RH CEO: Anyone who thinks we’re not in a recession is ‘crazy’

The mood was mostly upbeat, but RH’s second-quarter earnings beat expectations, and Friedman was thrilled to join the call from RH Guest House, the company’s brand-new ultra-luxury hotel in Manhattan’s Meatpacking District. Seemed to be — Friedman says third-quarter earnings will drop 18% As the Federal Reserve Raises Interest RatesThis compares to 19% growth in the third quarter of last year.

RH (RH) Shares initially fell 1% on a bleak outlook, but were up more than 5% on Friday.

Luxury brands tend to ride out economic slowdowns better because they cater to wealthy people who aren’t bothered by rising borrowing costs. The Federal Reserve is widely expected to raise its key interest rate by three-quarters of a percentage point. Because they are trying to keep inflation down.

So even if that means losing market share to competitors like West Elm and Wayfair, we haven’t seen, and won’t see, heavy discounts at RH or Labor Day redline sales. you won’t be able to

“While people were running around trying to pick up apples that had fallen on the ground, we figured out how to create an apple harvesting company,” he said. “It’s another game we’re playing.”

With a market capitalization of over $6.2 billion, RH (formerly Restoration Hardware) is at a major turning point as a luxury lifestyle brand with a strong focus on hospitality. The company’s new hotel, He RH Guest House, is certainly one of the most expensive hotels in the city. No online booking, no photography allowed, no lobby. Also, no pets or children. Rooms from $3,500 per night, suites from $7,500 per night. The restaurant in the same space will be RH’s 15th store.

Friedman said guests can find a delicious breakfast here. “Usually you don’t find good breakfasts in this town, at least that’s what I believe,” he said on Thursday’s earnings call.

Friedman appeared confident in his long-term strategy and said he was well-prepared to weather the economic turmoil next year.

“We’ve had storms before…we’ve had great depressions before,” he said. “Many others will trip and fall.”

And while economists are divided on whether the U.S. is in recession (officially, a recession is determined by the National Bureau of Economic Research’s group of economists), Friedman said: I think the recession is already well underway.

“Anyone who thinks we’re not in a recession is crazy,” Friedman told analysts. “The housing market is in recession and it’s just beginning. So maybe in our industry he’s going to have a tough 12-18 months. But now is the time when he can really make a profit.” is.”