Q4 2025 RH Earnings Call

Operator: Ladies and gentlemen, you are currently on hold for the RH fourth quarter and fiscal year 2024 earnings call. At this time, we are admitting additional participants and will be underway shortly. Thank you for your patience and please continue to stand by.

Ladies and gentlemen, you are currently on hold for the RH fourth quarter and fiscal year 'twenty 'twenty four earnings call. At this time, we are admitting additional participants who will be underway. Shortly thank you for your patience and please continue to standby.

[music].

Operator: Well, good day, everyone, and welcome to the RH fourth quarter and fiscal year twenty twenty four earnings call.

Speaker Change: Well good day, everyone and welcome to the RH fourth quarter and fiscal year 'twenty 'twenty four earnings call I would now like to turn the call over to MS. Allison Malkin. Please go ahead ma'am.

Allison Malkin: I would now like to turn the call over to Ms. Allison Malkin.

Operator: Please go ahead, ma'am. Thank you.

Allison Malkin: Thank you and good afternoon, everyone and thank you for joining us for our fourth quarter and fiscal year 'twenty 'twenty four earnings conference call. Joining me today are Gary Friedman, Chairman and Chief Executive Officer, and Jack Preston Chief Financial Officer, before we start I would like to remind you of our legal disclaimer that we.

Allison Malkin: Good afternoon, everyone. Thank you for joining us for our fourth quarter and fiscal year 2024 Earnings Conference Call. Joining me today are Gary Friedman, Chairman and Chief Executive Officer, and Jack Preston, Chief Financial Officer.

Allison Malkin: Before we start, I would like to remind you of our legal disclaimer that we will make certain statements today that are forward-looking within the meaning of the federal security clause, including statements about the outlook of our business and other matters referenced in our press release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings, as well as our press release issued today, for a more detailed description of the risk factors that may affect our results.

Allison Malkin: We'll make certain statements today that are forward looking within the meaning of the federal securities laws, including statements about the outlook about our business and other matters referenced in our press release issued today.

Allison Malkin: These forward looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our press release issued today for a more detailed description of the risk factors that may affect our results.

Allison Malkin: 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.

Allison Malkin: Please also note that these forward looking statements reflect our opinions only as of the data to call and we undertake no obligation to revise them publically 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.

Allison Malkin: Also, during this call, we may discuss non-GAAP financial measures, which suggest 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 call. is also available on the Investor Relations section of our website at ir.rh.com.

Allison Malkin: 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.

Also available on the Investor Relations section of our website at <unk> Dot Orange Dot com with that I'll turn the call over to Gary.

Allison Malkin: With that, I'll turn the call over to Gary. Thank you, everyone.

Gary Friedman: Thank you everyone well.

Gary Friedman: Well, welcome to the new world, when we're, at least at this moment, inventory is your friend. I was going to say maybe I just shouldn't read the letter, but heck, let's go through it and we'll kind of 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.

Gary Friedman: Welcome to the new World when we're at least at this moment inventories here Brian.

Gary Friedman: Alright.

Gary Friedman: Can I say, maybe I guess shouldn't read the letter but.

Gary Friedman: Yeah, let's go through it.

Gary Friedman: What kind of improvise adapt and overcome.

Gary Friedman: We're reacting lifetime with all of you.

Speaker Change: Two our people partners and shareholders.

Speaker Change: Morton working substantial investments we've made over the past two years are now, resulting in meaningful share gains and significant strategic separation.

Speaker Change: Positioning the RH brand to expand its leadership position across the luxury home market over the next decade.

Gary Friedman: The positive inflection of our business continued to accelerate in the fourth quarter with revenue up 18% and adjusted operating income increasing 57% in each case on a comparable 13-week basis. outperforming other home furnishings businesses by a wide margin at 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, where fourth-quarter demand increased 21%. demonstrating the disruptive nature of a 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.

Speaker Change: The positive inflection of our business continued to accelerate in the fourth quarter with revenue up 18% and adjusted operating income increasing 57% in.

Speaker Change: In each case on a comparable 13 week basis.

Speaker Change: Performing other home furnishings III businesses by a wide margin at the most prolific product transformation and platform expansion in the history of our industry continues to unfold.

Speaker Change: Our industry, leading growth in the quarter was driven by the RH brand, where fourth quarter demand increased 21%.

Speaker Change: Demonstrating the disruptive nature of our product transformation.

Speaker Change: While demand has softened in mid December after mortgage rates spiked in 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.

Gary Friedman: While we expect a higher risk business environment this year due to the uncertainty caused by tariffs, market volatility, and 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 50 years. For context, in 1978, there were 4.09 million existing homes sold when the U.S. had a population of 223 million. Contrast that to 2024, where 4.06 million existing homes sold with a population of 341 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.

Speaker Change: While we expect a higher risk business environment. This year due to the uncertainty caused by tariffs market volatility inflation risks. We believe it's important to separate the signal from the noise. The fact is we've been operating in the worst housing market and almost 50 years for context 1978.

Speaker Change: There were 4.09 million existing homes sold when the U S had a population of $223 million.

Speaker Change: Contrast that to 2024 were up 4.06 million existing homes sold with a population of $341 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 for what we like to call an inch wide and a mile deep.

Gary Friedman: 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 and a mile deep. elevating and expanding our platform by creating the most desired products presented in the most inspiring spaces in the world with bespoke 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 $2.2 billion, we also ended the year with incredible business momentum and meaningful assets.

Speaker Change: Elevating and expanding our platform by creating the most desired products presented in the most inspiring spaces in the world.

Speaker Change: 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.

Speaker Change: Intentions and attention to detail and everything we do and in every house, we turned into a home.

Speaker Change: While we ended the year with meaningful debt, mostly due to our stock repurchases of $2 2 billion. We also ended the year with incredible business momentum, adding meaningful assets. These assets include real estate that we believe has an estimated equity value of approximately 500 million, which we plan to monetize.

Gary Friedman: These assets include real estate that we believe has an estimated equity value of approximately $500 million, which we plan to monetize opportunistically as market conditions warrant, and excess inventory of $200 to $300 million at cost that we plan to turn into cash as we optimize our assortments post our product transformation.

Speaker Change: Domestically as market conditions warrant, an excess inventory of $2 million to $300 million of costs that we plan to turn into cash as we optimize our assortments stair product transformation.

Gary Friedman: Inclusive of our plans for significant and growing cash flow from operations, we remain confident in our ability to make the necessary investments to continue our industry-leading growth while paying down debt and lowering interest expense.

Speaker Change: Inclusive of our plans for significant and.

Speaker Change: And growing cash flow from operations, we remain confident in our ability to make the necessary investments to continue our industry leading growth.

Speaker Change: And on debt and lowering interest expense.

Gary Friedman: Now let's shift to our outlook. Based on our current plan and the uncertain macroeconomic environment, we are providing the following financial outlook for the full year and first quarter. for the fiscal year 2025. We're forecasting revenue growth of 10 to 13 percent, adjusted operating margin of 14 to 15 percent, adjusted EBITDA margin of 20 to 21 percent. In the first quarter, we're forecasting revenue growth of 12.5 to 13.5 percent, adjusted operating margin of 6.5 to 7 percent, adjusted EBITDA margin of 12.5 to 13 percent. The above outlook includes a negative 160 to 200 basis points of operating margin impact from investments and startup costs to support our international expansion.

Speaker Change: Now, let's look at the shift to our outlook.

Speaker Change: Based on our current plan and the uncertain macroeconomic environment, we are providing the following financial outlook for the full year and first quarter.

Speaker Change: For the fiscal year 2025.

Speaker Change: We're forecasting revenue growth of 10% to 13% adjusted operating margin of 14% to 15% adjusted EBITDA margin of 20% to 21%.

Speaker Change: In the first quarter, we're forecasting revenue growth of 12, five to 13, 5% adjusted operating margin of six 5% to 7% <unk>.

Speaker Change: Adjusted EBITDA margin of 12, 5% to 13%.

Speaker Change: The above outlook includes a negative 160 to 200 basis points of operating margin impact from investments and startup costs to support our international expansion.

Gary Friedman: Every act of creation is first an act of disruption. Pablo Picasso. We have worked hard to destroy the former version of ourselves and are in the process of unleashing what we believe is an exponentially more inspiring and disruptive R.H. brand. We believe the important investments we are making during this depressed housing cycle are creating the 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 sourcebook, 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.

Speaker Change: Every active creation is first inactive disruption Pablo Picasso.

Speaker Change: We have worked hard to destroy the former version of ourselves or in the process and leasing what we believe is an exponentially more inspiring and disruptive RH brand.

Speaker Change: We believe the important investments we are making during this depressed housing cycle are creating the level of strategic separation in our industry that rivals the most important brands in the world.

Speaker Change: 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 Excitingly textiles, operating plus a significantly improved.

Speaker Change: In stock position to start the season versus a year ago.

Gary Friedman: The introduction of our new RH interior sourcebook 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.

Speaker Change: The introduction of our new <unk> towards 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 our H Dot com.

Gary Friedman: While we had planned a higher amount of new collections for this book, due to the rapidly changing economic outlook, we believed it was prudent to delay some of our introductions until later this year.

Speaker Change: While we had planned a higher amount of new collections for this book is it rapidly changing economic outlook. We believed it was prudent to delay some of our introductions until later this year.

Gary Friedman: The launch of a significant new brand extension in the fall of 2025 that we believe will meaningfully expand the market size and share of the RH 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 Picature Upholstery by Dimitrian Co. and RH Bespoke Furniture by Joseph Jubed into this new brand extension, enabling greater exposure and market reach versus standalone concepts.

Speaker Change: The launch of a significant new brand extension in the fall of 2025 that we believe will meaningfully expand the market size and share. The RH brand. This new brand extension will include a new source book, a significant website presence and two freestanding galleries dedicated to the new concept.

Speaker Change: Our plan includes integrating our each picture upholstery by Dmitry Inco, and our bespoke furniture by Joseph jumped into this new brand extension, enabling greater exposure and market reach versus Standalone concepts.

Gary Friedman: We'll be sharing more details of this exciting new venture during our first quarter earnings call. As communicated last quarter, we 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 our manufacturing partners to mitigate the impact to both our margins and cost to our customers.

Speaker Change: We will be sharing more details with the society and exciting new venture during our first quarter earnings call.

Speaker Change: As communicated last quarter, we do not expect a negative impact to results related to previously announced increased tariffs on products from China, Canada or Mexico.

Speaker Change: It relates to reciprocal and other tariffs that will be announced and have been announced today.

Speaker Change: As we've done with prior tariffs will be working with our manufacturing partners to mitigate mitigate the impact to both our margins and cost to our customers.

Gary Friedman: We believe it is also important to note that we have been manufacturing upholstered furniture in our own North Carolina factory for over 10 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 U.S., 21% of our upholstered furniture will be produced in Italy, and 14% of our total business will be produced in the U.S. at the end of this year.

Speaker Change: We believe that it is also important to note that we have been manufacturing upholstered furniture in our own North American North Carolina factory for over 10 years and.

Speaker Change: In our recently expanded.

Speaker Change: <unk> doubling our capacity we have.

Speaker Change: Currently projecting that 48% of our upholstered furniture will be produced in the U S. 21% of our upholstered furniture will be produced in Italy, and 14% of our total business will be produced in the U S. At the end of this year.

Gary Friedman: 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 a reflection of human design, a study of balance, symmetry, and perfect proportions. 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.

Speaker Change: Now, let me shift your attention to the expansion of our platform.

Speaker Change: We continue to open the most inspiring and immersive physical experiences in our industry and some would say the world.

Speaker Change: Is that a reflection of human design, the study of balance Dimitri and perfect portions.

Speaker Change: Basis, the blurred the lines between residential and retail indoors and outdoors home and hospitality.

Speaker Change: <unk> with garden courtyard, rooftop restaurant wine and barista bars spaces that activate all of defenses and spaces that cannot be replicated online.

Gary Friedman: Our plan to expand the Yari Span globally, address new markets locally, and transform our North American galleries represents a multi-billion 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, the gallery at the Oaks, and RH Montreal, the gallery at Royalmont, both opening in the first half of this year. RH Paris, the gallery on the Champs-Élysées. RH Detroit, the gallery in Birmingham. R.H. Van Hasset, the gallery at the Americana, R.H. San Diego, the gallery at University Town Center, and R.H.

Our plan to expand the RH brand globally address new markets locally interest transform our north American galleries represents a multibillion dollar opportunity.

Speaker Change: Our platform expansion plans for 2025 include the opening of seven design galleries to outdoor galleries, plus two new concept galleries.

Speaker Change: The seven new design galleries R. R H, Oklahoma City, the gallery at the <unk> and.

Speaker Change: <unk> Montreal, the gallery at where Elmont, both opening in the first half of this year are each Paris the gallery on this.

Speaker Change: Alright, Detroit the gallery in Birmingham.

Speaker Change: Our <unk> San has at the gallery at the Americana are each San Diego The Gallery at University Town Center in our H Palm Desert. The gallery on the Elfa sale are all opening in the second half of this year.

Gary Friedman: Palm Desert, the gallery on El Paseo, 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 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.

Speaker Change: Additionally, we plan to expand our brand presence in Greenwich, Connecticut by developing a multi building RH design ecosystem inclusive the existing RH gallery at the start at the Historic Post office are.

Speaker Change: A freestanding RH outdoor gallery that opened last month, plus a new concept gallery in the form of Ralph Lauren building on Greenwich Avenue opening in the second half of this year.

Speaker Change: 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.

Gary Friedman: As previously communicated, we anticipate an inflection of our business in Europe as we begin to open the important branded building markets of Paris in 2025, plus London and Milan in 2026. all with dramatic and brand-building hospitality experiences.

Speaker Change: As previously communicated we anticipate an inflection of our business in Europe as we begin to open in the important brand in the building markets at Paris in 2025, plus London and Milan in 2026.

Speaker Change: All with dramatic and brand building hospitality experiences.

Gary Friedman: We believe post each opening, we will begin to have the scale to support the necessary advertising investments to accelerate our growth in Europe. Every moment has a lunatic friend. 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 progressive 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.

Speaker Change: We believe post each opening we will began to have the scale to support the necessary advertising investments to accelerate our growth in Europe.

Speaker Change: Every moment has alluded tick fringe.

Speaker Change: Quite appropriate for today Theodore Roosevelt.

Speaker Change: America's first Nobel Prize winner commander of the legendary rough riders medal of honor recipient.

Speaker Change: Promoter of the Conservative movement leader of the Progressive movies noted for as exuberant personality and ranked by <unk> as one of our greatest President Theodore Teddy Roosevelt proclaimed in his statements speak as if they're born it is not the critical counts naphtha manner women, who pointed out how the strong man.

Speaker Change: Symbols.

Gary Friedman: 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 errs 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 deeds, who knows the great enthusiasms, the great devotion. 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 bravely, so his place shall never be with those cold and timid souls who know neither victory nor defeat.

Speaker Change: Or where the dealer indeed could have done better.

Speaker Change: The credit belongs to the man or woman, who is actually in the arena.

Speaker Change: The space is marked by desk and sweat and blood.

Speaker Change: He strives valiantly, who errors and come up and comes up short again and again.

Speaker Change: There is no effort without error or shortcoming.

Speaker Change: But he or she who actually strives to do the deed who knows the great enthusiasms the great devotions.

Speaker Change: Spend for himself in a worthy cause.

Speaker Change: Had his best noticing the end trying to high achievement and who had its worst if he fails at least fails while daring greatly so its place shall not so I'll never be with those cold intimate souls, who know neither victory nor defeat nor defeat.

Gary Friedman: 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 followership, 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 until 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 in Aventura Mall in Miami that did $2 million in annual sales into an RH gallery that does $44 million in the exact same space with the exact same square footage.

Speaker Change: While our ambitions are not political.

Speaker Change: Maybe they should be they are personal.

Speaker Change: We remain inspired by the progressive thinkers unafraid to push forward, new ideas and fresh perspectives.

Speaker Change: The culture of leadership versus followership innovation versus duplication enlightenment versus ego.

Speaker Change: It's believing none of us are smarter than all of us that we need all of the brands in the game and the egos out of the room, it's about thinking it till it hurt until we can see what others can't see so we can do what others can't do that.

Speaker Change: That's how you transform a money losing restoration hardware store in Aventura mall in Miami that did $2 million in annual sales into and are each gallery that is $44 million in the exact same space with the exact same square footage.

Gary Friedman: It's also how we'll transform that $44 million legacy gallery into a $100 million plus RH design compound, a yet-to-be-unfailed multi-building design resort of sorts. in the parking lot of the same shopping center.

Speaker Change: It's also how we will transform that $44 million legacy gallery into $100 million plus our H design compound are yet to be unveiled multi building design resort of sorts.

Speaker Change: In the parking lot of the same shopping center.

Gary Friedman: Over 20 years ago, we began this journey with a vision of transforming a nearly bankrupt business that had a $20 million 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 in 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.

Speaker Change: Over 20 years ago, we began this journey with the vision of transforming and nearly bankrupt business that had a $20 million market cap and a box of Occidental laundry detergent on the cover of its catalog <unk>.

A leading luxury home brand in the world the lessons and learnings the insights and intricacies. The sacrifices made in the scar tissue developed by getting knocked down 10 times and getting up 11 leads to the development that the mental and moral qualities that build character in individuals' and form cultures and organizations.

Speaker Change: Lessons they can't be learned in a classroom or by managing our business lessons that must be earned by building one.

Gary Friedman: Lessons that must be earned by building one.

Gary Friedman: Are we part of the lunatic fringe? If it means, as President Roosevelt said in his speech at the Sibourne, that our place shall never be with those cold and timid souls who know neither victory nor defeat, then put us in that arena. Onward Team RH.

Speaker Change: Are we part of the Lunatic fringe.

Speaker Change: If it means as president Roosevelt said in his speech at the board that are placed shall never be with this call with those cold and timid sold we know neither victory nor defeat and put us in that arena onward, TMR H <unk>.

Gary Friedman: Carpe Diem.

Operator: Operator, I'll now open the call to questions. Thank you, sir, and ladies and gentlemen, if you have a question today, please press star one on your telephone keypad. We do ask that you limit yourselves to one question and one follow-up.

Speaker Change: Operator, I'll now open the call to questions.

Speaker Change: Thank you, Sir ladies and gentlemen, if you have a question today. Please press star one on your telephone keypad, we do ask that you limit yourself to one question and one follow up we will go first to Simeon Gutman with Morgan Stanley.

Pedro: 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 been delayed again. So, could you give us a bit of an update on how you see things developing over the spring and the summer? And related to that, how are legacy galleries doing?

Speaker Change: Yeah.

Pedro: Hi, Good afternoon. This is pedro on for Simeon.

Speaker Change: Thanks for taking our question.

Speaker Change: My question is how you see the outlook for the consumer it seems to have seen a slowdown in consumer sentiment and year to date in the housing market is not seeing a turn yet.

Speaker Change: Last year, we saw early signs of an inflection, but it seems things have been delayed again.

Speaker Change: So could you give us a bit of an update on how you see things developing over the spring and summer season and related to that.

Speaker Change: Our legacy Gallery store, how much of a demand growth is coming from the design galleries as opposed to the legacy galleries.

Pedro: How much of demand growth is coming from the design galleries as opposed to the legacy?

Gary Friedman: Okay, let me break that down. So How do we see the consumer? I mean, Unfortunately, we don't know those individuals exactly and don't talk to them on any kind of personal level about how they're doing. But I say, you know, look, everybody saw the recent news, you know, just as we were ready to break for this call. And you know, look, it's one of those times of uncertainty. It's one of those times where. It's not so much, I think. You know, what the consumer is going to do. I think it's how we're going to react to the consumer environment and what we're going to do.

Speaker Change: Okay great.

Speaker Change: Break that down so.

Speaker Change: How do we see the consumer.

Speaker Change: Unfortunately.

Speaker Change: No no. Thank you.

Speaker Change: Exactly.

Speaker Change: And any kind of person to lateral about how they are doing.

Speaker Change: But I'd say look everybody.

Speaker Change: Some of the recent news.

Speaker Change: Just as we are ready to break.

Speaker Change: This call.

Speaker Change: And.

Speaker Change: Yes.

Speaker Change: It's one of those times of uncertainty.

Speaker Change: It's one of those times, where.

Speaker Change: It's not so much.

Speaker Change: Thank you.

Speaker Change: What the consumers going to do I think it's.

Speaker Change: Now, we're going to react to the consumer environment, and what we're going to do and so I think a few.

Gary Friedman: And so I think if you. you know, look at our history, which is my 25th year, you know, going on 25 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 and we're not victims. So, um, you know, whether it's a, you know, confused or conflicted consumer environment.

Speaker Change: Look at our history, which is this is my 25th year.

Speaker Change: 125 years in the company.

Speaker Change: We thought we saw at all until today.

Speaker Change: This is the new one but.

Speaker Change: We have a.

Speaker Change: <unk> history.

Speaker Change: Yes.

Speaker Change: Really performing in times of crisis.

Speaker Change: And driving in those times.

Speaker Change: And have the ability to improvise adapt and overcome.

Speaker Change: At our at our core we are in.

Speaker Change: Innovators were not duplicated where leaders we're not managers.

Speaker Change: Were visionary, but were not victims.

Speaker Change: So.

Speaker Change: Yes, whether its stake.

Speaker Change: Yeah.

Speaker Change: Confused are conflicted consumer environment.

Gary Friedman: because of. a high interest rates or new tariffs or trade wars. or You know, military wars. I mean, there's there's always something, you know, and, you know, so I mean, look, we, we feel confident no matter what the environment looks like we, you know, I just articulated in the letter that we just get we just anniversary really the worst housing market in 50 years since 1978. How did 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 to the consumer and see how they're feeling.

Speaker Change: Yes.

Speaker Change: High interest rates or new tariffs or trade wars.

Speaker Change: Or.

Speaker Change: Military rewards I mean, there is there is always something.

Ann: Hi, Ann.

Ann: Yes, so I mean look we we.

Ann: We feel confident no matter, what the environment looks like.

Ann: Articulated in the letter that we just we just anniversaried really.

Ann: <unk> housing market in 50 years since 1978.

Ann: How did we do versus everybody else.

Speaker Change: Very different.

Speaker Change: What's our trends versus everybody else quite different.

Speaker Change: So maybe that's a better question for everybody else, maybe perhaps to talk consumers see how they're feeling we focus on our work.

Gary Friedman: We focus on our work, you know, and try to. You know, try to create the most desirable products presented to 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. You know, now the game's changed somewhat. I wouldn't want to compete with that in any environment. And Legacy Galleries, which is design galleries, they're all performing well, you know, so. That's not that much different in the comps. I mean, there's some places that obviously might be doing better than others at different times with different reasons, but Yeah, yeah.

Speaker Change: Try that.

Speaker Change: Yes try to create the most desirable products presented to the most inspiring spaces, whether theyre physic.

Speaker Change: Physical spaces digital spaces are.

Speaker Change: Prince experiences.

Speaker Change: I think we do that better than anybody in the world.

Speaker Change: Yes.

Speaker Change: Now the game has changed somewhat.

Speaker Change: But I wouldn't want to compete with that in any environment.

Speaker Change: Unlike legacy galleries riches.

Speaker Change: Design Gallery, Theyre, all performing well.

Speaker Change: Ed.

Not that much different than the comps I mean, there are some places that obviously might be doing better than others at different times for different reasons, but.

Speaker Change: Yes, yes.

Gary Friedman: 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.

Speaker Change: We're happy with all the galleries for opening more galleries, we have new kinds of galleries.

Speaker Change: We have design ecosystem design compounds, we've got a lot of things Kevin.

Gary Friedman: We've got a lot of things coming. So, you know, tariffs or not, here we come.

Speaker Change: Okay.

Tariffs are not Eric.

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

Speaker Change: We'll take the next question today from Steve Forbes Guggenheim.

Steve Forbes: Good evening, Gary, Jack. Gary, your your initial comment, I think was inventory is your friend. And so we'd love to sort of hear your your expand on that, that initial thought, especially as all of us, right, you know, sort of try to do the exposure math.

Steve Forbes: Good evening, Gary Jack.

Speaker Change: Okay, Gary or your initial comment I think was the.

Steve Forbes: Inventory is your friend.

And so we'd love to sort of hear your you expand on that that initial thought, especially as all of us right sort of try to do the exposure math.

Gary Friedman: 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 de-risk the situation that was just thrown at all retail operators? Sure. Let's start with the inventories, your friends, you know, going through the, you know, this. You know, the kind of massive product transformation we've been going through. You know, when when you're making big changes in your assortment, you know, it's, you know, not not normal newness, right? And we introduced hundreds of collections over the last couple of years. And, you know, you want to create the right bridge, right?

Steve Forbes: To Vietnam, Indonesia, and India, just sort of what should be the parting message here on sort of our age of the ability to sort of mitigate migrate.

Steve Forbes: And de risk the situation that was just thrown.

Steve Forbes: At all retail operators.

Steve Forbes: Sure.

Steve Forbes: Let's start with the inventory to your friends.

Steve Forbes: Going through that.

Steve Forbes: Yes.

Steve Forbes: And a massive product.

Steve Forbes: Information, we've been going through.

Steve Forbes: When you're making big changes.

Steve Forbes: In our assortment.

Steve Forbes: Not not normal newness right and we introduced hundreds of collections over the last couple of years.

Steve Forbes: And yes, you want to create the right bridge right you want to.

Gary Friedman: You want to not sell out. of legacy products before you understand what's happening in new products. You want to make sure in new products, in enough cases where you feel it's going to be in the top half of your assortment, you want to have that inventory, right? Because furniture, you can't respond to quickly. So, you know, we knew we were going to make. you know about a hundred million dollar insurance bet on inventory on the front end of this. Yeah, we expected trends to be better. We are you know, expecting our comps and the housing market to kind of come back.

Steve Forbes: <unk> fell out.

Steve Forbes: Yes legacy products before you understand what's happening in new product do you want to.

Steve Forbes: Make sure and new products.

Steve Forbes: In other cases, where you feel it's going to be in the top half of your assortment you want to have that inventory right because furniture, you can't respond to.

Steve Forbes: Quickly so.

Steve Forbes: We knew we are going to make.

Steve Forbes: $100 million insurance Scott on inventory.

Steve Forbes: On the front end of this.

Steve Forbes: And.

Steve Forbes: We expected trends to be better we are.

Steve Forbes: We're expecting our comps when the housing market panic and back.

Gary Friedman: You know, I mean, thank. 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 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. being Ron was 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 You know, today's tariff news was, yes, somewhat. shocking, you know, right?

Steve Forbes: Thank you.

Steve Forbes: I think everybody had a sense that in place and looked like things.

Steve Forbes: Their control.

Steve Forbes: Interest rates were easing.

Steve Forbes: 25 would be.

Steve Forbes: Would be the next upswing to the housing market.

Steve Forbes: So like look we were all wrong.

Steve Forbes: Even if the fed theyre almost always wrong.

Steve Forbes: Yes.

Steve Forbes: Being wrong is all part of.

Steve Forbes: <unk>.

Steve Forbes: Invention and innovation.

Steve Forbes: Yes.

Going somewhere you'd never been and moving into the future right. So.

Steve Forbes: So I think well.

Steve Forbes: Today's tariff news, where it was.

Steve Forbes: Yes somewhat.

Steve Forbes: Shocking.

Gary Friedman: I think we, you know, I think most of us were expecting, okay, maybe we'll get 25% tariffs, but You know, it's all logical, right? If you're... If you're the current administration, if you're Trump, if you read the art of the deal, I mean, look He knows how to use leverage, and he has leverage, 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, you know, we moved to Vietnam, Indonesia, Cambodia, and other countries, you know, and those manufacturers moved and made investments and built up operations and Yeah, you know, it's devastating for people that invested, you know, big sums of money to, you know, relocate, but Hey, get out there.

Steve Forbes: I think.

Steve Forbes: I think most of us were expecting okay, maybe we'll get 25% tariffs.

Steve Forbes: Logical right if you are.

Steve Forbes: This year that current administration, if youre trying to see if you read the art of the deal I mean look.

Steve Forbes: He knows how to use leverage and he has leveraging.

Steve Forbes: Andy.

Speaker Change: You don't have to do too much work to find out well.

Speaker Change: Where did all the manufacturing move from China.

Speaker Change: The move to Vietnam, Indonesia, Cambodia, and other countries and those manufacturers moved and made investments in built up operations.

Speaker Change: Yes.

Speaker Change: Devastating for people that invested yes makes.

Speaker Change: The money.

Speaker Change: Relocate but.

Speaker Change: Sure.

Speaker Change: Yes.

Gary Friedman: You know, the U.S. has leverage today. I don't, you know, I mean, leverage is how you win negotiations, not bluffing. So. I don't think... You know, you know, I think my view is, I don't think these tariffs are going to completely stick, I think. If you're these other countries, you're going to start. playing the few cards you have. You know, they might try to pull up, they might try to play a few cards. But you're either going to implode as an economy. in these countries or you're going to, you know, you're going to balance You know, you're going to balance the trade economics, and I think that's what the administration wants.

Speaker Change: The U S has leverage today I don't yes.

Speaker Change: Leverage is how you win negotiations not lumpy.

Speaker Change: No.

Speaker Change: I don't think.

Speaker Change: Yes.

Speaker Change: My view is I don't think these tariffs are going to completely.

Speaker Change: I think.

Speaker Change: Alright.

Speaker Change: If you have these other countries youre going to start.

Speaker Change: Playing the few parts you have.

Speaker Change: And.

Speaker Change: Felt they might try to blast they might try to place the part.

Speaker Change: But you're either going to implode as an economy.

Speaker Change: In these countries or youre going to add.

Speaker Change: Youre going to balance.

Speaker Change: Yes.

Speaker Change: Youre going to balance the trade economics, and I think thats, what the administrative administration one.

Gary Friedman: I think it's just a little shocking because we've never seen an administration, you know, and 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 going to play out. I don't know. I don't think it's time to overreact. I think we all believe that China was going to be a long term problem. And, you know, so, you know, moving out of China. was important. Now it looks like moving out of China didn't make a difference, right?

Speaker Change: I think it's just a little shocking because we've never seen an administration.

Speaker Change: Leader like Trump I mean, it's impressive quite frankly.

Speaker Change: Usually government.

Speaker Change: Move like glaciers.

Speaker Change: Yes.

Speaker Change: Yes, it's quite the opposite.

So.

Speaker Change: Yes, exactly how it's going to play out I don't know I don't think its time to overreact.

Speaker Change: I think we all believe that China was going to be a long term problem and so yes moving out of China.

Speaker Change: What's important.

Speaker Change: Now it looks like moving out of China didn't make a difference right. So I guess it did because there was another tariff on China.

Gary Friedman: Well, I guess it did because there was another tariff on China. Yeah. So, you know, look, I think I think basically that the game has changed. And now it's. It kind of doesn't matter where you go. I mean, except America, right? And in the US, which, you know, we've been building 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 we acquired through acquisitions and And America can make furniture, and that might be part of it, and part of it might be these countries.

Speaker Change: Yes, I think I think basically that.

Speaker Change: The game has changed and now it.

Speaker Change: It kind of doesn't matter, where you go.

I mean.

Speaker Change: <unk> America and the U S.

We've been building, our facility and expanding and doing other work.

Speaker Change: Better facilities in Los Angeles, and things like that that we that.

Speaker Change: We acquired through acquisitions.

Speaker Change: Yes.

Speaker Change: And America can make furniture and that might be part of it part of it might be these countries.

Speaker Change: Yes.

Gary Friedman: you know, acquiesce to some of the demands, which are, by the way, all fair demands in a lot of ways, right? If you just look at the math and look at the numbers. Yeah, it's kind of I mean, everybody else has a bad hand, because, you know, not only is there leverage, but the information says, hey, you know, it's not fair. So I don't you know, I'm not critical of any of it. I actually think long term, it's going to be great for America, quite frankly. I think it's just. You know, cut the world off guard because no one's ever moved at this speed.

Speaker Change: Acquiesce to some of the demands which are by the way all fair demands and a lot of ways right.

Speaker Change: Look at the math and look at the numbers.

Speaker Change: Yes.

Speaker Change: I mean, everybody else has a bad hand.

Speaker Change: Not only is there leverage at the information says Hey, it's not fair so I don't.

Speaker Change: I'm not critical of any of it I actually think long term, it's going to be great for America quite frankly.

Speaker Change: I think it's yes.

Speaker Change: Type of World are required because no one's ever moved that this fee.

Gary Friedman: No one You know, I mean, we're seeing a new kind of leadership, which again, in many ways, I think is impressive. So Yeah, forget what anybody else's personal views are on, you know. form, you know, I'd say look at the content, the content for America, the content of the decision for America is a really good thing long term. So from that point of view, I mean, is it going to be messy? Yeah, but it's messy for everybody, right? And so these are the times where we thrive, you know, because I think we can outthink others, we can outsmart others, we can outcreate others, not innovate others.

Speaker Change: No.

Speaker Change: Yes, I mean, we're seeing a new kind of leadership.

Speaker Change: Again.

Speaker Change: In many ways I think is impressive.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: What anybody else.

Speaker Change: Personal views are on.

Speaker Change: Yes.

Speaker Change: Form.

Speaker Change: I would say look at the content the content for America. The content of the decision for America is a really good thing Walter.

Speaker Change: Yes.

Speaker Change: From that point of view I mean is this going to be messy, but it's messy for everybody right and so these are the times, where we thrive.

Speaker Change: Because I think we can out think others, we can outsmart others. We've now create other if not innovate either.

Gary Friedman: You know, so I'm, you know, I Let's see what went on. I'm going to quite frankly, I was, 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. Joe Time, this is when we thrive. We're at our best in times like this, you know? And, you know, so, yes, it's exciting times. Yeah, it's you still have to compete. You know, the playing field is the playing field. You know, nobody of any scale is not sourcing out of Asia, except for maybe, you know, Ethan Allen, they have a smaller percentage, you know, but You know, I don't think it's going to really have our platform and capabilities.

Speaker Change: Yeah.

Speaker Change: Let's say, we're not going to quite frankly.

Speaker Change: On the phone to Jack.

Speaker Change: Yes, I'm in my car and.

Speaker Change: Yes. He is telling you what happened and I would just start lapping outside okay.

Speaker Change: This is this is when we thrive we're at our best in times like this.

Speaker Change: And.

Speaker Change: Yes, so yes it is.

Speaker Change: Exciting exciting times.

Speaker Change: You still have to compete the Plainfield as the playing field.

Speaker Change: Sure.

Speaker Change: Yes, nobody of any scale is not sourcing out of Asia, except for maybe.

Speaker Change: Ethan Allen they are a smaller percentage.

Speaker Change: Yes.

Speaker Change: I don't really have our platform and capabilities not to let too.

Gary Friedman: So 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 time. So Thank you, Gary.

Speaker Change: Worried about it.

Speaker Change: Any of that.

Speaker Change: I'm more excited to get off this phony get to work.

Speaker Change: Writing times.

Gary Friedman: Thank you Gary.

Steve Forbes: And then just a quick quick follow up for Jack.

Speaker Change: A quick quick follow up for Jack.

Jack Preston: I think that the company has sort of spoke to the return of positive free cash flow in 2025, maybe Maybe all this is in flux 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 just not going to have a lot of receipts coming in at really high prices, right? So start there. You've got a lot of inventory at really good prices.

Speaker Change: I think the company is sort of spoke to the return of positive free cash flow in 25, maybe.

Speaker Change: Maybe all of this is in flux, 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.

Speaker Change: Yes, I mean, we're just not going to have a lot of receipts coming in at really high prices right. So start.

Speaker Change: Start there you've got a lot of inventory.

Speaker Change: At really good prices.

Speaker Change: Yes.

Jack Preston: Yeah, we've got to kind of rethink some of the newness, you know, maybe the new concept, you know, that I wrote, wrote about might get delayed, you know, until we have some, you know, clarity, but, but also the investments get delayed and the complexity gets delayed. So I don't think about that. Like, that's gonna hurt the business, per se. I mean, we'll just focus in other ways. I just, I think, yeah. You know, a lot of the goods in development are coming from countries that have, you know, prohibitive Harris. So again, it could all change in 30 days.

Speaker Change: Yes, we've got a kind of rethink some of the newness.

Speaker Change: Maybe that new concept.

Speaker Change: That I wrote wrote about might get delayed.

Speaker Change: Until we have some.

Speaker Change: Clarity, but also the investments get delayed and the complexity gets delayed so I don't think about that like that's going to hurt the business per se.

Speaker Change: We'll just focus in other ways.

Speaker Change: I think.

Speaker Change: A lot of the goods in development are coming from countries that have prohibited.

Speaker Change: Tariff so again it could all change in 30 days.

Jack Preston: This could, you know, some of these countries could go from. Forty-five percent. to 25%, which is very manageable. Forty-five percent is much tougher.

Speaker Change: Yes.

Speaker Change: Somebody has to increase to go from.

Speaker Change: 45%.

Speaker Change: 25%, which is.

Speaker Change: Very manageable.

Speaker Change: 45% is much tougher.

Jack Preston: And the administration knows that, so I'm actually glad this wasn't a death by a thousand cuts, right? I'm glad it didn't go, oh, it's 15 percent. And, oh, okay, hey, just kidding, it's 25 percent. Hey, now it's 35, and, you know, because you don't have clarity. I think, again, I applaud the clarity, the intention. Yeah, and. and the logic. So I'm again, I'm just excited now to, you know, we're around here. We're not scared. We're smiling. Like we're kind of like, okay, let's go. It's, you know, it's a new world. It's a new day. We're at our best in times like these.

Speaker Change: And in the Ministry administrative administration knows at so Im actually glad it wasn't the desk by 1000 tests right I'm glad it didn't go up.

Speaker Change: 15% and.

Speaker Change: Okay, Hey, if sitting at 25% Hey at about 35 <unk> 45 in.

Speaker Change: Because you don't have clarity I think what again I applaud the clarity.

The intention.

Speaker Change: Yes.

Speaker Change: And the logic.

Speaker Change: Again I'll be excited.

Speaker Change: Yes.

Speaker Change: And here, we're not scared Brooks.

Speaker Change: Thanks.

Speaker Change: Okay, let's get it yes, it's a new world. It's a new day, we're at our best in times like these I wouldn't want to compete with us in times like these.

Jack Preston: I wouldn't want to compete with us in times like these. I don't think our business is going to collapse, I'd say inventory is our friend. I get two to three hundred million dollars of inventory that my competitors don't. They might have to do some ordering. at very expensive pricing, you know. And we, you know, we can navigate through this really well, you know, in the short term.

Speaker Change: When it's going to out work, that's known is going to I think no. One is going to create is that innovate us.

Speaker Change: So just in general I'm not too worried about it I don't think our business is in that five per se like inventory is our friend.

Speaker Change: I guess $2 million to $300 million of inventory, while my competitors now.

Speaker Change: They might have to do some ordering.

Speaker Change: We have very extensive pricing.

Speaker Change: We can navigate through this really well in the short term so yes.

Jack Preston: So, you know, I, you know, I feel pretty good about this year. I mean, we got to get into the details. And, you know, there might be some some holes here and there. But again, there's You know, there's always another move, right? You know, there's just always another move in times like these, and so I'm just excited about finding the other moves, you know, way before any of our competitors do.

Speaker Change: Yes.

Speaker Change: I feel pretty good about this year, we got to get into the details.

Speaker Change: There might be some some holes here and there but again there is.

Speaker Change: There's always another move right.

Speaker Change: There is always another move in times like these and so I'm just excited about finding the other moves.

Speaker Change: Way before any of our competitors do.

Jack Preston: So, um... Fun times!

Speaker Change: No.

Speaker Change: One time.

Jack Preston: Thank you, Gary.

Speaker Change: Thank you Gary Thanks Chuck.

Speaker Change: Right.

Michael Lasser: 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 going to do anything right now. Like I said, we've got inventory, you know, we're well positioned, like it's not, this is, this, these are the times when you want to do less. and think more so you can do more.

Speaker Change: Up next is Michael Lasser UBS.

Michael Lasser: 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 are already been levied and when do you start to take price and reaction to what was just announced in the last couple of hours. Thank you.

Michael Lasser: I don't think we would do anything right now.

Michael Lasser: As I said, we've got inventory.

Michael Lasser: We're well positioned it's not this is these are the times when you wanted to do less.

Michael Lasser: And thanks more so you can do more.

Gary Friedman: Right, this is not a time to panic. model time to react. It's a time to think. You know, invent, innovate. and yeah, develop. You know, it's compelling vision for for times like these, but I think it's again, you know, we saw We've seen tariffs go on, go off, go up, go down, you know, like it's going to move around. I don't, it is not just tariffs, right?

Michael Lasser: Alright, this is not a time to panic.

Michael Lasser: Not all the time to react if the time to think.

Michael Lasser: Yes.

Michael Lasser: Invent innovate.

Michael Lasser: And develop.

Speaker Change: No. It's a compelling vision for times like these but I think.

Michael Lasser: Again.

Michael Lasser: We saw that.

Michael Lasser: Again, we've seen tariffs go on go off go up go down.

Michael Lasser: Move around.

Michael Lasser: It is not just tariffs right. This is.

Gary Friedman: You know, what did they say in the movie 13 Days, you know, when he was talking to One of the advisors, you know, this is, you know, the Cuban Missile Crisis, this is, you know, this is President Kennedy talking to Gorbachev, right? These are signals, these are moves, this, you know. You got to kind of motor up and see the whole board right now. You know, you got to kind of understand where everything might be going. Did we anticipate this? Not at this level, but that's OK. It's, you know, I have more of an edge now.

Michael Lasser: What are they saying that movie 13 days.

Michael Lasser: He was talking.

Michael Lasser: One of the advisers.

Michael Lasser: The Cuban missile crisis. This is.

President Kennedy: This is president Kennedy.

Speaker Change: The Gorbachev right.

President Kennedy: Our signal these are moves.

President Kennedy: Yes.

President Kennedy: You got to kind of motor up and see the whole board right now.

President Kennedy: You got to kind of understand where everything might be going in we anticipate this not at this level, but that's okay.

President Kennedy: I have more of an edge now I don't like.

Gary Friedman: I don't like... any caught off guard, you know, so Yeah, so now we're just going to kind of Take some time, you know. Don't move until you see it. Yeah, so we got to take some time to see it, and then we'll move. We've got a lot of inventory that we own, that's at really good pricing, that's at really good margins. Our business has a good business trend. Is the consumer going to stop buying tomorrow? I mean, is this going to be like... you know 2008-9 housing prices or yeah like I don't think so because I don't think anybody really understands what's going on.

President Kennedy: And caught off guard.

President Kennedy: So.

President Kennedy: Yes, so now we're just going to kind of.

President Kennedy: Take some time.

President Kennedy: Don't move until you see it.

President Kennedy: Yes, so we got to take some time to see it and then we'll move.

President Kennedy: Okay.

President Kennedy: Got a lot of inventory that we owned that had really good pricing that can really good margins our business is a good business trend.

President Kennedy: As you can see we're going to stop buying tomorrow I mean is this going to be like.

President Kennedy: Yes, 2008, nine housing prices are like I don't think so because I don't think anybody really understand what's going on.

Gary Friedman: You know, at a very deep level, I think it's going to take take a while to digest, you know, so the housing market was already bad. Is it going to get worse? I don't know, I mean... It's never been worse in my lifetime. So, could it get worth it, Mike? Is that... Terrible, you know, no, I mean, we can navigate through any situation. We're in a really good position, you know. Yeah, we gave guidance that was appropriate. For the moment, maybe we would have been even more conservative had we known, but I don't know if we would have because I don't know how much impact this is going to have on us, even if it stays in place all year.

President Kennedy: At a very deep level I think it's going to take take a while to digest. So the housing market was already bad if you're going to get worse.

President Kennedy: I don't know I mean, it's.

President Kennedy: It has never been worse in my lifetime.

President Kennedy: Yes.

President Kennedy: Could it get worse it might.

President Kennedy: Is that.

President Kennedy: Terrible.

President Kennedy: And then we.

President Kennedy: We can navigate through.

President Kennedy: Any situation.

President Kennedy: We're in we're in a really good position.

President Kennedy: Yes.

President Kennedy: Yeah, we gave guidance that was appropriate.

President Kennedy: For the moment, maybe we would have been even more conservative had we known but I don't know if we would have because.

President Kennedy: I don't know how much impact this is going to have on us even if it stays in place all year not sure yet when it takes some time to analyze it.

Michael Lasser: Not sure yet, you know, when it takes some time to analyze. So. That's it, yeah. Got you.

So.

President Kennedy: Okay.

Speaker Change: Got you my follow up question is on your point about guidance, you might've been a bit more conservative.

Michael Lasser: 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 announcements. 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, how 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, you know, 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, a lot of moves that are going to be made at the government level, right around the world.

Speaker Change: Had the full benefit of insight into all the policy announcements 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.

Speaker Change: How would you think about the need to raise capital or utilized some of the assets that you have at your disposal. Thank you very much.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: I think I'd go below the guidance that we've given yes not today.

Speaker Change: Yes.

Speaker Change: Yeah, I think there is a lot of things that can be done and there's a lot of moves a lot of moves that are going to be made.

Speaker Change: At the government level right around the world and.

Gary Friedman: And, you know, a lot of a lot of things are going to be made, you know, the strategic level, you know, with with, you know, governments, countries, the strategic level of manufacturers and retailers and You know, people are going to get really creative. That's what they do in times like this. Humans, you know, we're not the biggest or strongest, but we're the ones most adaptable to change, right? So. You know, change is kind of right up their alley, right? You know, so I, I mean, if I was someone who's managing like some business that doesn't innovate or invent and, you know, they're kind of grinding the wheel and, you know, forecasting 2% for this or that.

Speaker Change: A lot of a lot of things theyre going to be made.

Speaker Change: The strategic level.

Speaker Change: Yes.

Speaker Change: Governments of countries, that's a strategic level of manufacturers.

Speaker Change: Retailers in.

Yes people are going to get really creative that's what they do in times like this.

Speaker Change: Yes.

Speaker Change: Yes humans.

Speaker Change: We're not the.

Speaker Change: The biggest their strongest.

Speaker Change: The ones most adaptable to change right.

Speaker Change: <unk>.

Speaker Change: Change is kind of right up their alley right.

Speaker Change: Yes.

Speaker Change: I mean, if I with someone who is managing like seven.

Business that doesn't innovator and Benson.

Speaker Change: Yes.

Speaker Change: We're kind of grinding the wieland.

Speaker Change: Forecasting, 2% or this or that.

Gary Friedman: And yeah, you know, like They're going to have a harder time figuring this stuff out. So I think we're good. And we don't need to raise any capital. We've got, you know, we, I think we're in good shape. The cash flow is going to be strong this year. You know, and we have, you know, we'll see how the real estate market is. We've got real estate assets we can turn into cash. You know, so, I mean, we just turned one of the buildings into cash. We had a building, we had an asset that was purchased for $10.5 million or something like that, $10.5 million.

Speaker Change: Yes.

Speaker Change: They're going to have a harder time figuring this stuff out.

Speaker Change: I think we're good.

Speaker Change: Yes.

Speaker Change: Need to raise any capital we've got.

Speaker Change: We.

Speaker Change: I think we're in good shape, if the cash flow is going to be growing this year.

Speaker Change: And we have we.

Speaker Change: We'll see how the real estate market.

Speaker Change: We've got real estate assets, we can turn into cash.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: I mean, we just turn one of the buildings into cash.

Speaker Change: While building, we had an asphalt with.

Speaker Change: Purchase.

Speaker Change: $10 5 million or something like that $10 $10 $5 million or just over 27 million.

Gary Friedman: We just sold for $27 million. Yeah, so, yeah. And so, you know, we were going to build a house on it and the housing, the construction costs in Aspen became prohibitive. It didn't look like a good investment. Someone buy this old house. We're almost three times what we paid for it, so our JV partner and our side decided to monetize that. We have 32 properties, I think, in Aspen. 31 now, maybe. We have galleries that we own in different places in the United States. We have Cleveland, Detroit, many others, several others. R.E. Chinglin, we have a guest house in New York.

Speaker Change: Yes.

Speaker Change: Yes, and so yes, we were going to build a house on it.

Speaker Change: Housing construction, Boston Aspen became prohibited.

Speaker Change: It looked like a good investment.

Speaker Change: Someone buy this old house.

Speaker Change: We're almost three times, what we paid for it so.

Speaker Change: Our JV partner and archive decided to monetize that we have 32 properties I can ask 131 now maybe.

Speaker Change: We have gas.

Speaker Change: Calories that we own.

Speaker Change: In different places in the United States.

Speaker Change: Yes.

Speaker Change: Evelyn Detroit.

Speaker Change: But many others.

Speaker Change: Others.

Speaker Change: Our 18, Glenn when the guest house in New York, We've got soda, yes. It was an episode of property.

Gary Friedman: It's an Appasota property. Yeah, it was an Appasota property. So we're fine. We have assets that we can turn into cash. If it's appropriate, you know, but it's not, you know, we're not in any kind of fire sale mode. You know, we're, we have You know, this is not like a company that's doing, you know, 5 to 8% operating margin going into, you know, I like this, I mean... You know, we we have a lot of levers we can You know, slow down spending. I mean, I guess I can talk about, you know, okay, nevermind.

Speaker Change: Yeah.

Speaker Change: We're fine we have assets that we can turn into cash.

Speaker Change: <unk>.

Speaker Change: If it's appropriate.

Speaker Change: But it's not we're not.

Speaker Change: Many have fire sale mode.

Speaker Change: Sure.

We have.

Not like a company thats doing 5% to 8% operating margin going into.

Speaker Change: Yes.

Speaker Change: Thanks, Mike.

Speaker Change: Yes, we have a lot of levers we can.

Speaker Change: The slowdown in spending.

Speaker Change: I mean I guess.

Speaker Change: Okay never mind.

Yes.

Speaker Change: Fair enough.

Speaker Change: Got it.

Speaker Change: Alright, Scott waved off anyway, Michael.

Maks Rakhlenko: Thank you very much and good luck.

Speaker Change: Okay.

Speaker Change: It was nice talking to you. Thank you very much and good luck.

Speaker Change: Thank you.

Maks Rakhlenko: And the next question is Maks Rakhlenko, TD Cowan. 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 one time costs that we should be thinking about as you reposition your supply Yeah, I mean, what's what's embedded is what we talked about, right? And so The China-Mexico-Canada tariffs. You know, we It's exactly what we knew before today. It's exactly what we knew. I mean, you know, we think our guidance is on the conservative side, but...

Speaker Change: And the next question is Max Glencoe TD Cowen.

Max Glencoe: 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 one time costs that we should be thinking about as you reposition your supply chain.

Speaker Change: Yes.

Speaker Change: What's embedded as what we talked about right and so.

Speaker Change: The China, Mexico, Canada tariffs.

Speaker Change: Yes.

Speaker Change: <unk>.

Speaker Change: Yes, we certainly what we knew before today, it's still what we knew I mean.

Speaker Change: Yes, we think our guidance is on the conservative side.

Speaker Change: Right.

Gary Friedman: you know what you should be modeling to re-architect supply chain like I'm actually hear what he just said in the first 30 minutes like 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've got to think about who has the leverage here. The U.S. has been. Yeah, you can. Yeah, you look at the number if you say the US has been in a disadvantage, not really treated Harold, you know, does it have to go to a complete balance?

Speaker Change: What you should be modeling for re architect by Kent.

Maxine: Alright, Maxine everybody just said.

Speaker Change: 430 minutes site.

Maxine: Not a time to overreact this is.

Maxine: Yes. This is.

Maxine: Donald Trump talking to every other president or Prime Minister.

Maxine: Round the world.

Maxine: This is higher level strategic negotiation.

Maxine: You got to think about who has the leverage here.

Maxine: The U S has been.

Maxine: Yes.

Maxine: Look at the numbers, if you say the U S has been a disadvantage.

Not really treated.

Errors.

Maxine: Does it have to go to a complete balance no, but yes, just because of the trade imbalance in five minutes like us funding the growth of other economies and I think that.

Gary Friedman: No. But, you know, just because of the trade imbalances, I mean, it's like us funding, you know, the growth of other economies. And I think that, you know, the administration saying is, we want to balance that out. You know, we don't want to pay for everything. You know, we don't want to He's the only one investing in military and protection. You know, we want to have more more fair and balanced. It's crazy. policies. I, you know, it's not. This is the move he made, and this is it. This is the first card he's played globally.

Maxine: The administration is saying as well.

Maxine: Want to balance that out.

Maxine: I want to pay for everything.

Maxine: We don't want to.

Speaker Change: The only ones investing in military and protection.

Speaker Change: Yes, we wont have more fair and balanced.

Craig: Yes, Craig.

Speaker Change: Policies.

Speaker Change: It's not.

Speaker Change: This is the move he made in this and did.

Speaker Change: This is <unk>.

Speaker Change: This is the first part he has played globally.

Gary Friedman: new part, Mexico and China are neighbors. You know, yeah, and I'm not going to try and mix you on Canada. And you know, China, you know, that that has been the single place of terrorists. This is now a global Negotiations. I don't know, I think I would predict. that there will be concessions. All right. And this. I don't believe it's going to continue at this level. It may for longer than we think, but. I mean, it can't be good for the other side, right? 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.

Speaker Change: A new part.

Speaker Change: <unk> in China, our neighbors.

Speaker Change: Yes.

Speaker Change: Mexico, and Canada and China.

Speaker Change: That has been that.

Speaker Change: Place of tariffs. This is now a global.

Speaker Change: Negotiation.

Speaker Change: And.

Speaker Change: I don't know I think.

Speaker Change: I would predict.

Speaker Change: That there will be concessions.

Speaker Change: And this.

Speaker Change: I don't believe its going to continue with this level of made for longer than we think but.

Speaker Change: I mean, it can't be good for the other side right, it's really can't be good.

Speaker Change: And so I think we've got very smart administration negotiating at a level we haven't seen.

Gary Friedman: Any administration, at least in our lifetimes, negotiates. So I'm, I think, you know, it's not a time. Yeah, it's like I say to our team, I say Don't move until you see it. Take your time. This is a chess game, not a checkers game.

Speaker Change: Any administration at least in our lifetimes.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: It's not a time.

Speaker Change: Yes, like I say to our team.

Speaker Change: Don't move until you see it.

Speaker Change: Take your time. This is a this is a chess game.

Speaker Change: Checkers game.

Maks Rakhlenko: Got it, that's helpful.

Speaker Change: Got it that's helpful. And then just can you provide any color on the quarter to date demand then just given the volatility in the stock market is 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.

Maks Rakhlenko: And then just can you provide any color on the quarter to date demand and just given the volatility in the stock market, 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 quarters flowing into revenue? Yeah. Well we said we were going to only give demand for last year. You know I wrote that pretty clearly in the earnings letter at this time last year because of the product transformation and the dislocation between demand and revenues.

Quite strong that we've seen over the past couple of quarters flowing into revenues here.

Speaker Change: Well, we said we were going to only give demand for last year.

Speaker Change: Wrote that pretty clearly.

Speaker Change: Yes, the earnings letter at this time last year because of the product transformation and the dislocation between demand and revenues.

Jack Preston: So we've now anniversary that. So I gave you None of that, you know, a look at January, right? And from a from a demand point of view, because that was still last year. But looking forward, we're not longer going to give demand. We'll give revenue guidance to it. You know, generally directionally in line. Demand. You know, so might 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 a Q4 that the gap narrows.

Speaker Change: We've now Anniversaried that yes, so I gave you.

Speaker Change: Canada.

Looking at January right and.

Speaker Change: Yes.

Speaker Change: Demand point of view because that was still last year, but looking forward. We're not we're no longer going to give demand will give revenue guidance switch.

Speaker Change: Generally directionally in line.

Speaker Change: With demand.

Speaker Change: Might change from quarter to quarter it might have some.

Speaker Change: That ship.

Speaker Change: Cross quarters somewhat differently, but it's usually not a big disconnect.

Speaker Change: I would add as an example that at Q4 the gap narrowed.

Jack Preston: So, yeah, with Q4 revenues on a comparable 13-week basis of 18 and Q4 total demand growth up 17. So, you know, that in essence normalizes the backlog piece that we were talking about and supports the point that Gary just made. Yeah.

Speaker Change: With Q4 revenues on a comparable 13 week basis up 18 in Q4 totaled.

Speaker Change: Both up 17 so.

Speaker Change: That in essence normalizes, the backlog piece that we were talking about it.

Speaker Change: Support and get to the point that Gary Smith.

Maks Rakhlenko: Thank you, Jack. Awesome. Thanks a lot, guys. Best regards.

Speaker Change: Thank you Jack.

Speaker Change: Awesome. Thanks, a lot guys and best regards.

Andrew Carter: Thanks, Max. We'll go to Andrew Carter, Stiefel. Hey, thank you for taking my question.

Speaker Change: Yes.

Speaker Change: We will go to Andrew Carter Stifel.

Andrew Carter: Hey, Thanks. 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, you've got I mean, you've got up 7% to 8% you've got revenue growth of 10% to 13 is our product margins still inflicting so is that going to be a majority in gross.

Andrew Carter: Good evening. So quick question on kind of looking at the controllable cost outlook here. You've got – I'm thinking about my math here. You've got – I mean you've got up 7% to 8%. You've got revenue growth of 10% to 13%. Is – are product margins still inflecting? So is that going to be a majority and gross margin, or are we going to see a lot in SG&A because you've lapped the investments? And the second question around the timing, there's more of a disconnect on cost growth in 1Q. Is there anything related to that? Is that timing around the advertising investments or something like that or delivery, just anything?

Andrew Carter: Or are we going to see a lot in SG&A, because you've lapped the investments and then a second question around the timing there is more of a disconnect on cost growth and <unk> is there anything related to that is that timing around the advertising investments or something like that or delivery just anything I'll stop there.

Jack Preston: I'll stop there.

Jack Preston: I'll comment on the alternative, Jack. If you want the level of detail you're looking for, I want you to come work on our FCNA team. You could help us with all the modeling, but let me talk about ad cost and some of the changes. I mean, I think as Gary pointed out, we've mailed two books in Q1, so between the outdoor book and the interiors book, you have an expense there. Yeah, incremental over a year ago. Incremental over a year ago, where you just had to add the outdoor. So that's, you know, we always say that the quarter to quarter difference is, you know, there's a lot of that variability that's driven by the ad cost.

Speaker Change: I'll comment I'll turn it over to Jack if you want the level of detail you're looking for I want to kind of work on our <unk>.

Andrew Carter: You could help with the modeling.

Andrew Carter: I've talked about AD cost and some of the changes I mean, I think as Gary pointed out we mailed to book in Q1, so between the outdoor book and the interiors book.

Andrew Carter: You have an expense there yes.

Andrew Carter: Incremental over a year ago for about a year ago, where you're just sort of add the outlook.

Andrew Carter: So thats, we always say that the quarter to quarter differences. There is a lot of that variability that's driven by the <unk> costs.

Jack Preston: So you're seeing that. And then as far as whether it's happening in gross margin and SG&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 magnitude just based on, you know, how we're guiding in our approach.

Andrew Carter: So you are seeing that and then and then as far as whether its happening in gross margin and SG&A.

Andrew Carter: Look the guidance speaks for itself, but the operating income level and I think.

Andrew Carter: We don't guide those pieces, but there is obviously positive factors both lines I just can't we can't speak to the magnitude just based on.

Andrew Carter: Our guiding in our approach.

Andrew Carter: Fair enough. Just thinking about more of a high level, you kind of said it today, but like, do these tariff announcements against like your competitors, you know, where you're going premium really create anybody that has an 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 kind of help with that?

Speaker Change: Fair enough just thinking about more of a high level, you've kind of said it today, but do these tariff announcements against like your competitors, where you're going premium really create anybody that has an advantage I know you mentioned Ethan Allen earlier that has some domestic 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.

Speaker Change: Are they really add any kind of cost advantage here today that you have or just any kind of kind of help with that.

Gary Friedman: Thanks. No, I don't think anybody's at a cost advantage from us. I mean, we're buying at the biggest scale at this quality in the world. And we can do that because we have the biggest platform. So when you think about a lot of the and 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 can, you know, can take the risks that we can and negotiate the prices that we can.

Speaker Change: No I don't think anybody hit a cost advantage from us I mean, we are buying at the biggest scale at this quality in the world.

And we can do that because we have the biggest platform.

Speaker Change: So when you think about a lot of it.

Speaker Change: And again, a higher end.

Speaker Change: People in the business I mean, they are relatively small because they don't have a platform right and many of them are.

Speaker Change: Selling wholesale they don't control the platform they may have a few stores.

Speaker Change: But.

Speaker Change: No one's got a platform like ours. So no one has the.

Speaker Change: Buying power that we do.

Speaker Change: I can take the risk that we can negotiate the prices that we can.

Speaker Change: So yes again.

Gary Friedman: And so, yeah, again, the playing field is is pretty level, right? At least in North America. And for people that are European-based coming to America, that's not good, right? Especially if they're a manufacturing-based business, because they're 100% tariff. So there's a lot of moves we can make, right? move more upholstery, we could look at bringing up, you know, you know, wood furniture operations, you know, I think the most difficult one today is, you know, is teak furniture out of Indonesia. You know, Indonesia is the capital of premium teak, you know, sustainably harvested teak in the world.

Speaker Change: The Plainfield is.

Speaker Change: It's pretty level.

Speaker Change: At least in North America.

Speaker Change: Yes.

Speaker Change: And for people that are European based coming to America.

Speaker Change: Right, if you, especially if they're manufacturing base business, because they're 100% tariff so.

Speaker Change: There's a lot of moves we can make right we can move.

Speaker Change: More upholstery, we could look at bringing up.

Speaker Change: Hi.

Speaker Change: Wood furniture operations.

Speaker Change: The most difficult one today.

Speaker Change: Peak furniture out of Indonesia.

Speaker Change: Indonesia is the capital of premium peak sustainably harvest at <unk>.

Speaker Change: In the world.

Gary Friedman: 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, you know, all my life in this business, I the best quality. The biggest teak resource in the world is in Indonesia. You know, that's a harder one. to kind of navigate out of and but then again, we're kind of the biggest and the best. So If you want real teak furniture and you don't want, you know, some people are like doing mahogany. Mahogany is not going to last outside. You know, it's like much cheaper wood.

Speaker Change: And other.

Speaker Change: Other countries.

Speaker Change: A little dicey.

Speaker Change: Definitely not the same quality so thats why.

Speaker Change: Forever that.

Speaker Change: All my life in this business.

Speaker Change: The best quality.

Speaker Change: The biggest peak resorts in the world is in Indonesia.

Speaker Change: <unk>.

That's a harder one.

Speaker Change: To kind of navigate out of.

Speaker Change: But then again.

Speaker Change: We're kind of the biggest and the best so.

Speaker Change: If you want real teeth furniture, and you don't want to.

Speaker Change: Thank you Larry like doing mahogany mahogany is not going to last outside.

Speaker Change: Much cheaper wood, yes, theyre doing Acacia would theyre doing.

Gary Friedman: You know, they're doing acacia wood. They're doing, you know, rubber wood, miata wood, euphalyptus wood. I mean, all nice trees, don't get me wrong. Just not great wood for outdoor furniture. If you want it for, you know. 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 going to keep buying new outdoor furniture. It's going to look like crap after a few years. So that's why we don't sell any of that stuff. You know, but, again... You know, that... And I can't see anybody doing anything that's going to hurt our position in the market.

Speaker Change: Robert Wood <unk>.

Speaker Change: User lift this wood I mean, all nice trees don't get me wrong.

Speaker Change: Yes.

Speaker Change: Great Wood for outdoor furniture, if you want it for.

Speaker Change: Three years.

Speaker Change: Sure.

Speaker Change: Maybe five years and a nice plan three years in rough climate.

Speaker Change: Great you're just going to keep buying new outdoor furniture look like crap. After a few years so.

Speaker Change: While we don't sell any of that stuff.

Speaker Change: Yes.

Speaker Change: But again.

Speaker Change: You know that.

Speaker Change: And I can't see anybody doing anything.

Speaker Change: That's going to hurt our position in the market.

Gary Friedman: I mean, you know, it just may mean peak furniture is a little bit more expensive. But it's, but what was the Indonesian number? Oh, the tariff? Yeah. Yeah, 30, you know, 32%. I mean, we dealt with, yeah. There's 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 playoffs, not necessarily their best in the regular season.

Speaker Change: It just may mean peak furniture is a little bit more expensive, but it's that quick.

Speaker Change: Does the Indonesia number.

Speaker Change: Sure Yes.

Speaker Change: Great.

Speaker Change: Yes, 30, 32% I mean, we dealt with.

Speaker Change: It was kind of tariffs out of China.

Speaker Change: Yeah figure out how to be more efficient and you figure out.

Speaker Change: How to work better.

Speaker Change: Humans I'd like to say humans without deadlines are useless, right, where no good without deadlines were not good without pressure.

Speaker Change: It's why the great athletes perform.

Speaker Change: In the playoffs not necessarily they are best in the regular season, although Steph Curry did have 12, 3% to 52 points last night I was happy about that but it's getting close to the playoffs and it was against one other their rivals right. So.

Gary Friedman: 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 rivals, right? So, you know, you see, like, you know, we're kind of 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're going to see who's really good. in times like these. So we're excited. This is like a exciting time. I mean, I'm not worried about God, are we going to be okay?

Speaker Change: See like.

Speaker Change: We're kind of one of those teams like we're right in the playoffs were great under pressure in humans generally are better under pressure, but you could.

Speaker Change: C <unk>.

Speaker Change: Really good.

Speaker Change: In times like these.

Speaker Change: So we're excited this is exciting.

Speaker Change: Exciting times.

Speaker Change: Worried about.

Scot: Scot are we going to be okay, do we have to raise money to do it now.

Gary Friedman: Do we have to raise money to do it now? Like, we're good. You know, I mean, I do not think this is going to be I think it's going to bring the whole economy to them. I think there's going to be pain. I've told everybody I know, and I think that... You know, when you kind of saw where this was going, that that Look, there may be pain for the next 12 to 18 months or at 24 months. And, but I think that the second half of this administration is tenure here is could be a booming American economy.

Speaker Change: Good.

Speaker Change: I do not think this is going to be.

Speaker Change: Yes, Blake can bring the whole economy, I think it's going to be pain.

Speaker Change: <unk> told everybody NL.

Speaker Change: Yes, I think that.

Speaker Change: When you kind of saw where this was going.

Speaker Change: Yes.

Speaker Change: Look there may be pain for the next 12 18.

Speaker Change: 18 months.

Speaker Change: At 24 months and.

Speaker Change: But I think the second half of this submitted administrations.

Speaker Change: Tenure here.

Speaker Change: It could be a booming American economy.

Gary Friedman: So, you know, I think the key is how do you position yourself for the other side of that? You know, how do you navigate correctly now? How do you optimize your, you know, your business and your sourcing structure? You know, just all aspects of the business, and there will be better times and better days. So there always are.

Speaker Change: So I.

Speaker Change: I think the key is how do you position yourself for the other side of that.

Speaker Change: How do you navigate correctly now how do you optimize your business.

Speaker Change: And your sourcing structure.

Speaker Change: Okay.

Speaker Change: All aspects of the business.

Speaker Change: There will be better times and better days. So there always are.

Gary Friedman: Thanks, I'll pass on.

Speaker Change: Thanks ill pass it on.

Brad Thomas: We'll take the next question today from Thomas Bradley, KeyBank Capital Markets. Hi, thanks. It's Brad Thomas.

Speaker Change: We'll take the next question today from Thomas Bradley Keybanc capital markets.

Brad Thomas: Hi, Thanks, Jeff It's Brad Thomas.

Gary Friedman: Gary, I want 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 American perceived brands, and how you think about, you know, the openings you have this year, and what risk, if any, there might be that you decide to lace on? Thanks. Yeah, those are all really good questions. I mean, yeah, I was I was talking to my wife last night, like, hey, if this really goes sideways, or, you know, I mean, if he hits all of Europe, I'm sure we're going to go to Italy in the summer, you know, but it's, you know, if there's going to be some kind of weird backlash, we were all thinking the same things, like, okay, or I mean, I mean, look what's happening to Tefra, like, you know, like, it's crazy, right?

Speaker Change: Gary I wanted to ask just about the international.

Brad Thomas: Side of the business.

Speaker Change: And wondering what youre seeing in terms of trends there.

Speaker Change: Wonder the degree to which you worry about any backlash about.

Speaker Change: American perceived brands.

Speaker Change: And how you think about the openings you have this year and what risk if any there might be if you decide to Sean. Thanks.

Speaker Change: Those are all really good questions I mean, yes.

Speaker Change: Yes talking about Wi Fi.

Speaker Change: If it's really go sideways.

Speaker Change: He has all of your share we're going to get Italy. This summer.

Speaker Change: No.

Speaker Change: If theres going to be some kind of weird backlash, we're all thinking the same things like okay.

Speaker Change: And we look at what's happening to Tesla.

Speaker Change: It's crazy rate I mean, you have a world that.

Gary Friedman: I mean, you have 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 going to create great noise. And I don't know, you know, it I think 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 tariffed. Right. And, you know, we're just trying to balance the thing out. You know, I think hopefully that...

Speaker Change: I live on the Internet right.

Speaker Change: And messaging and social media and news.

Speaker Change: Hi.

Speaker Change: I'm curious if this is going to create.

Speaker Change: Great noise.

Speaker Change: I don't know.

Speaker Change: It's.

Speaker Change: I think it.

Speaker Change: Communication is really key right now messaging is really key right now.

Speaker Change: I thought was interesting.

Speaker Change: Trump was holding up the big signed with.

Speaker Change: This is how much we're getting tariffs right and.

Speaker Change: We're just trying to balance the thing out.

Speaker Change: I think hopefully that.

Gary Friedman: You know, that image and that line 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, you know, we can't wait. You know, I'm just thinking out loud with you, you know, like we've, we've been thinking about this. I don't 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 going to get us to a conclusion much faster, a much clearer conclusion.

Speaker Change: That image and that we'll get to people in other countries and now also put some pressure on their governments to kind of.

Speaker Change: Level, the playing field.

Speaker Change: Again.

Speaker Change: I'm, just thinking out loud with you.

Speaker Change: We've been thinking about this I don't think.

Speaker Change: I think we underestimated the size of this move.

Speaker Change: But I'd rather have this happen.

Speaker Change: Then.

Speaker Change: Yes, four moves to get there in a long drawn out thing I think this is going to get us to a conclusion much faster and much clearer conclusion.

Gary Friedman: There is 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 don't think they were making up those numbers. I don't think the administration got a bunch of. you know, numbers that aren't true. I mean, I hope not. I mean, that would be a whole different issue, right? Like, holy cow. You know, like so, but I think I think the move is a well-played move.

Speaker Change: There is now kind of it's.

Speaker Change: It's a global negotiation its not this country now and what's the next country and where are we going next it's all laid out there right its completely laid out there for everyone to see so everyone in every country.

Speaker Change: I don't think they were making up those numbers I don't think the administrations that a bunch of it.

Speaker Change: Yes, the numbers that arent true I mean, I hope not I mean that would be a whole different issue right like fully cap.

Speaker Change: Yes.

Kevin: Hey, Kevin.

Speaker Change: I think I.

Speaker Change: I think the movies.

Speaker Change: Well played move ins.

Gary Friedman: The information is out there. The logic is out there. You know, the intention, the desire is clear. It's not bad. This administration wants tariffs, they want trade balance. I don't even think they're trying to get complete balance. It's just way out of whack. So, um. Will there be some backlash? I'm sure we're going to read about stuff in American businesses with ticketers or somebody throws a firebomb 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. Will they be any different than building the kind of buildings we have?

Speaker Change: The information is out there the logic is out there.

Speaker Change: All right.

Speaker Change: Yes.

Speaker Change: The intention the desire is clear.

Speaker Change: It's not bad.

Speaker Change: This administration wants tariffs.

Speaker Change: They want trade balance.

Speaker Change: I don't even think theyre trying to get complete balance it.

Speaker Change: It's just way out of whack.

Speaker Change: No.

Speaker Change: Will there be some backlash I'm sure we're going to read about staff and American businesses picked it or is there somebody throws a firebomb through window somewhere I don't know.

Speaker Change: That's just the world we live in today.

Speaker Change: But as it relates to us construction delays things like that.

Will they be any different than building the kind of buildings. We have we always have construction delays.

Gary Friedman: We always have construction delays. I don't know, but none of that is going to make a big deal. Those are all on the fringe, on the edges. I don't think the backlash is going to be a big deal. We're not doing that much volume out of Europe today anyway. You know, I hope things... You know, I hope things kind of...

Speaker Change: Et cetera.

Speaker Change: Yes.

Speaker Change: None of that is going to make a big deal, but if those are all on the on the fringe on the edges.

Speaker Change: I don't think the backlash is going to be a big deal, we're not doing that much volume out of Europe today anyway.

Speaker Change: I hope things.

Speaker Change: I hope things kind of.

Gary Friedman: get yeah, more, more clear and, you know, the world's kind of a more balanced place from trade and from you know, conflict and by the time we open Paris. Now, because we're all planning to open during Desinde Auxerre, which is one of the biggest home shows in the world, there'll be... You know, all the post-influential designers and other people will be there. time when everybody goes for all the antique markets and flea markets and we were going to 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 and I hope by saying that that I didn't all of a sudden create pictures up front there but it's a long way off it's not you know it's not happening in the next couple weeks so um But now, you know, I agree.

Speaker Change: Yes, more more clear.

The world.

Speaker Change: That's kind of a more balanced place from trade and from.

Speaker Change: Kind of conflict.

Speaker Change: By the time, we open Paris.

Speaker Change: We are planning to open during Zonday, Okay, which is one of the biggest home shows in the world will be.

Speaker Change: All of the.

Speaker Change: Most influential designers and other people will be there.

Speaker Change: Hi, I'm when everybody goes Bravo.

Speaker Change: Antique markets and flea markets and we're going to open.

Speaker Change: Open in Paris that we can say the world could see the design work at the Harrison.

Speaker Change: I hope, there's not pick areas upfront there helped by saying that I didn't penetrate pictures.

Speaker Change: It's a long way off its not what happened in the next couple of weeks.

Speaker Change: <unk>.

Speaker Change: No.

Great.

Gary Friedman: And we're giving you our best insights here, right? This is, I have no script in front of me, and it's probably a firm grasp of the obvious. That's very helpful, Gary.

Speaker Change: And we're giving you our best insight CR rate business.

Speaker Change: I have no script in front of me.

Speaker Change: And it's probably a firm grasp of the obvious.

Okay.

Andrew Carter: That's very helpful. Gary and if I could just ask a follow up on the topic of clearance activity and that's been something going on as you've been transitioning the assortment how should we think about clearance activity going forward here.

Gary Friedman: And if I could just ask a follow up on on the topic of clearance activity, you know, that's been something going on as you've been transitioning the assortment. How should we think about clearance activity going forward? Yeah, I think, you know, think about clearance in, in relationship to the economy, right? In, in In good markets, you're going to see less clearance. In bad housing markets, you're going to see more clearance, not just here, everywhere. And then we've got, you know, another layer that just relates to You know, the amount of new product that we're bringing in, you know, we talk about the, you know, products in thirds, right?

Speaker Change: I think think about clearance.

Andrew Carter: In relationship to the economy right.

Andrew Carter: Okay.

Andrew Carter: <unk>.

Andrew Carter: And good market youre going to see less clearance and bad housing markets Youre going to see more clearance not just here everywhere and then we've got.

Andrew Carter: Other layer that will what gets relates to.

Andrew Carter: The amount of.

Andrew Carter: New products that we're bringing in.

Andrew Carter: Just talk about the products in thirds right top third middle third.

Gary Friedman: Top third, middle third, bottom third. You know, that's how we communicate here with each other. You know, is this collection going to be in the top third? If it's in the top third, it'll pull the whole company up, right? If it's going to be in the middle third, you know, if it's in top and middle third, it'll pull you up a little bit. Bottom, middle third might pull you down a little bit. If it's in the bottom third, it's going to pull you down. And so. If you bring in, you know, a hundred new collections, you know, they're going to be in thirds, right?

Howard: <unk> this is Howard.

Speaker Change: Yes, we communicate with each other.

Speaker Change: Collection would be in the top third in the top third it'll pull the whole company right. If it's going to be in the middle third yes, it's been.

Speaker Change: The middle third is probably up a little bit bottom middle third by pulling down a little bit extend the bottom third it's going to pull it out and so.

Speaker Change: So.

Speaker Change: If you bring in.

Speaker Change: 100, new collections.

Speaker Change: Yes.

Speaker Change: B <unk> <unk> right, there is going to be top third middle third bottom.

Gary Friedman: There's going to be top third, middle third, bottom third, bottom third. You know, you're going to you know, rank against all, you 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 going to be some of those things you would keep versus mark down. But you're also just going to keep, I would have thought we would have been transitioning through more of our sales collection. I thought the housing market was going to get better too.

Speaker Change: Bottom third.

Speaker Change: Youre going to.

Speaker Change: Rank against all the other assortments that just against all the newness.

Speaker Change: And if you lift the whole if you lift the whole thing up if everything lift.

Speaker Change: Then there is going to be some of those things you would eat versus markdown.

Speaker Change: But youre also just.

Speaker Change: If I would've thought we would've been transitioning through more of our sales collection.

Speaker Change: Sooner, but I thought the housing market was going to get better too and so the housing market.

Gary Friedman: The housing market actually got kind of worse for a period there, when interest rates, spikes, and mortgage applications fell 22 percent. And I think that, you know, this is probably a. Yeah, good chance the housing market slows a little bit from here. You know, as people digest this information, I 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 giving thumbs up, it's a good day. Okay, 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 live read.

Speaker Change: Actually got worse.

Speaker Change: For a period, there right and interest stake bike and mortgage rates mortgage applications.

Speaker Change: And I think that.

Speaker Change: Probably.

Speaker Change: Yes, good chance to housing market slows a little bit from here as people Digest this information.

Speaker Change: Yes.

Speaker Change: Interesting I don't know what kind of day, we're having today, we can give you a library of our business now.

Speaker Change: I'm getting sounds that that's a good day.

Speaker Change: That demand guidance by the way.

Speaker Change: You've got a thumbs up my team give us the thumbs.

Speaker Change: Comes up on the library.

Gary Friedman: So yeah, like, we're just really well positioned right now. I think that's the headline. Like, if you're going to bet on somebody in this race, and I don't know, like, I don't know how poor is our stock now. I mean, I guess, you know, the stock went down, you know, based on some of the numbers we reported, and then it got killed because of... Oh, really? Oh, shit. Okay. I just looked at the screen. I hadn't looked at it. You know, it got hit when I think the tariffs came out, and, you know, everybody can see in our 10K where we're sourcing from, so it's not a secret, and we're not trying to disguise it by putting everything in an Asia bucket.

Speaker Change: Yes.

Speaker Change: We're just really well positioned right now I think thats the headwind.

Speaker Change: Like if you go ahead.

Speaker Change: That on somebody in this race.

Speaker Change: Mike.

Speaker Change: It's our stock now.

Speaker Change: I guess I guess.

Speaker Change: MS Baca will down based on some of the numbers, we reported and then it got killed because of.

Speaker Change: Oh really okay.

Speaker Change: Okay.

Speaker Change: I mean, it looks like just looking at the screen I haven't looked at it.

Speaker Change: It got hit what I think the tariffs came out and.

Speaker Change: Everybody can see in our 10-K, we're resourcing frankly, it's not a secret and we're not trying to disguise it by putting everything into that and in Asia bucket. So you can kind of figure it out and do the math.

Gary Friedman: You know, so you can kind of figure it out and do the math. But I can tell you that anybody else that has scale in the home business. I don't know who, again, put someone like Ethan Allen or, you know, some of the domestic, like, smaller players, you know, like Bassett or something like that, you know, put some of those people aside if they own, you know, more of the manufacturing, but not really, you know, I'd say, that big of a competitor with us any, you know, anyway, so, but anybody of scale, in the home business.

Speaker Change: Yes.

Speaker Change: But I can tell you that anybody else.

Speaker Change: That has scale in the home business.

Speaker Change: Got it.

Speaker Change: Put put someone like Ethan Allen or some of the domestic.

Speaker Change: <unk> players like the asset or something like that yes, I put some of those people who are buying.

Speaker Change: More of the manufacturing, but not really.

Speaker Change: Hey.

Speaker Change: That big of a competitor with SME.

Speaker Change: Anyway so.

Speaker Change: But any anybody at scale.

Speaker Change: In the home business.

Gary Friedman: has a high percentage of their content coming out of Asia. Anybody says they don't. like that just shocked me because I've looked at everybody's. I know most of his businesses pretty well. I've been studying them and watching them and hiring people from them. So we're all in the same boat, right? We might be going at different percentages out of different countries, people move different places. I think the people really that I feel worse for right now is all the manufacturers in China or people who are vested there. It's like that move manufacturing, move their lives, did things, moved out of China into other places and spent a lot of capital, had a lot of disruption, it's costing them a lot of time and capital.

Speaker Change: As a high percentage of their content.

Speaker Change: Coming out of Asia.

Speaker Change: Anybody says they don't.

Speaker Change: Just shocked me because I looked at everybody.

Speaker Change: Reporting.

Speaker Change: Yes, I know most of these businesses pretty well been studying them and watching them inspired people from them. So we're all on the same boat right, we might be going a different percentages at a different countries people move different places.

Speaker Change: I think people really that I feel works for right now it's all of the manufacturers.

Speaker Change: China or people who are invested there.

Speaker Change: Mood.

Speaker Change: <unk> manufacturing move their lives did things.

Speaker Change: Moved out of China into other places and spent a lot of capital have a lot of disruption.

Speaker Change: A lot capital and now with that I'd like Whoa.

Gary Friedman: And now the Fed is like, whoa, I'm not really going to be better off, because they might have been better off in China. higher tariffs and more efficiency and less capital. I think this move is is quite stunning, right? It's going to force everyone to just play a different game. You know, like, rather than sequential hit, like, let me hit Vietnam, and then I'm going to hit this one, and then I'm going to go here, and I'm going to put more tariffs in China, or I might do tariffs here, or I might, you know, do Europe.

Speaker Change: I'm, not really going to be better off because they might have been better off in China.

Speaker Change: Higher tariff and more efficiency and less capital.

Speaker Change: I think this move is quite stunning right yes.

Speaker Change: Everyone.

Speaker Change: Hey, just play a different game.

Speaker Change: Yes, like rather than sequential like let me hit Vietnam, and then Im going to hit this one and then I'm going to go here and I'm going to put more tariffs in China or it might be hair care I might.

Speaker Change: Yes.

Speaker Change: Europe I mean, we have a long term sourcing strategy that.

Gary Friedman: I mean, we have a long-term sourcing strategy that that we think is a really good one. We haven't announced it. You know, it's big and bold. And, you know, it probably seems like it might be the right thing for the rest of the world. But I don't really know where that where this whole negotiation is going to end up. It might end up. you know, in a much better place than it appears to be today. But it's still the long term. sourcing strategy that, you know, the vision that we have, I think is It's like a leapfrog, you know, we don't want to talk about it because we're, you know, trying to figure it out and how you do it.

Speaker Change: That we think is a really good one we haven't announced it big and bold in.

Speaker Change: It's probably.

Speaker Change: Seems like it might be the right thing for the rest of world, but I don't really know where that.

Speaker Change: Where this whole negotiation is going to end it.

Speaker Change: It might end up.

Speaker Change: Yes, much better placed than it appears to be today.

Speaker Change: But.

Speaker Change: Still the long term.

Speaker Change: Sourcing strategy.

Speaker Change: Vision that we have I think is.

Speaker Change: It's like a leapfrog yeah, we don't want to talk about it.

Speaker Change: Trying to figure it out with how you do it.

Gary Friedman: And 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, but Yeah, we're, yeah. We're just going to play our game, you know, we're going to keep narrowing our focus. And as I said, you know, like around here, we talk about being an inch wide and a mile deep, right? Like, you know, in times like this, this is, you know, you might want to take the inch and turn it into a half an inch and go a mile and a half deep.

Speaker Change: We believe it's doable and we believe it's as big as the leapfrog if anything else we do.

Speaker Change: What we focus on it so.

Speaker Change: But.

Speaker Change: Yes.

Speaker Change: We're just going to play our game, we're going to keep narrowing our focus and as I said like around here, we talk about being an inch wide the mildly right.

Speaker Change: The intent at times like this this is you might want to take the engine turned into a half an inch and go with Mylan has to be like this really really clear he really intentional and allocate.

Gary Friedman: Like just be really, really clear, be really intentional and allocate. Human and Financial Capital. with great precision. Thank you, Eric. Thanks Brad.

Speaker Change: Human and financial capital.

Speaker Change: With great precision.

Speaker Change: Thank you Eric.

Speaker Change: Thanks, Brad.

Jonathan Matuszewski: Your next question comes from Jonathan Matuszewski, Jeffries. Good evening and thanks for all the perspective this evening. My first question was a follow-up on the clearance activity topic. and was just hoping to better understand maybe how those, you know, markdowns have been fueling maybe the acquisition of new customers for RH versus incremental spend from existing customers. It looks like in the 10K, you know, 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. and member Cal. We'll stay on.

Speaker Change: Your next question comes from Jonathan manages Gaea Jefferies.

Jonathan: Good evening and linked for all the perspective.

Speaker Change: This evening.

Speaker Change: My first question was a follow up on the clearance activity topics.

Speaker Change: And was just hoping to better understand maybe how those markdowns had been fueling maybe the acquisition of new customers.

Speaker Change: For RH.

Speaker Change: Versus incremental spend from existing customers.

Speaker Change: Looks like in the 10-K the year ended with 265000 members.

Speaker Change: Down a bit versus the prior year. So just trying to kind of understand that relative to the increase in revenue. Thanks.

Speaker Change: Member Count was down again, I, just think that it.

Gary Friedman: Yeah, again, I just think that... You know, at a high level, at a macro level. You're just going to have more markdowns in a down market, and not just because less people are buying, because you should have them, or your sales will be lower. kind of simple people by. Let's sing. in a bad market and they they will buy more things on sale. It's really simple. You know in 2008-9 Yeah, great reception. Yeah, everybody in our category sales went down 35 to 40%. You know, we promoted, you know, said more on promotion and as we should, and we were able to stabilized the business but down 15.

Speaker Change: Yes.

Speaker Change: High level at a macro level.

Speaker Change: Youre, just going to have mark more markdowns in a down market.

Speaker Change: Not just because less people are buying because you should have them or your sales will be lower.

Speaker Change: Yes.

Speaker Change: And a simple people buy.

Speaker Change: Less things.

Speaker Change: In a bad market.

Speaker Change: They will buy more things on sale.

Speaker Change: Really simple.

Speaker Change: Yes.

Speaker Change: Hi.

Speaker Change: 2008 nine.

Speaker Change: Yes.

Speaker Change: Great reception.

Speaker Change: Yes, everybody in our category sales went down 35% to 40%.

Speaker Change: We promoted yes.

Speaker Change: Yes, we had more on promotion and as.

Speaker Change: As we should and we were able to.

Speaker Change: Stabilize the business the down 15 and.

Gary Friedman: And you can go back and look at this, you know, because Ethan Allen used to be I think 1.2 billion and they decided not to promote and were regular price and they went down 40 comps. You know, and their business shrunk to somewhere, I think, slightly below $600 million or somewhere around $600 million. They lost almost half the business over, like, a two-year period. And that was How many years ago? You know, 18 years ago, 17 years ago? They've never recovered. Never Recovered. 18 years later, they're not a billion dollar company anymore. So you got to really be careful and not be arrogant.

Speaker Change: You can go back and look at this because Ethan Allen needs to be I think $1 2 billion and they decided not to promote where regular price.

Speaker Change: They went down 40 comp.

Speaker Change: And their business shrunk to somewhere I think slightly below $600 million of somewhere around $600 million lessen with half the business or over like a two year period.

Speaker Change: And that was.

Speaker Change: How many years ago.

Speaker Change: 18 years ago.

Speaker Change: 17 years ago, they've never recovered.

Speaker Change: Never recovered.

Speaker Change: 18 years later, they're not $1 billion company anymore.

Speaker Change: So you've got to really be careful and not be arrogant.

Gary Friedman: You know, and think like, oh, I think you're a luxury fashion brand. You know, that's not how the furniture market works. So as far as the member count year-over-year, I mean, not a big variance in anything, you know, it's not... Yeah, I mean... You know, things generally track. with our, with our business right with our demand and revenue. So You know, again, 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.

Speaker Change: Thanks, Mike.

Speaker Change: I think Europe.

Speaker Change: <unk> fashion brand.

Speaker Change: That's not how the furniture market works.

Speaker Change: So that's as far as the member count year over year.

Speaker Change: Scott.

Speaker Change: Not a big variance in anything.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Things generally track.

Speaker Change: With our with our business right with our demand and revenue.

Speaker Change: Again.

Speaker Change: When you zoom out here and you look at it.

Speaker Change: Where.

Speaker Change: We're performing and where we're guiding.

Speaker Change: Versus everybody else.

Speaker Change: I like what we're doing better than anybody else.

Gary Friedman: That's really helpful, Gary. Thank you.

Speaker Change: Yes, that's really helpful. Gary Thank you and just a quick follow up question in terms of the sourcing diversification.

Gary Friedman: And just a quick follow-up question. In terms of the sourcing diversification, you know, it sounds like you're looking to bring, you know, half of your sourcing, near half of your sourcing to the U.S. by the end of the year. Probably, you know, 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.

Speaker Change: It sounds like you're looking to bring half of your sourcing 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.

Speaker Change: Could you just kind of comment on that in terms of ancillary benefits for the consumer from from what Youre doing from a sourcing perspective, yes.

Speaker Change: Yes, that's the upholstery category.

Speaker Change: That's not our entire business.

Speaker Change: Alright, so that says our upholstered furniture business.

Gary Friedman: which is one of our biggest categories. Thank you. And that's what we're doing.

Speaker Change: Which is one of our biggest categories.

Speaker Change: Yes.

Speaker Change: Yes that what we're doing.

Seth Basham: Next up, we'll take a question from Seth Basham, Wedbush Securities. Thanks, and good evening. I'm just 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, they 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. You mean our pre-emergency coming in relative to? Do they have guidance? Correct. Any details you want to get to now? Yeah, I mean, look, we're still I'd say product margin still up year over year on the quarter.

Speaker Change: Next up we'll take a question from Seth Basham Wedbush Securities.

Speaker Change: Okay.

Speaker Change: Thanks, and good evening I'm, just 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. They came in a bit light.

Speaker Change: Our sales were still at the low end of your guided range any perspective on what happened from a margin standpoint in the quarter it would be great.

Speaker Change: You mean, our operating margin coming in relative to.

Speaker Change: So the guidance.

Speaker Change: Correct.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: No.

Speaker Change: Yes, I mean look we're still I'd say product margins still up year over year.

Jack Preston: And, you know, some expenses came in higher than expected. But, you know, other than what's called out in the MD&A stuff, we can, you know, we can look at that later. I don't have any specific color at this time. Okay, thanks.

Speaker Change: <unk> and some expenses came in higher than expected.

Speaker Change: But other than what's called out in the MD&A. So if we can we can look at that up later.

At this time.

Speaker Change: Okay, Thanks, and just thinking about that.

Jack Preston: 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 we 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 correlated? Yeah, you know, we're not guiding advertising, but 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.

Speaker Change: Timing of costs in 2025, so you talked about higher advertising costs year on year in the first quarter was an extra source book and when you think about advertising for the balance of the year should we thinking about it being down.

Speaker Change: Down relative to the last three quarters of last year or any other transits.

Speaker Change: Transitory costs that you would call out as we think about.

Speaker Change: The quarterly cadence.

Speaker Change: Yeah, we're not guiding advertising, but.

Speaker Change: I think I would just look at it.

Speaker Change: The.

Speaker Change: The operating margin for the year.

Speaker Change: The adjusted operating margin what that looks like that incorporates our views of advertising so.

Jack Preston: So, I think the first quarter is, you know, obviously the, I think the highest quarter in, from an ad cost point of view. Fair enough.

Speaker Change: I think first quarter is.

Speaker Change: Obviously, I think the highest quarter.

Speaker Change: From an AD touch point of view.

Speaker Change: Fair enough alright, Thank you guys.

Brian Nagel: All right. Thank you, guys.

Speaker Change: Yep.

Jack Preston: The next question is Brian Nagel, Oppenheimer. Good evening. So maybe just a simple question to start, I don't think we've discussed it. Have you, did you talk at all about just the trend in your business? through the fourth quarter and then maybe into Q1 here. Yeah, we said we were only giving, you 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 inside the fourth quarter. Inside the fourth quarter, yeah. So, with, you know, demand ending up in the core business, set 21, and 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.

Speaker Change: The next question is Brian Nagel Oppenheimer.

Speaker Change: Hi, good evening.

Speaker Change: So maybe.

Speaker Change: Maybe just a simple question Scott Thompson group discussion here can you talk at all about just the trend in your business.

Through the through the fourth quarter and then maybe into.

Speaker Change: Into Q1 here.

Speaker Change: Yes, we said we were only giving kind of demand guidance for last year. So we're not giving it this year.

Speaker Change: Brian.

Speaker Change: And Gary in the third paragraph was letter did talk about the trends in the inside the fourth quarter inside the fourth quarter. So.

Speaker Change: With with demand ending up.

Speaker Change: And the core business set at 21, and he gave you some color because you had it from the December call, where we were heading into the call and where.

Speaker Change: Where it's stabilized in January of 19, So you can kind of reach some of those trends in the quarter, but we're not giving any further demand guidance as it relates to this quarter going forward.

Jack Preston: So, you know, you can kind of 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.

Brian Nagel: Okay, that's fair. Then I guess my follow up question, bigger picture, and I know we've been discussing, obviously, tariffs a lot, but recognizing, I mean, it's an extraordinarily fluid environment. Okay, and I think you may be the first company addressing this after the announcement from the White House. But I guess, just philosophically, as you look at this, with sourcing costs is presumably going somewhat higher, where do you kind of shake out? Is it you think you have more ability to kind of adjust prices here in the United States? Or, you know, do something on the sourcing side, either negotiate with your vendors or move sourcing around?

Speaker Change: Okay, No that's fair.

Speaker Change: So I guess my follow up question bigger picture I know, we're discussing obviously tariffs a lot but recognizing.

Speaker Change: Recognizing this is an extraordinarily fluid environment okay.

Speaker Change: The first company addressing this after the announcements whitehouse.

Speaker Change: But I guess.

Speaker Change: Sort of if you look at this in your wood and wood wood sourcing cost is presumably going somewhat higher or how do you say.

Speaker Change: Where do you kind of shake galleries is it more usage.

Just kind of adjust prices here in the United States or do something on the sourcing side, either negotiated with your vendors or move to source and ramped.

Speaker Change: Okay.

Gary Friedman: It's all of the above. It's no different than... navigating through the, you know, China tariffs and so on and so forth. Everybody's in the same boat. Yes, no one is, you know, not exposed to this. I, 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 end. You know, we'll look for efficiency 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 do in these kind of situations to optimize.

Speaker Change: All of the above it's no different than.

Speaker Change: Navigating through the China tariffs and so on and so forth.

Speaker Change: Everybody's in the same boat.

Speaker Change: No one is not.

Speaker Change: We're not exposed to this.

Speaker Change: Well there.

Speaker Change: Will there be impact to the consumer of course, there will.

Speaker Change: Yes.

Speaker Change: But there will be.

Speaker Change: There'll be concessions on the manufacturing side there'll be some concessions on our end.

Speaker Change: We will look for efficiencies in our business we may consolidate.

Speaker Change: Consolidate to fewer vendors to get more leverage and cost in all kinds of things that.

Speaker Change: That you do in these kind of situations.

Gary Friedman: Right. And. You know, so... You know, it's, it's, this is not, again, there's no one's hit escape this, that's what I like. So it's not like, oh, we hit this place. And, you know, now people move to that 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 going to change in the next week or two or three because there's going to be concessions, I think so. There's going to be ongoing things like that for several months or you know we might be in a You know, three month negotiation period, six months.

Speaker Change: Optimized right and.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: This is not again.

Speaker Change: There is no ones.

Speaker Change: Escape. This that's what I like so it's not like we hit this place.

Speaker Change: Now people move to that one and then when they hit that one and then in a spike.

Speaker Change: It's crystal clear.

Speaker Change: That's what I love, there's real clarity right now doubt.

Speaker Change: Is it going to change in the next week.

Speaker Change: Week, or two or three because theres going to be concessions.

Speaker Change: There's going to be ongoing things like that for several months.

Speaker Change: We might BNS.

Speaker Change: Three months negotiation period six months.

Gary Friedman: What I feel 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 mean, we're going to 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 would say it's a percentage of other people, it's going to be much smaller.

What I feel good about.

Speaker Change: DNS is the inventory investment, we made and the heavy inventory we have.

Speaker Change: Is at a good price for the first time in my career.

Speaker Change: Extra inventory as my friend.

Speaker Change: So.

Speaker Change: I think we might be the only one positioned the way we are because of the product transformation, we're going through.

Speaker Change: Yes.

Speaker Change: I mean, we're going to have to.

Speaker Change: Work with our partners. There is things that are in flight that are being produced and we'll have to take some inventory.

Speaker Change: With tariffs and but yes, I would say as a percentage of.

Speaker Change: And other people, it's going to be much smaller.

Gary Friedman: So I think we start with an advantage. I like that. You know, I'm You know, we've been doing this. I don't think there's anybody that's No, there is, there is, yes. guys from Ethan Allen might have been doing this longer than I have. You know, 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.

Speaker Change: So I think we start with it an advantage I like that.

Speaker Change: And.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: We've been doing this I don't think there's anybody.

Speaker Change: Yes.

Speaker Change: No there is serious yes.

Speaker Change: Guys can Ethan Allen it might've been doing this longer than I have.

Speaker Change: But we have a lot of experience around the table here.

Speaker Change: We've been doing this a long time.

And some of us at multiple companies similar to this one and so.

Speaker Change: We know the game as well as anybody we know the countries as well as anybody we have unbelievable.

Gary Friedman: We have unbelievable partners around the world, you know, and we're all. you know, we're all getting we're on the same team, right? It's, it's, this is the time of you know, thought, reflection, collaboration. And I don't know what else to say. It's a... It's a good time to be RH, even though it looks like a bad time. That would be... A mess to be in. look into other times of crisis. You know, and who's come out the other side really well. I think we have, you know, and we have when we had a lot less resources and a way less dynamic strategy than we have today.

Speaker Change: <unk> partners around the world.

Speaker Change: <unk>.

Speaker Change: We're all good we are on the same team right.

Speaker Change: Yes. This is the time.

Speaker Change: Yet reflection collaboration.

Speaker Change: Yes.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: No I don't know what I will say I mean, it's.

It is.

Speaker Change: It's a good time to be RH, even though it looks like a bad time.

Speaker Change: That would be the.

Speaker Change: Mr <unk>.

Speaker Change: Looking at other times of crisis.

Speaker Change: And who's come out the other side.

Speaker Change: Well I think we have.

Speaker Change: And and we have when we had a lot less resources.

Speaker Change: A way less dynamic strategy than we have today so.

Gary Friedman: Yeah, but yeah, it's also time to decide what's nice to do and need to do, you know, and you really want to focus on the need to do and, and be super disciplined and, you know, about Time and Capital. You know, time's the most important thing we allocate. So just thinking about where we're going to focus. in light of this. new situation and understanding that the situation is going to change. We can't see it yet. But it's a big, clear move. That's the best thing. It's crystal clear what what the administration is trying to do.

Speaker Change: Yes, but it's also time decide whats nice to do and need to do and you really want to focus on the need to do.

Speaker Change: And.

Speaker Change: And these super disciplined.

Speaker Change: You know about.

Speaker Change: Time and capital.

Speaker Change: Yes.

Speaker Change: Times, the most important thing we allocate so just thinking about.

Speaker Change: Where we're going to focus.

Speaker Change: In light of this.

Speaker Change: New situation.

Speaker Change: And understanding the situation is going to change.

Speaker Change: We can't see it yet.

Speaker Change: But it's a big clear move that's the best thing.

Speaker Change: So.

It's crystal clear with.

Speaker Change: What the administration is trying to do crystal clear and I thank them for that.

Gary Friedman: 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 a really clear and focused move. They've 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 going to tell you which way I voted. I know, like, it's a dangerous thing to do in this world today. Oh, it's dangerous driving a Tesla. Just kidding, Jack.

Speaker Change: I, thank them for not like.

Speaker Change: Kind of.

Speaker Change: Playing a hodgepodge game all over the place and being really in focus. This is a really clear focus move they've thought about this deeply and for a long time, I mean, thats, what it looks like I don't know anybody inside there.

Speaker Change: Not going to tell you, which way voted.

Speaker Change: It's a dangerous thing to do in this world today.

Speaker Change: Thanks.

Speaker Change: Dangerous driving attached by just getting Jack.

Speaker Change: But.

Gary Friedman: And 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.

Speaker Change: Yes, we are.

Jeff: Good at what we do here and we're getting better all the time this is Jeff.

Speaker Change: This is just another one of those opportunities.

Speaker Change: To learn and grow.

Jeff: And bent and innovate and.

Speaker Change: Leapfrog to another better place that we can even see yet.

Gary Friedman: Thank you. I appreciate the color.

Speaker Change: Thank you I appreciate the color.

Speaker Change: Sure.

Gary Friedman: 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 interior source book that was mailed this year seemed like it had a lot of newness, but I know you also have some things planned for the back half. So can you share some thoughts and where do you think would be the most significant ones?

Speaker Change: Your next question is from Cristina Fernandez Telsey Advisory group.

Speaker Change: Hi, Good afternoon, I wanted to ask a question about product Munich, SG look at what's coming in.

Speaker Change: For 2025 to drive demand.

Speaker Change: Where do you see the most incremental D. I'm thinking the interiors source books mailed this year seem like you have a lot of.

Speaker Change: Units, but I know you also have some things planned for the back half.

Speaker Change: Can you share some thoughts.

Speaker Change: Do you think would be the most significant ones.

Gary Friedman: Yeah, look, I think just start with what we have right now. We're nowhere near optimizing the assortment we have right now. Right? Like again, everything that any retailer buys, they buy it 100% wrong. Nobody buys it 100% 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 going to 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.

Speaker Change: Yes.

Speaker Change: Thank you, let's start with what we have right now.

Speaker Change: We're nowhere near optimizing the assortment we have right now.

Speaker Change: Like again you.

Speaker Change: Everything.

Speaker Change: That any retailer buys they buy it 100% wrong nobody buys at 100% right. I mean, there is some degree of wrong that you have with everybody. So.

Speaker Change: Nobody knows exactly what's the best seller is going to be and how much the buyer and seller and so forth. So we have so much newness that we're optimizing.

Speaker Change: So much opportunity to get those products into our galleries presented right. We have so much opportunity that.

Gary Friedman: We have so much opportunity to I would say just at a global level, at a macro level in our industry, You know, at our competitive set, you're going to see a lot less newnesses here, or it's going to be really expensive newness. Yeah, so that's why, you know, I say, you know, 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, you know, we'll probably still work from a development point of view because it's not going to be clear where the tariffs will really land long term.

Speaker Change: Look at how we're presenting things in.

Speaker Change: Marketing things throughout the company.

Speaker Change: On and on and on so.

I would say just at a global level.

Speaker Change: At a macro level in our industry.

Speaker Change: At our competitive set youre going to see a lot less newness this year for.

Speaker Change: Or it's going to be really expensive newness.

Speaker Change: Yet we have so.

Speaker Change: That's why I would say.

Speaker Change: 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.

Speaker Change: We made price still work from a development point of view, because it's not going to be clear.

Speaker Change: The tariffs were really land long term. So it's not like you wanted to stop everything I think there is some level of investment you would still want to make from a product development point of view and be prepared.

Gary Friedman: So it's not like you want to just stop everything. I think there's some level of investment you still want to make from a product development point of view and be prepared. But I You know, I think You know, I just think that there is. Yeah, you know, every business that's being affected by this is You've got to think differently. 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 going to be. The best people are the ones who are going to win in environments like these.

Speaker Change: But.

Speaker Change: Hi.

Speaker Change: I think.

Speaker Change: I just think that there is.

Speaker Change: Every business that's being affected by this.

Speaker Change: Got to think differently. This.

Speaker Change: Yes. This is forced change.

Speaker Change: This isn't.

Speaker Change: Elective change this isn't like a work from home if you feel like it.

Speaker Change: There is no escaping what just happened.

Speaker Change: So it's going to be.

Speaker Change: Yes.

Speaker Change: First people are going to are the ones who are going to.

Speaker Change: In environments like this.

Gary Friedman: So, you know, like. Newness is just one aspect. at optimizing what we have, you know, looking at other levers and what we're doing and You know, we've got a lot of new galleries and new things coming, you know, today.

Speaker Change: So yes like noon.

Speaker Change: Newness is just one aspect.

Speaker Change: Optimizing what we have.

Speaker Change: Looking at other levers of what we're doing.

Speaker Change: We've got a lot of new galleries, and new things coming in I would say.

Gary Friedman: You know, is 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 you go oh nothing really changed that much except for the you know, the framework of the global trading policies. I don't know. Wish I had a crystal ball, but it's more fun when you don't.

Speaker Change: Yes, Sir is there a risk we push out the new concept maybe yes.

Speaker Change: Yes.

Speaker Change: If there is.

Speaker Change: But theres also.

Speaker Change: A good chance that things resolve themselves in four to eight weeks ago, nothing really changed that much except for the.

Speaker Change: Yes.

Speaker Change: The framework of the global trading policies.

Speaker Change: So I don't know.

Speaker Change: Wish I had a crystal ball, but it's more fun when you're done.

Gary Friedman: And then my second question, the London store is being delayed to 2026. Can you talk about, I guess, what, what the reason for that is? And does that would imply that some of the investments get pushed out to 2026? Um, yeah, it's, you know, doing big, complex. development job. Yeah, things don't. I mean, like if anybody here if you'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.

Speaker Change: And then my second question.

Speaker Change: London store, it's being delayed to 2026.

Speaker Change: Can you talk about I.

Speaker Change: I guess, what what's the reason for that is and does that imply that some of the investments get pushed out to 2026.

Speaker Change: Yes.

Speaker Change: Yes doing big complex.

Speaker Change: Development.

Speaker Change: Yes, Thanks, Don does that mean, if anybody here, if we've ever remodeled at home.

Speaker Change: Nothing really goes right nothing's really on time, everybody says if you build a house.

Speaker Change: Twice as long and twice as much as people would tell you three times, one three times as much imagine.

Gary Friedman: Imagine . you know, stringing together four buildings in London and creating One harmonious shopping experience and, you know, doing things at the level that we do right in the heart of Mayfair. There's just complexities. There's just things that don't go exactly to schedule, no matter, you know, how hard you push. and what you do. So, yeah, just. kind of, you know, some things get done a little faster, some things come online faster, some things take longer. You know, and 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 mid to late September, so we'll probably Yeah open it sometime early spring or something like that, but you know we'll you know, we'll keep you posted.

Speaker Change: Stringing together four buildings in London and creating.

Speaker Change: One harmonious shopping experience.

Speaker Change: Doing things at the level that we do right in the heart of Mayfair. This is complexities. There are some things that don't go exactly as schedule no matter.

Speaker Change: How hard to push.

Speaker Change: And what you do so.

Speaker Change: Yes.

Speaker Change: Kind of some things get down a little faster some things come online faster somethings take longer.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: It could we.

Speaker Change: Really rush and spend more money and try to get it open in December.

Speaker Change: Third I think the best time to open.

Speaker Change: In mid to late December So we'll probably.

Speaker Change: Yes, openness sometime early spring or something like that but we'll we'll keep you posted.

Gary Friedman: I, you know, we're not we're not you know stamping out mall storage where you just filled the store from, you know, and kind of fill up you know, fill up a windowless box with some pictures, 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 in 12 to 18 weeks. Yeah, it's really simple. Um, no. That storefront that was 40 feet wide and 50 feet wide and 100 feet deep, 5,000 feet, you know, or maybe you're doing 10,000 feet.

Speaker Change: We're not we're not.

Speaker Change: Stamping out mall stores, where you just build the storefront and kind of fill up.

Speaker Change: Philip a windowless box with some fixtures.

Speaker Change: That's easy to do.

Speaker Change: Right.

Speaker Change: Yes, My former company.

Speaker Change: We were we could stamp out a store in 12 months to 18 weeks.

Speaker Change: Really simple.

Speaker Change: Yes.

Speaker Change: The storefront is 40 feet wide.

Speaker Change: 50 feet wide and 155000 feet.

Speaker Change: Or maybe at 10000 feet.

Gary Friedman: 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 you might not see something like this for another hundred years. if done You know, the complexity, the cost, the investment, you know, you've got to be able to perform in spaces like these, you know, and, you know, we've proven is we've kept expanding and dimensionalizing our physical platform and incorporating hospitality and incorporating interior design services and offices and, you know, all kinds of support, you know, indoor, outdoor space, rooftops, gardens, courtyards, and all the things we do.

Speaker Change: These are really big complex.

Speaker Change: Sure.

Speaker Change: Investments in <unk>.

Speaker Change: Leaf products, where the company no one will ever build I don't believe anybody will build a platform.

Speaker Change: Anywhere comparable to what we're building.

Speaker Change: For sure not in my lifetime.

Speaker Change: You might not see something like this for another 100 years.

Speaker Change: <unk>.

Speaker Change: The complexity.

Speaker Change: The cost the investment yes.

Speaker Change: <unk> got to be able to perform in spaces like these.

Speaker Change: We've proven as we kept expanding.

Speaker Change: Dimensionalize in our physical platform and incorporating hospitality cooperating Siri design services and offices.

Speaker Change: The sport, yet indoor outdoor space rooftop gardens courtyard, and all the things we do know built anything like that no one in the world both anything close to what we did so.

Gary Friedman: No one builds anything like us. No one in the world builds anything close to what we do. So, it's more complex and. Yeah, and plus, we're constantly innovating. So, you know, there's Yeah, it's just... That's Stampin' Things Up! That's what happened.

Speaker Change: It's more complex.

Speaker Change: And.

Speaker Change: Yes, plus we're constantly innovating so there is.

Speaker Change: Yes.

Speaker Change: Staffing things out.

Speaker Change: That's what happened.

Yes.

Gary Friedman: I haven't seen anybody who's ever been on time with a kitchen remodel, you know, so. Thank you.

Speaker Change: I haven't seen anybody has ever been on time with a kitchen remodel.

Speaker Change: Yes.

Speaker Change: So.

Speaker Change: Thank you.

Gary Friedman: 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. Hey, well, I You know, thank you everyone for your time. So I said at the beginning, welcome to a new world. and you know my quote I use from Theodore Roosevelt every moment, movement has a lunatic fringe I think is quite appropriate but let's not let that just characterize what's happening in 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 deeds and and we will you know err 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 I did.

Speaker Change: 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.

Speaker Change: Great well.

Gary Friedman: Thank you everyone for your time.

Speaker Change: <unk>.

Speaker Change: As I said at the beginning welcome to a new world.

Speaker Change: And.

Speaker Change: The quota use from Theodore Roosevelt every moment movement Hasnt <unk> branch.

Speaker Change: I think it's quite appropriate, but let's not let that just characterize what's happening in the external environment. It really is what's happening in the internal environment here.

Speaker Change: Yes, we are the men and women in the arena and we are the one who will do the good deeds and and.

Speaker Change: And we will.

Speaker Change: Air and come up short.

Speaker Change: From time to time, but we.

Speaker Change: We will also do some extraordinary remarkable and amazing things.

Speaker Change: And that's what we believe we are on the planet to do and.

Speaker Change: And we believe will create one of the most admired brands in the world if not the most admired so.

Speaker Change: Got it.

Gary Friedman: Bye. 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 want to thank our team members around the world, our partners around the world, you know, all of our team members here at the Center of Innovation and our, you know, our campus in Corto Madera, California. I think the work we've done this past year in 2024 is extraordinary, the strategic separation we've created is unlike anyone else in our marketplace. you know, our stock is going to go up and down.

Speaker Change: It's long term thinking and it's that.

Speaker Change: Being an inch wide and a mile deep and youll see it get even more focused and more intentional in times like these so I want to thank our team members around the world our partners around the world.

Speaker Change: All of our team members here.

Speaker Change: Centered innovation in our in.

Speaker Change: Our campus in Corte Madera, California.

Speaker Change: I think the work we've done.

Speaker Change: This past year in 2024, its extraordinary strategic separation we've created.

Speaker Change: Unlike anyone else.

Speaker Change: In our marketplace and.

Speaker Change: Our stock is going to go up and down I have been here 25 years I was here when it was <unk> 50 per share and adjusted for the number of shares. We have is that was probably a nickel a share.

Gary Friedman: I've been here 25 years. I was here when it was 50 cents a share and adjusted for the number of shares we have. That was probably a nickel a share. And so, yeah, when you think about it, it's a long term. You think about it like you're an owner and you own 100% of the company. You make the kind of decisions that allow you to do the kind of work we're doing for 25 years of your life. And I feel privileged 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.

Speaker Change: And so.

Speaker Change: Yes, when you think about it as a long term you think about it like you're an owner and you own 100% of the company you make the kind of decisions that allow you to do the kind of work we're doing for 25 years of your life.

Speaker Change: Privileged to be here to be doing that and I feel privileged and proud to be doing it with debt.

Speaker Change: The people and partners with team RH so.

Gary Friedman: 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.

Speaker Change: As I like to say, yes never underestimate a few good people, who don't know what cant be done, especially these people the carpathia everyone.

Speaker Change: Okay.

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

Speaker Change: And once again, everyone that does conclude today's conference I would like to thank you all for your participation today you may now disconnect.

Speaker Change: [music].