RH, the retailer formerly known as Restoration Hardware, quoted poet Robert Frost in its quarterly earnings statement Tuesday to double down on its bet on bricks-and-mortar stores and shopping as a life experience.
“While most in our industry are closing or downsizing stores, we remain committed to our quest of revolutionizing physical retailing,” RH RH, -4.86% Chief Executive Gary Friedman said in a letter to shareholders that accompanied the retailer’s second-quarter earnings.
“The road of endless promotions, free shipping, and a shrinking store base is resulting in broken and unsustainable retail models. We prefer the road less traveled by, and like Robert Frost, believe it will make all the difference,” he said.
RH after the bell Tuesday reported mixed second-quarter results and shares wavered between gains and losses. The shares slumped 5.1% in premarket trade, putting them on track to open at a one-month low.
The company reported sales that missed expectations but per-share adjusted profit came in above forecasts. The company also raised quarterly and yearly profit outlooks.
That road less traveled included opening new stores, or “galleries” in the company’s parlance, in Portland, Ore., and Nashville this year, and going for soon-to-open new stores in New York City and Yountville, in the heart of California’s Wine Country.
RH galleries often include cafes and wine bars, and can be massive. The New York City store, in the Meatpacking District, is expected to have 90,000 square feet of indoor and outdoor space and will include a glass elevator to take customers to a rooftop restaurant.
By way of comparison, a Nordstrom Inc. JWN, +3.45% Nordstrom Rack store planned for 2019 in the outskirts of Los Angeles is expected to boast 25,000 square feet of retail space.
Forget about “chasing low quality sales at the expense of profitability,” RH’s Friedman said in the statement. The focus on earnings rather than revenue “made it possible for us to see opportunities throughout our business that would have otherwise gone unnoticed.”
RH’s also-massive catalog, which the company calls “source books,” are expected to hit customers’ mailboxes starting later this month.
“We do understand that the strategies we are pursuing ... are all in direct conflict with conventional wisdom and the plans being pursued by many in our industry,” RH said. But the company is building a brand and creating a customer experience that cannot be replicated online, it said.
“Carpe Diem,” Friedman signed off.
So far, RH is having the last laugh. Its shares have gained more than 75% this year and are up 204% in the past 12 months.
That contrasts with gains of 8.3% for the S&P 500 index SPX, -0.17% and 5% for the Dow Jones Industrial Average DJIA, -0.05% in 2018, and advances of 18% and 19% for the major benchmarks, respectively, in the past 12 months.
