RH Prepares to Disrupt the Retail Interior Design Industry – Furniture World | NutSocia

Furniture World News Desk on 12/27/2022

First, RH CEO Gary Friedman was in a sober mood to deliver a sober message in the company’s most recent third-quarter 2022 earnings report.

Although sales and operating margin exceeded the previous outlook, revenue declined 14% to $869 million from last year’s $1,006 million and adjusted operating margin declined to 20% from last year’s 27.7%, 8% back this year. Adjusted net income fell 30% to $147 million from $209 million.

While he forecasts that fiscal 2022 will end with sales down between 3.5% and 4.5%, Friedman expects things to get worse before they get better.

“As noted in our previous letter to shareholders, we expect our business trends to continue to deteriorate over the next few quarters and possibly longer due to accelerating weakness in the housing market, due to anticipated Federal Reserve policy,” he said.

And he added, “We expect the next few quarters to be challenging in the near term as we manage exceptional growth from COVID-related spend shifting and the loss of less valuable market share.”

No matter how far and fast the housing market shrinks in the next year – “From the point of view of the housing industry, there is no such thing as a soft landing. We’re well past the soft landing. It looks more like a crash landing in the housing market. It looks like 2008, 2009.” – RH will drive the launch of more new products than ever in its history, most notably RH Contemporary, which is set to triple in size over the next year.

Also on the company’s agenda is to launch a new gallery design concept, revamp its current galleries and open in the UK in spring/summer 2023. To its credit, the company has a $2.1 billion war chest to invest in to advance further.

Friedman’s spirits then lifted when he announced three major strides toward the company’s ultimate goal, “flavor scaling” in the style and design of the luxury home furnishings market.

RH acquired bespoke retail upholstery company Dmitry & Co to form RH Couture Upholstery and Jeup, a bespoke retail furniture company, to create RH Bespoke Furniture. The founders of both companies will stay with RH so the company can benefit from its inside knowledge of the interior design industry and the high net worth individuals (HNWI) it serves.

And in another bold move, Friedman announced the hiring of Margaret Russell, the former editor-in-chief of Architecture Digest and elle decor, to manage RH Media. This editorial content platform will ultimately shape the taste of luxury home decor that RH will deliver.

In this RH Media initiative, RH takes influencer marketing to the next level, giving the company authority in the upper echelons of design. His platform will “celebrate the most innovative people and ideas shaping the world of architecture and design,” Friedman said.

Christopher P. Ramey, speaking from his perspective as founder of The Home Trust International, which curates the most exclusive resources for high-end design, said: “Both companies, not to mention Margaret Russell, are highly respected in the retail world. These moves will hit the heart of the retail insulated product category.”

That market is isolated, as Friedman described: “We’re also going to create a market because this product isn’t accessible at that level of the market. You cannot enter these showrooms. The goods are not priced. You’re kind of blind and you have to go to a middle person to get that quality and design.”

Collectively, RH will disrupt the estimated $121 billion retail interior design market, a market it has so far only been chasing.

“We’re not just tracking one market and what’s the revenue opportunity there,” Friedman said. “This is going to be a big unlock. We believe that we will enlarge the market. We believe that bringing us into the main rooms of these customers will be a big, big plus for our brand. I think today we mostly play in the family room, the second bedroom.”

Describing the company’s moves to position RH for the future, and not for the next two, three, even five or greater quarters, he said, “We’re trying to look ahead and say how best we play this know where we’re going and are positioned for the next five to ten years. And what decisions do we make today that will help us in the long term [to] make a big, big difference.”

In response, he reiterated, “Today’s announcements, as well as our earlier acquisition of Waterworks, firmly place four RH flags at the top of the luxury mountain and clearly state our intention to establish RH as the arbiter of taste and design. These brands and companies will begin to fundamentally change the landscape of the luxury home furniture market and retail design industry.”

Ramey was at the San Francisco Design Center the day after RH broke the news, and the people there were stunned. It wasn’t the first time RH had set the retail industry back, but over time they had found a way to live with RH because the perceived quality and design there didn’t meet their standards.

“By doing so, Friedman will lessen any questions about quality and take a disproportionate share of the luxury furniture category,” affirms Ramey. “The acquisitions legitimize Friedman’s commitment to investors, designers and HNWIs to ‘climb the mountain of luxury.'”

About Pam Danziger: Pamela N. Danziger is an internationally recognized expert specializing in consumer insights for marketers targeting the affluent consumer segment. She is President of Unity Marketing, a boutique marketing consultancy she founded in 1992, where she leads research to give brands actionable insights into the minds of their most profitable customers.

She is also a founding partner of Retail Rescue, a company that provides advice, mentoring and support to retailers Marketing, Management, Merchandising, Operations, Service and Sales.

She is a prolific writer and the author of eight books including Shops that POP! 7 Steps to Exceptional Retail Success written about and for independent retailers. She writes for The Robin Report and Forbes.com. Pam is frequently asked to share new insights with audiences and leaders around the world. Contact them at pam@unitymarketingonline.com.


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