HR updates its outlook for fiscal year 2022

HR (NYSE: HR, Financial) today announced revisions to its outlook for fiscal year 2022.

Gary Friedman, Chairman and CEO, said, “The deteriorating macroeconomic environment has resulted in weaker-than-expected demand since our previous guidance, and we are updating our outlook, particularly for the second half of the year. .

Given macroeconomic conditions and our current business trends, we provide the following outlook for the second quarter and full year, which assumes that demand will continue to slow for the remainder of fiscal 2022:

FY2022 net revenue growth of between (2%) and (5%), with an adjusted operating margin of between 21.0% and 22.0%.

Second quarter net sales growth of between (1%) and (3%) with an adjusted operating margin of between 23.0% and 23.5%. The outlook for the second quarter remains unchanged from our previous guidance due to a faster reduction in the order backlog offsetting weaker than expected demand.

Mr. Friedman continued, “With mortgage rates doubling from last year’s levels, luxury home sales down 18% in the first quarter and the Federal Reserve’s forecast for another 175 basis points in the federal funds rate by the end of the year, we expect demand to continue to slow throughout the year.

Mr. Friedman concluded: “While we expect the next few quarters to be challenging in the near term as we cycle the extraordinary growth of the COVID-induced shift in spending, lose less valuable market share as we continue to improve our quality and choose not to promote our business as we navigate multiple macroeconomic headwinds, we continue to believe that our long-term investments will enable us to generate peak performance over a longer-term horizon.

The Company also indicated that it had not repurchased any shares since the announcement of the extension of its authorization to repurchase common shares on June 2, 2022.

ABOUT HR

RH (NYSE: RH) is a curator of design, taste and style in the luxury lifestyle market. The company offers collections in its retail galleries, sourcebooks, and online at RH.com, RHModern.com, RHBabyandChild.com, RHTEEN.com, and Waterworks.com.

NON-GAAP FINANCIAL MEASURES

The Company’s adjusted operating margin outlook does not include certain fees and costs. Adjustments to operating margin in future periods are generally expected to be similar to the types of charges and costs excluded from adjusted operating margin in prior periods. The exclusion of these charges and costs in future periods will have a significant impact on the Company’s adjusted operating margin. The Company is unable to provide a reconciliation of the Company’s non-GAAP financial outlook to the corresponding GAAP measures without unreasonable effort due to the uncertainty and variability in the nature and amount of such future charges and costs.

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles (“GAAP”), RH uses certain non-GAAP financial measures, including adjusted net income, adjusted operating profit, adjusted net income or adjusted net income. , adjusted diluted earnings per share, adjusted diluted net earnings per share, return on investment or return on invested capital, free cash flow, adjusted operating margin, adjusted gross margin, adjusted gross profit, adjusted general and administrative expenses, EBITDA, adjusted EBITDA , EBITDA margin and Adjusted EBITDA margin (collectively, the “Non-GAAP Financial Measures”). We calculate these measures by adjusting applicable GAAP measures to remove the impact of certain recurring and non-recurring costs and gains and the tax effect of such adjustments. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared and presented in accordance with GAAP. RH uses these non-GAAP financial measures for financial and operating decision making and as a means of evaluating period-to-period comparisons. HR believes they provide useful insights into operating results, improve overall understanding of past financial performance and future prospects, and allow for greater transparency regarding key metrics used by senior management in making financial and operational decision making. Non-GAAP financial measures used by RH in this release may differ from non-GAAP financial measures, including similarly titled measures, used by other companies.

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, our outlook for the second quarter and fiscal year 2022, including with respect to net revenue growth and margin. adjusted operating income; HR’s anticipation that demand will continue to slow throughout the year given mortgage rates that doubled from last year’s levels, luxury home sales down 18% in the first quarter and forecasts by the Federal Reserve for another 175 basis point increase in the Fed Fund rate by the end of the year; HR’s expectation that a faster reduction in backlog will offset weaker than expected demand; the fact that RH has not repurchased any shares to date since the announcement of the extension of its authorization to repurchase ordinary shares on June 2, 2022; the next few quarters posing a near-term challenge as we cycle extraordinary growth from the COVID-related shift in spending, our plans to lose less valuable market share and increase our quality, and our choice not to promote our business while we let’s navigate through the multiple macro headwinds; the statement that we continue to believe that our long-term investments will enable us to generate peak performance over a longer time horizon; and any statements or assumptions underlying any of the foregoing.

You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “will”. , “should”, “probable” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future events. We cannot assure you that future developments affecting us will be those we anticipated. All discussions of new developments are subject to inherent uncertainty as to the timing and manner in which a new development may ultimately be launched, including that certain new concepts may be canceled prior to introduction. Important risks and uncertainties that could cause actual results to differ materially from our expectations include, among others, risks relating to our reliance on key personnel and any changes in key personnel; successful implementation of our growth strategy; uncertainties regarding the current and long-term performance of our business, including a range of risks relating to our operations as well as external economic factors; general economic conditions and the impact on consumer confidence and spending; changes in customer demand for our products; decisions regarding our investments, including with respect to capital allocation for, among other things, the repurchase of additional shares of our common stock which will affect outstanding shares and EPS; factors affecting our outstanding debt; our ability to anticipate consumer preferences and buying trends, and to maintain our brand promise to customers; changes in consumer spending due to weather and other conditions beyond our control; risks relating to the number of new business initiatives we undertake, including international expansion, our property and gallery development strategy and our expansion into new business areas such as hospitality; strikes and work stoppages affecting port workers and other industries involved in the transportation of our products; our ability to obtain our products on a timely basis or in the quantities required; risks related to our sourcing and supply chain, including our reliance on imported products made by foreign manufacturers and the risks of importing such products, risks related to the operations of our suppliers , pricing risks and risks related to the impact of COVID on our Business; and other risks and uncertainties disclosed in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in HR’s most recently filed Annual Report on Form 10-K with the Securities and Exchange Commission, and similar disclosures in subsequent reports filed with the SEC, which are available on our Investor Relations website at ir.rh.com and on the website of the SEC at www.sec.gov. You should not place undue reliance on these forward-looking statements. Any forward-looking statement made by us in this release speaks only as of the date on which we make it. RH expressly disclaims any obligation or undertaking to post any updates or revisions to these statements to reflect any change in its expectations regarding them or any change in events, conditions or circumstances on which any such statement is based.

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