RH

Well, good day, everyone, and welcome to the RH Fourth Quarter and Fiscal Year 2024 Earnings Call. I would now like to turn the call over to Ms. Allison Malkin. Please go ahead, ma'am.

Thank you. 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. 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 laws, 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. Please also note that these forward-looking statements reflect our opinion only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Also, during this call, we may discuss non-GAAP financial measures which adjusts 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 . A live broadcast of this is also available on the Investor Relations section of our website at ir.rh.com. With that, I'll turn the call over to Gary.

Thank you, everyone. 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. 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 as the most prolific product transformation and platform expansion in the history of our industry continues to unfold. Our industry-leading growth in the quarter was driven by the RH brand, where fourth quarter demand increased 21%, demonstrating the disruptive nature of our product transformation. While demand softened in mid-December after mortgage rates spiked and mortgage applications fell 22%, post the Fed signaling rates would remain largely unchanged this year, the RH brand demand stabilized at up 19% in January. While we expect a higher risk business environment this year due to the uncertainty caused by tariffs, market volatility, 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. 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. 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 million to $300 million at cost that we plan to turn into cash as we optimize our assortments post our product transformation. 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. 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%, adjusted operating margin of 14% to 15%, adjusted EBITDA margin of 20% to 21%. In the first quarter, we're forecasting revenue growth of 12.5 to 13.5%, adjusted operating margin of 6.5 to 7%, adjusted EBITDA margin of 12.5 to 13%. The above outlook includes a negative 160 to 200 basis points of operating margin impact from investments and startup costs to support our international expansion. Every act of creation is first an act of disruption, Pablo Picasso. We have worked hard to destroy the former version of ourselves. We're in the process of unleashing what we believe is an exponentially more inspiring and disruptive RH brand. We believe the important investments we are making during this depressed housing cycle are creating a level of strategic separation in our industry that rivals the most important brands in the world. Our product transformation plans for 2025 include The introduction of our new RH Outdoor Sourcebook, featuring the most dominant assortment of high quality outdoor furniture in the world, arrived in homes early February with eight new furniture collections, an exciting new textiles offering, plus a significantly improved in stock position to start the season versus a year ago. The introduction of our new RH Interior 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. 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. 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 Couture Poultry by Dimitri & Co. and RH Bespoke Furniture by Joseph Jupe into this new brand extension. enabling greater exposure and market reach versus standalone concepts. We will be sharing more details of the 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. 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 US at the end of this year. Now let me shift your attention to the expansion of our platform. We continue to open the most inspiring and immersive physical experiences in our industry, and some would say the world. Spaces that are a reflection of human design, a study of balance, symmetry, and perfect portions. Spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality. Spaces with garden courtyards, rooftop restaurants, wine and barista bars. Spaces that activate all of the senses and spaces that cannot be replicated online. Our plan to expand the Yaris brand 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 Oak, and RH Montreal, the Gallery at the 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 Hassett, the gallery at the Americana, R.H. San Diego, the gallery at University Town Center, and R.H. 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 R.H. design ecosystem, inclusive of the existing R.H. gallery at the Historic Post Office, a freestanding R.H. outdoor gallery that opened last month, plus a new concept gallery in the former Ralph Lauren building on Greenwich Avenue, opening in the second half of this year. We also plan to expand our brand presence in East Hampton this summer by opening a freestanding RH outdoor gallery and are exploring plans to further enhance our design ecosystem with a new concept gallery in the near future. As previously communicated, we anticipate an inflection of our business in Europe as we begin to open the important branded building markets of Paris in 2025, plus London and Milan in 2026, all with dramatic and brand building hospitality experiences. We believe post each opening, we will begin to have the scale to support the necessary advertising investments to accelerate our growth in Europe. Every moment has a lunatic fringe. Quite appropriate for today. Theodore Roosevelt, America's first Nobel Prize winner, commander of the legendary Rough Riders, Medal of Honor recipient, 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 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 marked 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 deed, who knows the great enthusiasms, the great devotions, who spends himself in a worthy cause, who at his best knows in the end the triumph of high achievement, and who at his worst, if he fails, at least fails while daring greatly. So his place shall never be with those cold, intimate souls who know neither victory nor defeat. While our ambitions are not political, maybe they should be, they are personal. We remain inspired by the progressive thinkers, unafraid to push forward new ideas and fresh perspectives. It's a culture of leadership versus 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 it till it hurts. until we can see what others can't see so we can do what others can't do. That's how you transform a money-losing restoration hardware store 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. 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. 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 and learnings, the insights and intricacies, the sacrifices made, and the scar tissue developed by getting knocked down 10 times and getting up 11, leads to the development of the mental and moral qualities that build character in individuals and form cultures and organizations. Lessons that can't be learned in a classroom or by managing a business, lessons that must be earned by building one. Are we part of the lunatic fringe? If it means, as President Roosevelt said in his speech at the Soborn, 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. Carpe diem. 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 1 on your telephone keypad. We do ask that you limit yourselves to one question and one follow-up. We'll go first to Simeon Gutman, Morgan Stanley.

Good afternoon. This is Pedro on for Simeon. Thanks for taking our question. My question is how you see the outlook for the consumer. It seems we've seen a slowdown in consumer sentiment year-to-date, and the housing market is not seeing a turn yet. Last year we saw early signs of an inflection, but now it seems things have 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 season? And related to that, how are legacy galleries doing? How much of demand growth is coming from the design galleries as opposed to the legacy galleries?

Okay, let me break that down. So how do we see the consumer? Unfortunately, we, you know, 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 have to 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. And so I think if you 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 uh 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 uh at our at our core we are innovators we're not duplicators we're leaders we're not managers um we're visionaries and we're not victims so um yeah whether it's a you know, confused or conflicted consumer environment because of high interest rates or new tariffs or trade wars or, you know, military wars. I mean, there's always something. You know, and, you know, so, I mean, look, we feel confident no matter what the environment looks like. We, you know, I just articulated in the letter That we just, yeah, we just, anniversary is 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 consumers, see how they're feeling. We focus on our work. 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 um i think we do that better than anybody in the world um yes now the game's changed somewhat um but i wouldn't want to compete with us in any environment so And legacy galleries, which is design galleries, they're all performing well. Yes. So, not that much different in the comps. I mean, there's, you know, some places that obviously might be doing better than others at different times for different reasons. But, yeah, we're happy with all the galleries. We're opening more galleries. We have new kinds of galleries. We have, you know, design ecosystems, design compounds. We've got a lot of things coming. So, you know, carrots or not, here we come.

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

Good evening, Gary Jack. Gary, your initial comment I think was inventory is your friend. And so we'd love to sort of hear you expand on that initial thought, especially as all of us, right, sort of try to do the exposure math to Vietnam, Indonesia, and India. Just sort of what should be the parting message here on sort of RH's ability to sort of mitigate, migrate, and de-risk the situation that was just thrown at all retail operators?

Sure. Let's start with the inventory as your friends. You know, going through the, you know, this, you know, this kind of massive product transformation we've been going through, you know, when you're making big changes in your assortment, you know, 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? You want to not sell out, you know, 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, you know, quickly. So, you know, we knew we were going to make you know, about $100 million insurance debt on inventory, you know, on the front end of this. And, you know, we expected trends to be better. We were, you know, expecting our comps in the housing market to kind of come back. You know, I mean, I think everybody had a sense that inflation looked like it was coming under control and interest rates were easing and that, you know, 25 would be, you know, would be the next upswing to the housing market. You know, so like, look, we were all wrong. I mean, and even at the Fed, they're almost always wrong. So, you know, being wrong is all part of, you know, invention and innovation and, you know, going somewhere you've never been and moving into the future, right? So I think, you know, while you know, today's tariff news was, yes, somewhat shocking, you know, right? 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, and he, uh, You don't have to do too much work to find out, well, where did all the manufacturing move to from China? Well, it moved to Vietnam, Indonesia, Cambodia, and other countries. And those manufacturers moved and made investments and built up operations. And it was devastating for people that invested big sums of money to relocate. You know, there's, you know, the U.S. has leverage today. I don't, you know, leverage is how you win negotiations, not blessing. So I don't think, 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. And You know, they'll, 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. 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, um, was important, you know, 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. Yeah. So, you know, 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, and the U S. 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, you know, and America can make furniture, and that might be part of it, and part of it might be these countries, you know, 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, it's, you know, 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 mean, it's just, you know, cut the world off guard because no one's ever moved at this speed. No one's, you know, I mean, we're seeing a new kind of leadership, which again, in many ways, I think is impressive. So, you know, 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 surprise, you know, because I think we can outthink others. We can outsmart others. We can outcreate others. We can outinnovate others. You know, so I'm, you know, let's see what went on. I'm going to quite frankly, you know, on the phone to Jack and, you know, I'm in my car and, and, uh, you know, he's telling me what happened and I just started laughing. I thought, okay, showtime. This is, this is when we thrive. We're at our best in times like this, you know? And, uh, yeah. So, yeah. So it's exciting, exciting times. Yeah. It's, you still have to compete. You know, the playing field is the playing field. Uh, 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, they don't really have our platform and capabilities. So I'm not too worried about any of that. I mean, I'm more excited to get off this phone and get to work. You know, it's exciting times, so.

Thank you, Gary. And then just a quick follow-up for Jack. I think the company has sort of spoke to the return of positive free cash flow in 2025. Maybe 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 access?

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. Yeah, we've got to kind of rethink some of the newness. You know, maybe the new concept, you know, that I wrote about might get delayed, you know, until we have some, you know, 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. I mean, we'll just focus in other ways. I just, I think... A lot of the goods and development are coming from countries that have prohibitive tariffs. So again, it could all change in 30 days. Some of these countries could go from 45% to 25%, which is very manageable. 45% is much tougher. And the administration knows that. So I'm actually glad if this wasn't a death by a thousand cuts, right? I'm glad it didn't go, oh, it's 15%. And oh, okay, hey, just kidding, it's 25%. Hey, now it's 35, now it's 45. And, you know, because you don't have clarity. I think what, again, I applaud the clarity, the intention. You know, and the logic. So, again, I'm just excited now to, you know, we're sitting around here. We're not scared. We're smiling. Like, we're kind of like, okay, let's go. You know, it's a new world. It's a new day. We're at our best in times like these. Yeah, I wouldn't want to compete with us in times like these. You know, no one is going to outwork us. No one is going to outthink us. No one is going to outcreate us, outinnovate us. You know, it's... You know, so just in general, I'm not too worried about it. I don't think our business is going to collapse and say like inventory is our friend. I, I get two to $300 million of inventory that my competitors don't. They might have to do some ordering at very expensive pricing. You know, we, we, you know, we can navigate through this really well, you know, in the short term. So, you know, I, you know, I feel pretty good about this year. I mean, I, we got to get into the details and 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 there's just always another move in in times like these and so i'm just excited about finding the other moves you know way before any of our competitors do so um fun times thank you gary thanks jack thank you

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 inventories. You know, we're well-positioned. Like, it's not, this is, these are the times when you want to do less and think more so you can do more, right? This is not a time to panic. Not a time to react. It's a time to think, you know, invent, innovate, and, yeah, develop. you know, compelling vision for times like these. But I think it's, again, you know, we saw, you know, 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? This is, you know, what did they say in the movie 13 Days, you know, when he was talking to, you know, 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 okay. I have more of an edge now. I don't like being caught off guard. So now we're just going to kind of take some time. Don't move until you see it. So we've 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. You know, is the consumer going to stop buying tomorrow? I mean, is this going to be like, you know, 2008, 2009 housing crisis? Or, yeah, like, I don't think so, because I don't think anybody really understands what's going on. You know, at a very deep level, I think it's going to 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 worse? It might. Is that terrible? You know, no. I mean, we can navigate through any situation. We're in a really good position. You know, we gave guidance that was appropriate for the moment. 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. Not sure yet. You know, when it takes some time to analyze it. So, that's it.

Yeah. Got you. My follow-up question is on your point about guidance. You might have been a bit more conservative. had you had the full benefit of insight into all the policy 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. I don't think I'd go below the guidance that we've given, not today. I think there's a lot of things that can be done and a lot of moves that are going to be made at the government level around the world. A lot of things are going to be made at the strategic level with governments, countries, the strategic level, the manufacturers, Retailers and, you know, people are going to get really creative. That's what they do in times like this. Yeah. Yeah. Humans, uh, you know, we're not the biggest or strongest, but we're the ones most adaptable to change. Right. So, um, you know, changes 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% or this or that. And yeah, you know, like they're going to have a harder time figuring this stuff out. So, uh, I think we're good. And we don't need to raise any capital. We've got, you know, we, we, I think we're in good shape. The cashflow is going to be strong this year. Um, We'll see how the real estate market is. We've got real estate assets we can turn into cash. 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, we just sold for 27 million. We were going to build a house on it. The housing construction costs in Aspen became prohibitive. It didn't look like a good investment. Someone buy this old house for 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, you know, many others, you know, several others. R.H. England, we have a guest house in New York. We've got... An episode of property. Yeah, it was an episode of property. You know, 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%, 8% operating margin going into, you know, something like this. I mean, you know, we have a lot of levers. We can, you know, slow down spending. I mean, I guess I can talk about, you know, no, don't say it. Okay. Never mind. You turn it on. No, don't go there. Okay. All right. It just got waved off anyway, Michael.

It was nice talking to you. Thank you very much, and good luck. Okay. Thank you.

And the next question is Max Recklenko, TD Cowen.

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

Yeah, I mean, what's embedded is what we talked about, right? And so, you know, the China-Mexico-Canada tariffs, you know, we— It's basically what we knew before. It's basically what we knew. I mean, you know, we think our guidance is on the conservative side. But, you know, what you should be modeling to re-architect the supply chain, like, I Well, Max, can you hear what he just said? In the first 30 minutes, I said it's not a time to overreact. This is, you know, 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 look at the numbers, you say the U.S. has been in a disadvantage, not really treated fairly. You know, does it have to go to a complete balance? No, but, you know, just because of the trade imbalance, I mean, it's like us funding, you know, the growth of other economies. And I think that, you know, the administration is 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 that's investing in military and protection. We want to have more fair and balanced trade policies. It's not this is the move he made and this is it. This is the first part he's played globally. New part. Mexico and China are neighbors. Yeah, and I'm not going to try to mix you on Canada and China. You know that that has been the. Single place of tariffs. This is now a global. Negotiation. And. I don't know, I I think. I would predict. That there will be concessions. And this. I don't believe it's 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 any administration, at least in our lifetimes, negotiate. I think, you know, it's not a time You know, it's like they say to our team, they say, don't move until you see it. Take your time. This is a chess game, not a checkers game.

Got it. That's helpful. And then just can you provide any color on the quarter-to-date demand and just given the volatility in the stock 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 revenues here?

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. So we've now anniversaried that. And so I gave you kind of a, you know, a look at January, right? And, you know, from a demand point of view, because that was still last year, but looking forward, we're not, we're no longer going to give demand. We'll give revenue guidance, which, you know, is generally directionally in line with demand. You know, so might change from quarter to quarter. You might have, you know, some, things that ship across quarters somewhat differently, but it's usually not a big disconnect.

And Max, I would add as an example that at Q4, the gap narrowed. So with Q4 revenues on a comparable 13-week basis up 18 and Q4 total demand growth up 17. So that, in essence, normalizes the backlog piece that we were talking about and supports the point that Gary just made.

Yeah.

Thank you, Jack.

Awesome. Thanks a lot, guys. Best regards.

Thanks, Max. We'll go to Andrew Carter, Stiefel.

Hey, 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 inflecting, so is that going to be a majority in gross margin, or are we going to see a lot in SG&A because you've lapped the investments? And then the second question around the timing, there's more of a disconnect on cost growth in 1Q. Is there anything related to that? Is that timing around the advertising investments or something like that or delivery, just anything? I'll stop there.

I'll comment and I'll turn it over to Jack. If you want the level of detail you're looking for, I want you to come work on our FCNA team. And so you could help us with all the modeling. But let me talk about ad costs and, you know, 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 a year ago where you just sort of had the outdoor book. So that's, you know, we always say that the quarter to quarter differences, you know, there's a lot of that variability that's driven by the ad costs. So you're seeing that. And then 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 positive factors in both lines. I just can't speak to the magnitude just based on how we're guiding and our approach.

Fair enough. Just thinking about more of a high level, you kind of said it today, but do these tariff announcements against your competitors, 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 your true competitors, and you have a lot of people coming out of Europe, You have some niche here. Are they really at any kind of cost advantage here today that you have or just any kind of help with that? Thanks.

No, I don't think anybody's at a cost advantage from us. I mean, we'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 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. 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 we can just, there's a lot of moves we can make, right? We can move more upholstery. We could look at bringing up wood furniture operations, I think the most difficult one today is, you know, is peak furniture out of Indonesia. You know, Indonesia is the capital of premium peak, you know, sustainably harvest peak in the world. And, you know, other countries, it's a little dicey and it's definitely not the same quality. So that's why, you know, I mean, forever that I, you know, all my life in this business uh the best quality the biggest peak resource in the world is in indonesia uh you know that's that's a harder one to kind of navigate out of and um but then again we're kind of the biggest and the best so if you want realty furniture and you don't want know some people are like doing mahogany mahogany is not going to last outside you know it's like much cheaper wood you know they're doing acacia wood they're doing uh you know rubber wood miata wood eucalyptus wood i mean all nice trees don't get me wrong um just not great wood for outdoor furniture if you want it for yeah 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 look like crap after a few years. So, um, why we don't sell any of that stuff. Uh, 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. I mean, you know, it just may mean the furniture is a little bit more expensive, but it's, it's, uh, What was the Indonesian number?

The tariffs?

Yeah. 32%. Yeah, 32%. I mean, we dealt with those kind of tariffs out of China. I mean, you figure out how to be more efficient. You figure out how to work better. I like to say humans without deadlines are useless, right? We're no good without deadlines. We're not good without... pressure. Uh, you know, it's why the great athletes perform in the, in the playoffs, not necessarily their best in the regular season. Although Steph Curry did have 12 threes and 52 points last night. I was happy about that, but it's getting close to the playoffs and it was against one of their, their rivals. Right. So, you know, you see like, you know, we're kind of one of those teams, like we're great in the playoffs. We're great under pressure and humans, generally you're better under pressure, you know, but you could, 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? Do we have to raise money? Do it now? Like we're good. You know, I mean, I do not think this is going to be, you know, it's like, going to bring the whole economy down. I think, you know, there's going to be pain. You know, I told everybody I know, and I think that, you know, when you kind of saw where this was going, that, look, there may be pain for the next 12 to 18 months or 24 months, but I think the second half of this administration's tenure here is could be a booming American economy. So, you know, I think the key is how do you position yourself for the other side of that? How do you, you know, how do you navigate correctly now? How do you optimize your, you know, your business and your sourcing structure? You know, just all aspects of the business. There will be better times and better days. So there always are.

Thanks, I'll pass it on.

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

Hi, thanks. It's Brad Thomas. 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 lay some.

Thanks. Yeah, those are all really good questions. I mean, you know, I was just talking to my wife last night, like, hey, if this really goes sideways or, you know, I mean, if PSL, you're sure we're going to go to Italy this summer? You know, no, 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, mean look what's happening to tesla like you know like it's crazy right i mean you have a world that's alive on the internet right and like tweets and messaging and social media and news and uh you know i'm sure this is going to create great noise um i don't know you know it's i i think it it's communication is really key right now. You know, messaging is really key right now. I thought it was interesting, you know, how Trump was holding up the big sign with, you know, this is how much we're getting tariffs, right? And, you know, we're just trying to balance the thing out. You know, I think hopefully that, you know, that image and that sign will get to people in other countries and they'll also put some pressure on their governments to kind of level the playing field. Again, I'm just thinking out loud with you. We've been thinking about this. I think we underestimated the size of this move, but I'd rather have this happen than four moves to get there and a long drawn out thing. I think this is gonna get us to a conclusion much faster, a much clearer conclusion There 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 numbers that aren't true. I mean, I hope not. I mean, that would be a whole different issue, right? Like, holy cow. But I think the move is a well-played move. The information is out there. The logic is out there. The intention, the desire is clear. It's not that 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, you know, will there be some backlash? I'm sure we're going to read about stuff and American businesses with picketers 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? We always have construction delays. So yeah, 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 to be a big deal we're not doing that much volume out of europe today anyway um you know i hope things you know i hope things kind of get yeah more more clear and you know the world's uh it's kind of a more balanced place from trade and from you know conflict and uh um by the time we open paris yeah because we're all planning to which is one of the biggest home shows in the world will be, you know, all the most influential designers and other people will be there. And, you know, it's a 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. 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, but now, you know, 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, right?

That's very helpful, Gary. And if I could just ask a follow-up 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 here?

Yeah, I think, you know, think about clearance in relationship to the economy, right? 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 products that we're bringing in. You know, we talk about the, you know, products in thirds, right? 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, yeah, if it's in the 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, 100 new collections, and you, yeah, they're going to be in thirds, right? 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 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 collections sooner, but I thought the housing market was going to get better too. And so the housing market actually got kind of worse for a period there, right? And interest rates and mortgage rates, mortgage applications fell 22%. And I think that it's probably a good chance the housing market slows a little bit from here as people digest this information. It'll be interesting. I don't know what kind of day we're having today. We can give you a live read of our business now. I'm 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. 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, where's our stock now? I mean, I guess, 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. 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, again, put someone like Ethan Allen or, you know, some of the domestic, like, smaller players, you know, like Bassett or something like that. 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 that thing, you know. Anyway, so, but anybody of scale in the home business has a high percentage of their content coming out of Asia. Anybody who says they don't, like that just shocked me because I looked at everybody's, you know, reporting and I know most of these 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 invested there that moved manufacturing, moved their lives, did things, moved out of China into other places. and spent a lot of capital, had a lot of disruption. It's cost him a lot of time and capital. And now, all of a sudden, he's like, whoa, I'm not really going to be better off, because they might have been better off in China with higher tariffs and more efficiency and less capital. So I think this move is quite stunning. It's going to force everyone to just play a different game. you know, like rather than sequential, 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 might be here. I might, you know, do Europe. 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's probably seems like it might be the right thing for the rest of the world. But I don't really know where this whole negotiation is going to end up. It might end up in a much better place than it appears to be today. But still, the long-term sourcing strategy and vision that we have, I think, is like a leapfrog. We don't want to talk about it because we're trying to figure it out and how you do it. And we believe it. 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, you know, we're, yes, 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. like this be really, really clear, be really intentional, and allocate human and financial capital with great precision.

Thank you, Eric. Thanks, Brad.

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 markdowns have been fueling maybe the acquisition of new customers for RH versus incremental spend from existing customers. It looks like in the 10K, the year ended with 265,000 members. So down a bit versus the prior year. So just trying to kind of understand that relative to the increase in revenue. Thanks.

Remember Cal was down. 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 you, you know, not just because less people are buying, because you should have them or your sales will be lower. it's just kind of simple. People buy less things in a bad market and they will buy more things on sale. It's really simple. You know, in 2008 and 9, you know, Great Recession, you know, everybody in our category sales went down 35 to 40%. You know, We promoted that more on promotion and as we should, and we were able to stabilize the business to down 15. And you can go back and look at this, you know, cause 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 comp, you know, and their business shrunk to somewhere, I think slightly below 600 million or somewhere around 600 million. They, they left some of half the business or, or, you know, 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. 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, I, I, not, you know, not a big variance in anything, you know, it's not, yeah, I mean, you know, things generally track, you know, with our, with our business, right, with our demand and revenue. So, you know, 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.

Yeah. That's really helpful, Gary. Thank you. 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 BISL, which is one of our biggest categories.

Thank you. Yeah, that's what we're doing.

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

Thanks, Anne. 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 operating margin coming in relative to the guidance? Correct.

Any details you want to get? Yeah, now.

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

OK, thanks and just thinking about Timing of costs in 2025, you talked about higher advertising costs year-over-year in the first quarter with an extra source book. You know, 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 core allocations?

Yeah, you know, we're not guiding advertising, but, you know, I think I just look at, you know, the operating margin for the year and, you know, the adjusted operating margin, what that looks like, you know, that incorporates our, you know, our views of advertising. So I think the first quarter is, you know, obviously I think the highest quarter from an ad cost point of view.

Fair enough. All right. Thank you, guys. Yep.

The next question is Brian Nagel Oppenheimer.

Hi, good evening. So, uh, maybe just a simple question to start. Did you talk at all about just the trend in your business through the, through the, through the, the, the fourth quarter and then maybe into, uh, into, into Q1 here?

Um, 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, um, Brian, but, uh, And Gary, in the third paragraph of his letter, did talk about the trends inside the fourth quarter.

Inside the fourth quarter. So with 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. 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.

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 And 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, and with sourcing costs is presumably going somewhat higher, where do you kind of shake out? Do you think you have more ability to kind of adjust prices here in the United States? or do something on the sourcing side, either negotiate with your vendors or move to source and rent?

All of the above. It's no different than navigating through the China tariffs and so on and so forth. Everybody's in the same boat. No one is not exposed to this. Will there be there be impact to the consumer, of course there will. Yeah, I mean, you know, 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 you do in these kind of situations. to optimize. Right. And you know, so, you know, it's, it's, this is not, again, there's no one's 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 we might be in a three-month negotiation period, six months. What I feel good about seeing 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 think we might be the only one positioned the way we are because of the product transformation we were going through. You know, so I, you know, I 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. But, yeah, I would say it's a percentage of other people. It's going to be much smaller. So I think we start with an advantage. I like that. And, you know, we've been doing this. I don't think there's anybody that's No, they're serious, yes. Guy from Ethan Allen might have been doing this longer than I have. But we have a lot of experience around the table here. We've been doing this a long time. And some of us at multiple companies, similar to this one. And so we know the game as well as anybody. We know the countries as well as anybody. We have unbelievable experience 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, uh, this is a time of, you know, thought, reflection, collaboration, uh, and, uh, you know, no, I don't know what else to say. I mean, it's, it's, it's, uh, it's a good time to be RH, even though it looks like a bad time. that would be the missed view. 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. So 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, uh, uh, and these super disciplines and, um, you know, about time and capital, you know, 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. So. It's crystal clear with. What the administration is trying to do, crystal clear, and I thank them for that. Yeah, I thank them for not like. You know, kind of. You know, playing a hodgepodge game all over the place and being really unfocused. 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, I'm not going to tell you which way I voted. It's a dangerous thing to do in this world today. Oh, it's dangerous and driving a Tesla. Just kidding, Jack. But we, you know, we're good at what we do here. And we're getting better all the time. This is just another one of those opportunities to learn and grow and, you know, invent and innovate and leapfrog to another better place that we can't even see yet.

Thank you. I appreciate the color.

Your next question is from Christina Fernandez, Tulsi Advisory Group. Hi, good afternoon.

I wanted to ask a question about product newness. If 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?

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 you 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, so much opportunity to get those products into our galleries presented right. We have so much opportunity to look at how we're presenting things and marketing things throughout the company, on and on and on. So 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 newness this year, 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, yeah, 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. 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, you know, I think, you know, I just think that there's, you know, every business that's being affected by this has 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, you know, the best people are going to, are the ones who are going to win in environments like these. So, you know, like newness is just one aspect. 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, to say, you know, is there a risk we push out the new concept? Maybe. Yeah. You know, if there's, you know, but there's also, a good chance that things resolve themselves in 48 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.

And then my second question, the London store is being delayed to 2026. Can you talk about, I guess, what the reason for that is? And does that would imply that some of the investments get pushed out to 2026?

Yeah, it's, you know, doing big, complex development jobs. Yeah, things don't, I mean, like if anybody here, if we've ever remodeled a home, you know, nothing really goes right. Nothing's really on time. Everybody says, you know, if you build a house, it's twice as long and twice as much. Then there's people tell you three times as long, three times as much. Imagine, you know, stringing together four buildings in London and creating one harmonious shopping experience. And, uh, 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 December. So we'll probably open it sometime early spring or something like that. But, you know, we'll, you know, we'll keep you posted. I, you know, we're not, we're not, you know, stamping out mall stores where you just build a storefront, you know, and kind of fill up you know, fill up a windowless box with some fixtures, you know, like, that's easy to do, you know, when I was at, you know, my former company, and, you know, we were, we could stamp out a store in 12 to 18 weeks. It's really simple. You know, that storefront is 40 feet wide, and you know, 50 feet wide and 100 feet deep, 5,000 feet, you know, or maybe you're doing 10,000 feet. I mean, these are really big, complex kind of investments and 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 100 years, if then. You know, the complexity, the cost, the investment, you know, you've got to be able to perform in spaces like these. You know, we've proven as 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, indoor, outdoor space, rooftops, gardens, courtyards. And all the things we do, no one builds anything like us. No one in the world builds anything close to what we do. So it's more complex. And, you know, and plus we're constantly innovating. So, you know, there's, you know, it's just, we're not stamping things out. That's what happens. But I haven't seen anybody who's ever been on time with a kitchen remodel. And so.

Thank you.

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

Great, well. You know, thank you everyone for your time, you know. So excited at the beginning. Welcome to to to a new world. And you know my. The quote I use from Theodore Roosevelt every moment, movement has a lunatic fringe, 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 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 we believe we'll create one of the most admired brands in the world that's not being most admired. But 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, all of our team members here at the Center of Innovation in our campus in Puerto 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. 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 people and partners of Team RH. So as I like to say, never underestimate a few good people who don't know what can't be done, especially these people. So carpe diem, everyone.

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