RH Says Luxury Brands Don’t Discount, Resists Promos Despite Slumping Sales

Luxury lifestyle retailer RH won’t sacrifice its image and margins to keep its sales growing as consumers tighten their wallets, RH Chairman and CEO Gary Friedman said Thursday (Sept. 8) in a presentation released along with the company’s quarterly earnings call.

Friedman reported that the company had better than expected results during the quarter ended July 30 — with revenue up 0.3% from a year earlier and up 40% from two years ago — but it does see demand trends continuing to slow.

While many other brands in the home furnishings industry are responding to this macro environment by discounting, Friedman said RH is resisting promoting itself in that way.

“And while there may be short-term risk of market share loss as a result of our choice not to promote, we believe there are certain long-term risks of brand erosion and model destruction once you begin down that path,” Friedman said in the presentation.

During the earnings call, Friedman added, “If we hit the promotional button here, our sales will go up 50x easily. It’s just not the game we’re playing. So, just go ask Hermes or ask Chanel or ask Ferrari or ask everybody else, ask the luxury brands what they’re going to do [because] we’re going to do what they’re going to do.”

As a result of this strategy, RH recorded a better-than-expected adjusted operating margin of 24.7% — a figure that’s comparable to leading luxury brands — Friedman said.

Looking ahead, the company expects demand to continue to soften due to ongoing weakness in the housing market and rising interest rates.

“While we expect the next several quarters to pose a short-term challenge as we cycle the extraordinary growth from the COVID-driven spending shift and shed less valuable market share as we continue to raise our quality and navigate through the multiple macro headwinds,” Friedman said in the presentation, “we believe our long-term investments will enable us to continue driving long-term industry-leading performance.”

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