a thumbs up on the library. So so yeah. Like, we're just really well positioned right now. I think that's the headline. Like, if you're gonna bet that bet on somebody in this race and I don't know, like, I don't have sports or stock now. I mean, I guess I guess, you know, the the the stock went down know, based on some of the numbers we reported, and then it got killed because of Oh, really? Oh, shit. Okay. Uh-huh. Uh-huh. I just looked I just looked at the screen. I hadn't looked at you know, it got hit when I think the tariffs came out, and you know, everybody can see in our 10 k where we're sourcing from, so it's not a secret. And we're not trying to disguise it by putting everything in an in an Asia bucket. You know? So you can kinda figure it out to do the math and but I I I can tell you that anybody else that has scale in the home business I know who again, put put someone like Ethan Allen or you know, some of the domestic, like, smaller players know, like Bassett or something like that, you know, I put some of those people aside if they own you know, more of the manufacturing But not really, you know, I it's a that big of a competitor with that thing.

You know? Anyway. So but any anybody at scale in the home business has a high percentage of their content coming out of Asia. Anybody says they don't like, that just shocked me because I looked at everybody's you know, reporting thing. Yeah. I know most of these businesses pretty well have been studying them and watching them and hiring people from them. So we're on the same boat. Right? We might be going at, you know, different percentages out of different countries. People move different places. You know, I think that I think the people really that I feel worse for right now is all the manufacturers in China or, you know, people who invested there. You know, it's like that you know, moved manufacturing, moved their lives, know, did things, you know, moved out of China into other places. And spent a lot of capital, had a lot of disruption, you know, cost it's cost them a lot of time and capital And now the Fed is like, woah. I you know, I'm not really gonna be better off, you know, because they might have been better off in China. This is higher higher tariffs and more efficiency and less capital.

So I think this move is is quite stunning. Right? It's gonna force everyone to just play a different game. You know? Like, rather than sequential hit, like, let me hit Vietnam, and then I'm gonna hit one, and then I'm gonna go here, and I'm gonna put more tariffs in China or might be tariffs here. I might you know, do Europe. I mean, we we have a long term sourcing strategy that that we think is a really good one. We announced it You know, it's big and bold and, you know, it it's probably seems like it might be the right thing for the rest of world, but I don't I don't really know where that where this whole negotiation is gonna end up. It might end up you know, in a much better place than it appears to be today. But it's still the the long term sourcing strategy that you know, envision that we have, I think, is is like a leapfrog Yeah. We don't wanna talk about it because we're, you know, trying to figure it out and how you do it and we we believe it's doable, and we believe it's as big as a leapfrog if anything else we do.

You know, you know, when we focus on it. So, [indiscernible] you know, we're yes. We're just gonna play our game. You know, we're gonna keep narrowing our focus and you know, they said but, you know, like, here, we talk about being an inch wide and a mile deep. Right? Like, you know, the in times like this, this is you know, you might wanna take the engine turn it into a half an inch. And go a mile and a half feet. Like this. Be really really clear. Be really intentional and allocate human and financial capital with great precision. Thank you, Eric. Brad.

The next Your next question comes from Jonathan Matuszewski, Jefferies.

Good evening and thanks for all the perspective this this evening. My first question was a follow-up on the clearance activity topic. And was just hoping to better understand maybe how those mark downs have been fueling maybe the acquisition of new customers for RH versus incremental spend from existing customers. It looks like in the 10 ks, the year ended with 265,000 members. They're down a bit versus the prior year. So just trying to kind of understand that relative to the increase in revenue. Thanks. Member count.

Was down. Yeah. I again, I I did think that you know, at a at a high level, at a macro level, you're just gonna have more more markdowns in a down market, and you you know, not just because less people are buying you should have them or your sales will be lower. [indiscernible] kind of simple. People buy less things in a bad market, and they they will buy more things on sale. It's really simple. You know, in 02/1989, Yeah. Great recession. Yeah, everybody in our category sales went down 35 to 40%. You know, we promoted you know, that more on promotion, [indiscernible] as we should. And we were able to stabilize the business to down 15 and you can go back and look at this, you know, because Ethan Allen to be, I think, 1,200,000,000.0, and they decided not to promote and we're regular price. And they went down 40 comp. You know, their business shrunk to somewhere, I think, slightly below 600,000,000 or somewhere around 600,000,000. They they lost some half the business or you know, over, like, a two year period. And that was how many years ago? You know? Eighteen years ago?

Seventeen years ago? They've never recovered. Never recovered. Eighteen years later, they're not a billion dollar company anymore. So you gotta really be careful and not be arrogant. You know, and think like, oh, I I I think you're a a luxury fashion brand. [indiscernible] That's not how the furniture market works. So that as far as the member count year over year, I mean, I I not, you know, not a big variance in anything. You know, it's not yeah. I mean, you know, things generally track you know, with our with our business, right, with our demand and revenue. So you know, again, I I get it. When you zoom out here, and you look at where we're performing and where we're guiding, versus everybody else. I like what we're doing better than anybody else.

Yeah. That's really helpful, Gary. Thank you. And and just a quick follow-up question. In terms of the sourcing diversification, it sounds like you're looking to bring half of your sourcing a near half of your sourcing to The U. S. By the end of the year.

Probably could drive some improvement in the consumer experience in terms of maybe delivery speed and maybe some other factors. Could you just kind of comment on that in terms of ancillary benefits for the consumer from what you're doing from a sourcing perspective?

Yeah. That's the upholstery category. That's not our entire business.

Right? So that says our upholstered furniture business.

Which is one of our biggest categories. Yeah. And that and that we're doing yeah. That we're doing.

Next up, we'll take a question from Seth Basham, Wedbush Securities.

Thanks, and good evening. I'm just yeah. I'm taking a quick step backwards looking at the fourth quarter. If you could give us some perspective on the margins in the quarter relative to your expectations that came in a bit light.

Whereas sales were still at the low end of your guided range.

Any perspective on what happened from a margin standpoint in the quarter would be great.

Mean our operating margin coming in relative to to the guidance? Correct. Any details? You wanna get? Yeah.

No.

Yeah. I mean, look, we're still I'd say, product margin's still up year over year, in the quarter. And, you know, some expenses came in higher than expected. But but, you know, other than what's called out in the MD and A, stuff, we can, you know, we can look at that later. I don't I have any specific color at this time.

Okay. Thanks. And just thinking about the timing of costs in 2025, you talked about higher advertising costs year over year in the first quarter with an extra source book. Now when you think about advertising for the balance of the year, should we be thinking about it being down relative to the last three quarters of last year or any other transitory costs that you would call out as we think about the quarterly cadence?

Yeah. You know, we're not guiding advertising, I, you know, I think I just look at you know, the the operating margin for the year and you know, the adjusted operating margin, what that looks like, you know, that incorporates our you know, our views of advertising. So I think first quarter is you know, obviously, I think the highest [indiscernible] In in from an ad hoc point of view. Fair enough. Alright.

Thank you, guys. Yep.

The next question is Brian Nagel, Oppenheimer.

Hi, good evening.

So, like, maybe just a simple question.

To start. Can't be discussed. Have you did you talk at all about just the trend in your business through the fourth quarter and then maybe into into Q1 here?

Yeah. We said we were only giving know, kind of demand guidance for last year. So we're, you know, we're not giving it this year. Brian. But And Gary, in the third paragraph of his letter did talk about the trends. In the inside the fourth quarter. Inside the fourth quarter. So Yeah. With with you know, demand ending up in the core business set 21, he gave you some color because you had it from the December call. Where we were heading into the call and where you know, where it stabilized in January at 19. So, you know, you can kinda read some of those trends in the quarter, but we're not giving any further demand guidance as it relates to this quarter going forward.

Okay. No. That's fair. Then I guess my follow-up question, bigger picture, I know we've been discussing, obviously, tariffs a lot, but recognizing, I mean, is an extraordinarily fluid environment. Okay? And I think you may be the first company addressing this after the announcement, hopefully, the White House. But I guess, you know, this this philosophical as you look at this, you know, and and and with with sourcing costs is presumably going somewhat higher, How do you say where do you kind of shake out Is it more you think you have more going to kind of adjust prices here in The United States? Or do something on the sourcing side, either negotiate with your vendors or or move the source in route.

It's all of the above. It's it's no different than navigating through the, you know, China tariffs and and so on and so forth and everybody's in the same boat. It's no one is you know, not exposed to this, You know, will there you know, will there be impact to the consumer? Of course, there will. Yeah. I mean, you know, but but there will be you know, there'll be concessions on the manufacturing side. There'll be some concessions on our You know, we'll look for efficiency in our in our business. We may consolidate you know, consolidate to fewer vendors to get more leverage and costing, you know, all kinds of things. That that you you do in these kind of situations. To optimize. Right? And you know, so you know, it's it's this is not again, there's no one's [indiscernible] this. That's what I like. So it's not like, oh, we hit this place and, you know, now people moved it out. One and then then they hit that one and then, you know, like, it's you know, it's it's crystal clear. It's that's what I love. There's real clarity right now. Now is it gonna change in the next week or two or three because there's gonna be concessions?

Think so. There's gonna be ongoing things like that for several months or you know, we might be in a you know, three month negotiation period six months, What I'm feeling good about being us is the inventory investment we made and the heavy inventory we have. Is at a good price. For the first time in my career, extra inventory is my friend. So, you know, I I think we might be the only one positioned the way we we are because of the product transformation we are going through. You know? So I you know, we I mean, we're gonna have to you know, work with our partners. There's things that are in flight that are being produced and we'll have to take some inventory you know, with tariffs and, but yeah, I I I would say as a percentage of other people, it's gonna be much smaller. And so I I think we we start with an advantage. I like that. And you know, and it you know, we've been doing this. I don't think there's anybody that's may no. There there is. Yes. Guys from Ethan Allen might have been doing this longer than I have.

You know, like, you know, so but you know, we have a lot of experience around the table here. We've been doing this a long time. You know, and some of us at multiple companies you know, similar to this one. And so, we know the game as well as anybody. We know the countries as well as anybody. We have unbelievable partners around the world, you know, and we're all you know, we're all get we're on the same team. Right? It's it's yes. This is a time of yeah, thought, reflection, collaboration, and you know, note I don't know what else to say. I mean, it's it's it's it's a good time to be RH even though it looks like a bad time. That would be the midst of you. Looking at other times of crisis, you know, and who's come out the other side really well. I think we have know, and and and we have when we had a lot less less resources and a a way less dynamic strategy. Than we have today. So, yeah. But, yeah, it's also time to decide what's nice to do and need to do. Know? And you really wanna focus on the need to do.

And, and be super disciplined. And you know, about time and capital. You know? And know, time's the most important thing we allocate. So just thinking about where we're gonna focus in light of this new situation. And understanding that the situation is gonna change. We can't see it yet. But it's a big clear move. That's the best thing. So it's crystal clear what what the administration is trying to do. Crystal clear. And I thank them for that. Yeah. I thank them for not, like, you know, kind of you know, playing a hodgepodge game all over the place and being really unfocused. This is their really clear and focused move. They thought about this deeply and for a long time. I mean, that's what it looks like. I don't know anybody inside there. You know? You know, I'm not gonna tell you which way I voted, [indiscernible] yeah. It's a dangerous thing to do in this world today. Oh, it's dangerous in driving a Tesla. Just kidding, Jack. But but we you know, Yeah. We're we're good at what we do here.

And, we're getting better all the time. This is just just another one of those opportunities to learn and grow and you know, invent and innovate and leapfrog to another better place that we can't even see yet. Thank you. I appreciate the color.

Sure.

Your next question is from Christina Fernandez, Telsey Advisory Group. Hi, good afternoon. I wanted to ask a question about product newness. As you look at what's coming in, for 2025 to drive demand, Where do you see the most incrementality? I'm thinking, you know, the interiors source book that was mailed this year seem like it have a lot of units, but I know you also have some things planned for the back half. So can you share some thoughts and do you think would be the most significant ones?

Yeah. I look.

I I think just start with what we have right now. We're nowhere near optimizing the assortment we have right now. Right? Like, again, you everything that any retailer buys, they buy it a % wrong. Nobody buys it a %. Right? I mean, there's some degree of wrong that you have with every buy. So you know, nobody knows exactly what the best seller is gonna be and how much to buy of it and so on and so forth. So we have so much newness that we're optimizing. You know, so much opportunity to you know, get those products into our galleries presented right. We have so much opportunity to you know, look at how we're presenting things and marketing things throughout the company. On and on and on. You know? So it's you know, I would say just at a global level at a at a macro level in our industry, you know, at our competitive set, gonna see a lot less newness this year. Or it's gonna be really expensive newness. Yeah. We have so that's why, you know, I'd say, you know, I I'm really happy about the inventory position we're in because I think we can really cut back on receipts until we have clarity.

We may yeah. We'll price still work from a development point of view because it's not gonna be clear where the tariffs will really land long term. So it's not like you wanna just stop everything. I think there's some level of investment you still wanna make from a product development point of view and be [indiscernible] But you know, I think I you know, I just think that there's yeah. You know, every business that's being affected by this is gotta think differently. This is yeah. This is forced change. This isn't, elective change.

This isn't like, hey. Work from home if you feel like it. You know, there's no escaping what just happened. So it's gonna be you know, the the the best people are gonna are the ones who are gonna win in environments like these. So, yeah, it's like newness is just one aspect. [indiscernible] Optimizing what we have, you know, looking at other levers and what we're doing and you know, we've we've got a lot of new galleries and new things coming, you know, to say, you know, it's their there a risk we push out the new concept? Maybe. Yeah. You know, if there's you know, but but there's also a good chance that things resolve themselves in four to eight weeks and go, oh, nothing really changed that much. Except for the you know, the framework of the global trading policies. I know. Wish I had a crystal ball, but more fun when you do.

Got it. And then, my second question, the the London store, it's being delayed to 2026. Can you talk about, I guess, what what the reason for that is? [indiscernible] imply that some of the investments get pushed out to 2026?

Yeah. It's you know, it's doing big complex [indiscernible] Yeah. Things don't. Does that mean, like, if anybody here if we've ever remodeled a home, you know, nothing really goes right. Nothing's really on time. Everybody says, you know, if you build a house, it's twice as long and twice as much. Then there's people tell you, three times as long, three times as much. Imagine you know, stringing together four buildings in London and creating one harmonious shopping experience. And you know, doing these things at the level that we do right in the heart of Mayfair. This is complexities. There's just things that don't go exactly the schedule no matter you know, how hard you push. And what you do. So yeah. Just kinda you know, some things get done a little faster, some things come online some things take longer. You know, then, you know, could we really rush and spend more money and try to get it open in December. I mean, could. I just don't think the best time to open you know, in in mid to late December. So we'll probably yeah, open it sometime early spring or something like that, but you know, we'll we'll, you know, we'll keep you posted.

I I you know, we're not we're not you know, stamping out mall stores where you just fill the store front. You know, and kind of fill up you know, fill up a windowless box with some fixtures. You know? Like, that's easy to do. You know? When I was at you know, my former company and you know, we were we could stamp out a store and twelve to eighteen weeks, It's really simple. You know, [indiscernible] 40 feet wide and 50 feet wide and a hundred feet deep, 5,000 feet, like that, you know or maybe you're doing 10,000 feet. I mean, these are really big complex kind of investments in leapfrogs for the company. No one will ever build a I don't believe anybody will build a platform anywhere comparable to what we're building For sure, not in my lifetime. But I I you might not see something like this for another hundred years. If then. You know, the the complexity the cost, the investment, Yeah. You gotta be able to perform in spaces like these, you know, and you know, we've proven as we kept expanding and dimensionalizing our physical platform and incorporating hospitality and incorporating interior design services and offices and, you know, all kinds of sport, you know, indoor outdoor space, rooftops, gardens, courtyards, and all the things we do, no one built anything like that.

No one in the world built anything close to what we we do. So it's it's more complex and yeah, and plus, we're constantly innovating. So, you know, there's yeah. It's just less stamping things out. That's what happened. [indiscernible] I haven't seen anybody's ever been on time with a kitchen remodel. And so Thank you.

And everyone at this time there are no further questions. I'd like to hand the call back to Mr. Gary Friedman for any additional or closing remarks.

Great. Well, you know, thank you everyone for your time. You know, it's so I said at the beginning, welcome to to to a new world. And, you know, my the quote I use from Theodore Roosevelt every moment movement has a lunatic fringe. Think it's quite appropriate, but, not let that just characterize what's happening in the the external environment It really is what's happening in the internal environment here. That, you know, we are the men and women in the arena and we are the ones who, will do the good deed. And and we will you know, air and come up short you know, from time to time. But we will also do some extraordinary remarkable, and amazing things. And that's what we believe we're on the planet to do. And and we believe we'll create one of the most admired brands in the world, if not the most admired. So but it's it's long term thinking. And it's being an inch wide and a mile deep. And you'll see us get even more focused and more intentional in times like these. So I wanna thank our our team members around the world, our partners around the world, you know, all of our team members here yeah, at the center of innovation and our you know, our campus in Puerto Madera, California.

I think the work we've done, you know, this past year in 2024 is extraordinary. The strategic separation we've created is unlike anyone else in our marketplace. And you know, our stock is gonna go up and down. I've been here twenty five years I was here when it was 50¢ a share and adjusted for the number of shares we have. It was that was probably a nickel a share. And so yeah, when you think about it as a long term, you think about it like you're an owner and you own a % of the company, you make the kind of decisions that allow you to do the kind of work we're doing for twenty five years of your life. And I feel privileged to to be here, to be doing that, and I feel privileged and proud to be doing it with the you know, the people and partners of team RH. So, as I like to say, you know, never underestimate a few good people who don't know what can't be done. Especially these people. So carpe diem, everyone.

Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.