RH (formerly Restoration Hardware) on Thursday reported record revenue in excess of $2.5 billion for 2018. It also notched record GAAP operating margin of 11.5% and record adjusted operating margins of 12.1% for the year, according to a company press release.
Fourth quarter adjusted net revenues were up 7%, versus a 6% rise last year. Adjusted net income was $76 million versus $43.3 million last year. Adjusted operating margin in the quarter was 15.9%, up from 11.2% at the same time last year.
For fiscal 2019, the company lowered its sales outlook "due to the continued weakness in our core business post the fourth quarter market volatility, the negative trends in the high end housing market, and our continued efforts to edit unprofitable and non-strategic businesses." The company expects net revenue between $2.58 billion and $2.63 billion. Adjusted net income is expected in the range between $213 million to $230 million.
Now that RH has closed in on two years with a new business model, it says its record results are demonstrating it's building a "disruptive brand and business to gain profitable market share for years to come." RH sees itself as an outlier — or as CEO Gary Friedman says, "a brand with no peer."
"We do understand that the strategies we are pursuing … are all in direct conflict with conventional wisdom and the plans being pursued by many in our industry," the company said in its press release, noting initiatives to open the largest specialty retail experiences in the industry, move to a membership model and continue to mail print catalogs. While macro trends in the industry are holding back the vast majority of retailers from these kinds of programs, RH says the business model is working for it because it allows for a unique "customer experience that cannot be replicated online."
It's a "very exciting concept" according to analysts at Jane Hali & Associates, who say there is still room for growth and the brand is gaining momentum with its new store approach and membership program. "RH stores are full of experiences, some have cafés, others wine bars, and others have a full roof top restaurant, which are really creating a buzz. All of these experiences aids to increase traffic," according to an analyst note emailed to Retail Dive.
Where RH may be excelling in-store, it's lacking online, however. "RH does not have omni-channel capabilities," and its online experience "is not seamless or easy," according to the note. "The website could be better designed. The mobile experience is also not user friendly, it is a large catalog."
But for a business experiencing record revenues while going against the grain as everyone chases Amazon online, that may not matter much.