RH (NYSE:RH) Q3 2022 Earnings Call Transcript

Page 7 of 13

And they’re big believers of trying to scale this level of quality and design. And so we’re really excited about it. It’s going to take a while. We’ve got to get it up and going and test it and see how it goes. We’ve got to figure out exactly how it’s integrated. But the long term — yes, I would just say probably today right now, there’s a bunch of people in the high-end trade industry that just kind of said, WTF. And then like now what is going to happen. And this is a big move for us strategically. But we’ve got to build capability. There could be other acquisitions to build capability here. And you think about the investments we’re making, building a media platform and a content editorial platform that will position the brand as an authority in the industry.

I’m not speaking about ourselves, speaking about the people who are really shaping the world of architecture and design. We want to become an authority and a voice in that. So you don’t really do that by talking about yourself. You do that by talking about other people. And so we’re just going to taking a different path and to build a different market. We’re going to continue to evolve and change. I mean not too different. If you think about Apple, right? I mean, Apple, I mean, they started pretty high up with a $400 phone or something we started out. And what’s the latest Apple phone like $1,100 or something, $1,200? Yes, I mean, they kind of created a high-end market for phones. But I think the average phone back then was like $69 in Motorola Razr or something.

So I think we’re — one, we’re not just going after a market and how big is the revenue opportunity there. We’re also going to create a market because that product at that level of the market is not accessible. You can’t go into those showrooms. The goods aren’t priced. You’re kind of blind and you have to go through a middle person to even to have quality of — that quality and that design. So we think it’s going to be a big unlock just starting to make that level of quality and design available. We think we will grow the market. We think it will be a big, big plus to our brand to get us into those customers’ main rooms. I think today, we mostly play in the family room, the second bedroom. I don’t know we get that customer’s living room, master bedroom, main house.

I think it’s just going to open up a lot of opportunity. But lot to test, lot to learn, lot to figure out. We thought about it for a long time. We’ve worked on this for a long time. Today, we decided to tell you officially that we’re doing it before everybody knows. We’re super excited about the talent. It’s also — what I’d say is the talent acquisition, too. I mean these people are just incredible culturally, creatively, entrepreneurially just incredible, incredible talent. We’ve all, in the short time we’ve been together. We’ve learned from each other and they’ve rendered us more valuable. I think we’ve rendered them more valuable. So it’s kind of an upward spiral.

Curtis Nagle: Yeah, for sure, some really impressive resumes there. And then just going to the follow-up question, Gary, just a comment you made about could have 20% margins if you pulled back or something like that, I may have misheard, but I just wanted to clarify that?

Page 7 of 13