RH The following discussion and analysis of our financial condition and the results of our operations should be read together with our condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our 2020 Form 10-K.
FORWARD-LOOKING STATEMENTS AND MARKET DATAThis quarterly report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. 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," "short-term," "non-recurring," "one-time," "unusual," "should," "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
Forward-looking statements are subject to risk and uncertainties that may cause
actual results to differ materially from those that we expected. We derive many
of our forward-looking statements from our operating budgets and forecasts,
which are based upon many detailed assumptions. While we believe that our
assumptions are reasonable, we caution that it is very difficult to predict the
impact of known factors and it is impossible for us to anticipate all factors
that could affect our actual results, and matters that we identify as "short
term," "non-recurring," "unusual," "one-time," or other words and terms of
similar meaning may, in fact, recur in one or more future financial reporting
periods. Important factors that could cause actual results to differ materially
from our expectations, or cautionary statements, include those factors disclosed
under the section entitled Risk Factors in our Annual Report on Form 10-K for
the fiscal year ended
We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this quarterly report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Overview
We are a leading luxury retailer in the home furnishings market. Our curated and
fully integrated assortments are presented consistently across our sales
channels in sophisticated and unique lifestyle settings. We offer merchandise
assortments across a number of categories, including furniture, lighting,
textiles, bathware, décor, outdoor and garden, and child and teen furnishings.
We position our Galleries as showrooms for our brand, while our websites and
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Table of Contents As ofMay 1, 2021 , we operated the following number of Galleries, Outlets and Showrooms: COUNT RH Design Galleries 24 Legacy Galleries 38 Modern Galleries 2 Baby & Child and TEEN Galleries 4 Total Galleries 68 Outlets 38 Waterworks Showrooms 14
The COVID-19 outbreak in the first quarter of fiscal 2020 caused disruption to
our business operations. In our initial response to the health crisis we
undertook immediate adjustments to our business operations including temporarily
closing all of our retail locations and Restaurants, curtailing expenses, and
delaying investments including scaling back some inventory orders while we
assessed the status of our business. Our approach to the crisis evolved quickly
as our business trends substantially improved during the second through fourth
fiscal quarters of fiscal 2020 as a result of both the reopening of most of our
retail locations and also strong consumer demand for our products. Operational
restrictions related to the COVID-19 pandemic affecting our Galleries and
hospitality locations continued to fluctuate in the first quarter of 2021 based
upon changes in local conditions and regulations. As of
Our overall customer demand in specific markets has generally correlated
favorably with our customers' ability to access our Galleries and Outlets.
Although our business has strengthened during the period from the second quarter
of fiscal 2020 and continuing into fiscal 2021, consumer spending patterns may
shift away from spending on the home and home-related categories, such as home
furnishings, as pandemic restrictions are lifted and consumers return to
pre-COVID consumption trends, such as spending on travel and leisure and other
activities. In addition, various constraints in our merchandise supply chain
have resulted in some delays in our ability to convert business demand into
revenues at normal historical rates. We anticipate that the backlog of orders
for merchandise from our vendors, coupled with business conditions related to
the pandemic, will continue to adversely affect the capacity of our vendors and
supply chain to meet our merchandise demand levels during fiscal 2021. It may
take several quarters for inventory receipts and manufacturing to catch up to
the increase in customer demand and as a result the exact timing cannot be
accurately predicted due to ongoing uncertainty of the continuing impact of the
pandemic on our global supply chain. In particular, business circumstances and
operational conditions in numerous international locations where our vendors
operate are subject to ongoing risks, and regions in which our vendors have
production facilities, such as
We will continue to closely manage our investments while considering both the overall economic environment as well as the needs of our business operations. In addition, our near-term decisions regarding the sources and uses of capital in our business will continue to reflect and adapt to changes in market conditions and our business including further developments with respect to the pandemic. For more information, refer to the section entitled "Risk Factors" in our 2020 Form 10-K.
Key Value Driving Strategies
In order to drive growth across our business, we are focused on the following long-term key strategies and business initiatives:
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Table of Contents
Product Elevation. We have built the most comprehensive and compelling
collection of luxury home furnishings under one brand in the world. Our products
are presented across multiple collections, categories, and channels that we
control, and their desirability and exclusivity has enabled us to achieve
industry leading revenues and margins. Our customers know them as RH Interiors,
RH Modern, RH
Gallery Transformation. Our product is elevated and rendered more valuable by
our architecturally inspiring Galleries. We believe our strategy to open new
Design Galleries in every major market will unlock the value of our vast
assortment, generating a revenue opportunity for our business of
Brand Elevation. We are beginning to evolve the brand beyond curating and selling product, towards conceptualizing and selling spaces, by building an ecosystem of products, services, places, and spaces designed to elevate and render our product more valuable while establishing the RH brand as a thought leader, taste and place maker. We believe our seamlessly integrated ecosystem of immersive experiences inspires customers to dream, design, dine, travel and live in a world thoughtfully curated by RH, creating an impression and connection unlike any other brand in the world.
Digital Reimagination. Our strategy is to digitally reimagine the RH brand and business model both internally and externally. Internally regarding how we innovate, curate, and integrate all the dynamic aspects of our brand, and externally as we introduce our customers to The World of RH, a new digital portal presenting our Products, Services, Places and Spaces. This multi-year effort began internally last year with the reimagination of our Center of Innovation & Product Leadership, which will incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation.
Our external efforts will begin this fall with the launch of phase one of our new digital portal, The World of RH, which will include rich, immersive content with simplified navigation and search functionality, all designed to enhance the shopping experience and render our product and brand more valuable. We believe an opportunity exists to create similar strategic separation online as we have with our Galleries offline, reconceptualizing what a website can and should be.
Global Expansion. We believe that our luxury brand positioning and unique
aesthetic have strong international appeal, and that pursuit of global expansion
will provide RH a substantial long-term market opportunity to build a
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Table of Contents
Basis of Presentation and Results of Operations
Matters Affecting Comparability
The disruption to our business operations from the COVID-19 pandemic has had a
significant impact on the comparability of certain ratios and year-over-year
trends for our operating results for the three months ended
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