And you had to think about, when you had to learn that part of the business, we had to kind of build relationships with the team way to get strategically aligned and without using a lot of time, because it was the wrong time. So we spent very little time in the first few years. And how do you kind of build the business model and the assortment logic is for the business model and a lot of things. And so we through the years we spent a little bit of time and got aligned and the team has done an outstanding job, I think at almost doubling the business, core than doubling the EBITDA. And now it’s, I think business that’s positioned to grow. And I think we have a platform that it’s the perfect platform to scale the business on. With direct customer component, we have a consumer part of the business that, even though they have 14 showrooms, they’re not in places that consumers really shop.
And we have experienced taking mostly trade focused businesses and brands, over our years and putting those brands on our platform, putting their assortments on our platform and doing multiple times the business, right. Just because it’s now the best products are in front of the consumer, but let’s be proud. It’s not in front of the consumer out yet. Consumers don’t really go into water or showrooms. I mean, they stumble in, but they’re in design districts or to the trade or set up for business to business. They’re not really set up for consumer, even though they have a showroom, no different than any of furniture brands like that, so on and so forth. And then there’s some distribution and third-party distribution is that, they’re in there with other brands and where they don’t have total control of the brand.
But I think when you look at the platform we’re building and the stage we’re building for the best products in the most important categories, this is a perfect fit. I mean, it couldn’t be more aligned and it’s also really hard business. I mean, we’ve been in the business. We sell water delivery and faucets in cities and we sell bath, hardware and stuff like that, but we’re not experts. I mean, they’ve got, what, 45 years more than that experience, family business. Peter Selleck, he’s the CEO and leader there, in their most of his life. And his mother founded the business and Ralph Bennett has been CEO for, I don’t know, 15 years. So it’s like, the leadership team there, it’s really smart has a great view and grasp of the high-end market, that we’re benefiting from and learning from.
And we think we’re pretty smart and we have a great view of the consumer market, but what we’re trying to do is merge both of those markets. And we think that’s where we think long-term the world’s only going to be more transparent and long time, but, the best product, not basing the consumer in these categories. And that’s what RH has been trying to do for our entire journey, since I’ve been here as slow going in the beginning, we were on the edge of bankruptcy for almost my first 10 years. And so we made it through that. And now, we’re doing what we’ve always wanted to do and we’re getting smarter and better. And Waterworks is just a great synergies and yes, no different than you’ll hear us talk at some point later about, the V3 and the Couture Upholstery brand we bought Joseph Jeup, kind of Bespoke, furniture brand.
And just having these people and the talent inside our organization, learning from them, them leading us to higher quality, better taste, how to think about the trade market and so and so forth. It’s just so much synergies, it’s like — a lot of times you take one plus one, you get less than one, right. Every time there’s another thing or another person involved, there’s more complexity. And, Einstein said, you know, the only way to battle complexity is, through simplicity, but once in a while you got one plus one equals more than two, right. And I think we’ve found that with Waterworks. We found that with Dmitry, we found that with Joseph Jeup. And other things that we’re doing sometimes, maybe not, it’s not necessarily an acquisition, but it’s a deep partnership and relationship.
And I think that’s what we’re really good at. In Waterworks again, like, I mean, it’s really funny. I could pull out the PowerPoint from 24 years ago, there’s Waterworks in this, little grid. It looks so amateur when I look at it back then, what we’re thinking, but it’s always been our radar and we think it’s just a great fit and RH was restoration hardware. It had hardware. It had bath. I mean, it didn’t have faucets and fittings when I came here, I added that, but it had towel bars and books and a few things like that. And then when I added faucets and fittings, the model was, looking at Waterworks is the best. So we’re always obviously inspired by them, but we were never going to be Waterworks. Right. And so it’s much better to just partner with and integrate with Waterworks.
And I think it’s going to be unbelievable. I really do. And I think it’s going to bring you, I think the other benefits is it’s going to bring the highest quality trade customers to RH that maybe not are frequent, frequenting us yet. And you get into the business at an earlier point in the design stage. We sometimes get interact with the consumer at a much later stage. The home is done. They’re ready to furnish it. So on and so forth. Interact with Waterworks consumer, you’re at the front end, you’re at the architectural point, you’re at the plumbing point and all this other stuff. So the opportunity to get access to that customer, integrate that customer, be building the design holistically, all the categories that we’re in and the categories that we’ll continue to expand into and become more dominant.
And I think it’s really like, if you could ever say there’s a match made in heaven, I think it’s a match made in heaven. Like it just, it was supposed to be, so we’re really excited. I think they’re really excited. And I think it’s going to be big.
Curtis Nagle: Got it. Thanks. And then just a really quick one, Gary, just in terms of the mid-outlook, I think on the last call you said something to affect, you had expected a peak or an inflection in peak demand or something like that in 2Q or spring. Any changes there? Obviously, the outlook has been strong for the year.
Gary Friedman: Yes, I think they’re going to keep peaking because we’ve done more work since then, like there’s more things, we can see more things. So, yes, I think that, like phase one, so what I think about that, Curt, is like kind of phases, there’s multiple phases of this transformation, right, as we will be unveiling, but kind of phase one will kind of hit peak, I think, in late Q2. But then there’s a whole phase two now that we’ve got coming that will be unfolding, right. And I think we’ve got phase three coming. There’s just a lot of excitement, a lot of great work that’s being done. And the debate around here is how do you sequence it? How should it all unfold over what period of time? And so I’d say that’s peak inflection on like phase one, RH interiors, RH contemporary and outdoor and modern, right?
Like, if you knew modern would be coming in, that’s like the next of the big books. And I think it looks incredible. Like, I’m glad we actually delayed it a bit and took a little bit more time because it took a leapfrog. I mean, it’s stunning. And I think it’s so fresh and cool. And, people just see the images and, it’s all laid out. You feel like, wow, okay, it’s not a walk on by, I guarantee you, it’s not an Aretha Franklin, walking by. So that’s coming, that’s going to create a big kind of move in Q2. And outdoor, it’s going to be hitting peak, March, April, May, June. And you’ve got learnings and interiors and that’s cycling through and then we’ve got in stocks that are going to get meaningfully better, backorder rates are going to go down, which means demand goes up when backorder rates go down.
There’s all kinds of metrics here that you can just add them up and it tells you what to do. And all the adjustments we’re going to make. So, yes, I think at phase one, you’ll kind of get kind of peak inflection, might peak a little later than that, but you’re going to kind of know, like the arrow, like when I talk about inflection, it doesn’t mean that the outcome, right? Like the curve, the line will be pointed in that peak direction. How high does it go? That might take to Q3 or Q4, but like the inflection point will angle up, right? And we’ll see that in Q2. So that hasn’t changed. They just changed a little because they pushed modern out a little, but you’re still, modern is going to get in there in Q2. You’ll get enough of a read. You’ll see where that’s going.
And then, and then you got like just phase two and phase three and things that are coming through the pipeline. And I think it just all keeps building. So, yes, so we’re directionally correct. Try to get a little bit more color there. Hopefully it’s helpful.
Operator: Next question comes from the line of Christopher Horvitz with J.P. Morgan. Your line is open.
Christopher Horvers: So I’m just going to put my two questions out there. So my first question is, the $40 million that was deferred of January, that, why wouldn’t it come back much sooner if it was a lot of domestic and we’re hearing from other retailers that the Red Sea has just added weeks of delivery. And then my second question is, if you look at non-occupancy gross margin pressure, it looks like it got a little bit worse. I guess, how far is that all clearance and how long before we get through all of the clearance and do you expect to recapture all that pressure? Thanks very much.
Gary Friedman: Yes. I mean, well, look, for one, you’ve got to think about like, there’s a lot of people in home furnishings or might sell home goods and you have to say like, okay, what’s their furniture content and what’s their special order content? And when you think about those goods, and then what’s coming from Asia and coming around the pipeline. So, now that’s kind of coming around Africa and not through the Red Sea and the canal. So we probably have the highest content, right? We have a significantly bigger outdoor business, I think, than anyone. I don’t think anyone, holds a candle to us in that category. And so, that’s all how to travel and take a couple of extra weeks. And so that’s a meaningful number. Our special [indiscernible] or any of our other businesses, all our newness, all our things attached to back orders, right, that got delayed.
So you’ve got that delay and then you’re delaying kind of everything looking out. Like when does, when do the shipping lanes reopen? That’s the question. How long, is this two-week delay built in? You’re not going to catch up with it until the shipping lanes opened or, like it’s just kind of permanently deferred for two weeks. That makes sense. And then, the piece with the weather and, the ice storms that hit, yes, that piece comes back now and is coming back. Yes, so you generally have a delay with that. But it’s not like it comes back tomorrow because they’re maybe design price of the design projects, it’s special orders, that they’re doing. It’s outdoor furniture that they were going to buy. If they bought anything that has the two-week delay, that’s delaying it more.
So it’ll all cycle back. It’s just, what’s the timing? Like if you’re selling things that are cash and carry, got it. Yes. Like if you look at the product mix of people that had Christmas product or especially all the Christmas stuff that was on sale, in December and January and stuff like it, of course, all that stuff comes back, like that’s no problem. If you’re selling, any home furnishings categories and, if you’re selling tabletop, food-related products, accessories, cookware, name all the categories that are attached to home, they’re all cash and carry kind of businesses, or just domestically shipped, from the D.C. We’ve got a very different product mix and model than anyone else. We probably have the highest furniture content, of anybody that you might compare us with.
Jack Preston: And Chris, on the gross margin side, there was the continuing impact on the product margin.
Operator: Next question comes from the line of Max Rakhlenko with TD Cowen. Your line is open.
Max Rakhlenko: Gary, Jack, congratulations on strong demand that you’re seeing as well as the recent opening. I was curious, given all the new galleries that are coming online in the U.S., can you provide an update to the new gallery economics as you convert a legacy gallery to a design gallery? You provided color in the past, but just curious how that has evolved over time.
Gary Friedman: Markets, do they have hospitality or not? So, yes, it has been a while if I think about it. So, that’s good. Let’s pull that together in the right way and make sure we distribute it in the right way so everybody’s got the same data.
Jack Preston: Yes.
Max Rakhlenko: Got it. Sorry. Could you repeat that? It went blank for a little bit.
Gary Friedman: Okay. I was saying it was a good question. It has been a while, as you said that. And there’s been a lot of things that have changed. We have restaurants and galleries now, hospitality aspects. It depends where they are in the cycle, how many square feet you’re expanding into. There’s a lot of things to consider when you look at these. And so, I think what we ought to do is update that data set and create a framework and let us distribute that next quarter in a fashion that everybody has the same information at the same time and it’s all accurate.
