Gary Friedman: Yeah I don’t think we’re — well I mean did you miss the whole first part of this conference call? I can repeat myself. The transformations in the early stages, the goods aren’t in stock, they’re not in the gallery yet. We haven’t been through a full mailing cycle. And I don’t believe — I think we’ve massively closed the gap. I think we’re gaining market share in a lot of people today. And there might be a few people out there that are outperforming us at a demand point of view. I mean, they may not outperform us in the next quarter, say there’s going to be an inflection very soon here. And so what do we have to do? Everything I just said. So I don’t think you want me to repeat myself to you. Like, I don’t think we’ve got to lower our prices anymore. I don’t think we’ve got to — the goods just got to get in stock. We got to get the galleries reset, and we got to go through the next cycle and we’ll be off to the races.
Michael Lasser: My follow-up question is on the degree to which your P&L this quarter benefited from lower freight and transportation costs. Was that more significant? Could you, a, quantify it, and, b, was it more significant than the P&L had experienced in the second quarter? Thank you very much.
Jack Preston: Michael, we’ve talked about this a few quarters now. We’ve given our turn and you know the way you know Fernando and his team attack ocean freight where the bulk of the increases in costs had occurred through the pandemic. Those turned over last year. We peaked in May as far as the highest contracted rates we’ve ever seen. And then every month thereafter, it’s been a decline. And now, in many markets, we’re back to or close to 2019 levels, right Fernando? So, as far as, kind of [any of the] (ph) product margin impact from freight rates, I mean, we’re for the most part cycled through that given our…
Gary Friedman: Yeah, we’re not really seeing a benefit right now. I know other people are. I think they got stuck in longer contracts with bad freight rates than we did.
Jack Preston: Yeah, we were just more nimble at accessing the spot market and taking advantage of the decline in ocean freight rates that really began last June, I think, June, July. So I wouldn’t say there’s any really that’s quantifiable or if it is, it’s de minimis for Q3.
Operator: Your next question comes from line of Jonathan Matuszewski of Jefferies. Your line is open.
Jonathan Matuszewski: Hey Gary, hey Jack, thanks for taking my questions. The first one was just a follow-up on RH England. Great to hear the demand continues to build. A while ago, Gary, you mentioned the $50 million to $250 million range for first-year revenues was possible. Obviously, the backdrop has changed a lot, but what you’ve seen in the first six months and the sequential trend, how should we think about what you’re internally expecting for an annualized first year volume? And appreciate it’s more about conversation than commerce, but just trying to think about how it’s annualizing versus expectation, thanks.
Gary Friedman: Yeah, I don’t know if we had any real expectations. People said, like, what could it be? Could it be, I said I don’t know, could be $50 million, could be $250 million. And that’s, I think about it as, we’re going to keep kind of marketing the brand, right, to forget about RH, that gallery, think about that country, and what will our investments in marketing do to the direct business? What will the brand recognition do? How does it build? When do you get to certain run rates? I just think it’s super early for us to know because we didn’t open a typical store. If we would have opened in London first, it would be massively different. We opened in the countryside, we tried to do something super inspiring and something the world’s never seen.
And so making investment, it’s like, it’s just, I wouldn’t get too focused on this gallery, right? This — try to draw a conclusion of this one, it’s not going to tell us, you’re not going to get the right answer from this one. This is really a brand investment and to create the right first impression and the right conversation. London is going to be coming around the corner. We’re looking at other locations in other parts of England, and we’re going to be investing in marketing, right, and not just books but other types of marketing to drive the online business, But we’re just in the early stages of all that. Just like I’m telling you, don’t get too obsessed with RH England. From that telling us what the market’s going to be for us, I’m not too obsessed about that because it’d be the wrong place to draw conclusions from.
It’s like, has anybody opened a store like that anywhere in the world in any category? Somebody name something similar to that. Just think about that. Like if you’ve seen it, if you’ve been there, you know, anybody on the call, if you haven’t, take a look at the pictures. Have you ever been to a retail store like that? No. So if you try to draw too many — we’re not going to really do another one like that, right? So don’t — we’ve got other things like seeing how — how does Germany build? That’s a lot more normal. We’re on streets where there’s a lot of people walking by, driving by, so on and so forth. It’s a different — there are two different objectives and goals and visions, right, and strategies for the two. They serve two different purposes.
So, did I think, RH England, like, there’s a number I always had, and it’s a modest number. And — like what you don’t know is, okay, when you open up a brand to an entire country like England, how does that go? How does it grow? What marketing do you have to do beyond RH England? We’re still learning. So, we’re not in a hurry to jump to any conclusions on any of this. We’re really happy with the work we’ve done, with the team we have, with the initial, you know, feedback we’re getting from consumers and the kind of people that are coming and all that looks directionally right. So, over time, we’ll all take care of ourselves. England’s its own thing. There’s nothing like it in the world. That’s why we did it. To get people to see something they’ve never seen, think about our brand in a different way, have people at the highest levels of the economic ladders, like, who are shopping the best luxury brands in the world and stuff.
Look at us differently. Think about us differently. So they’re all, they’re all long term, things like that are really a long term investment. It’s like a guest house. Yeah, we opened what we believe is the highest quality hotel experience in New York City. It’s not one of the best in the world. I’m not looking at that thing to really tell me am I going to roll out a lot of guest houses. No. I’m just trying to communicate differently about a brand to build something that no one’s ever built before. It’s like somebody just wrote a report that I thought was one of the most comprehensive reports written about our company. Went all the way back to the very beginning, wrote about everything, wrote about RH music, when we had a record label and we were — we did a concert at the Greek theater and we did performances in all of our new galleries and we had RH contemporary art and we owned the rain room, the most exhibited art exhibit in the history of the [indiscernible] New York and the history of the [Lackland] (ph) New York.
