Good day, everyone, and welcome to today's RH First Quarter Fiscal 2024 Earnings Q&A call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session, and you may register to ask a question at any time by pressing star one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note that this call is being recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Allison Malkin. Please go ahead. Thank you. Good afternoon, everyone. Thank you for joining us for our first quarter fiscal 2024 earnings conference call. Joining me today are Gary Friedman, Chairman and Chief Executive Officer, and Jack Preston, Chief Financial Officer. Before we start, I'd like to remind you of our legal disclaimer that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about our outlook of our business and other matters referenced in our press release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our press release issued today for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Also, during this call, we may discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in today's financial results press release. A live broadcast of this call is also available on the Investor Relations section of our website at ir.rh.com. With that, I'll turn the call over to Gary. Great. Thank you, Allison. Good afternoon, everyone. We're actually calling you live from New York at our guest house, as we just got back from our opening at RH Madrid last night. I'm gonna start with our letter to our people, partners, and shareholders, and then we'll open the call to your questions. "To our people, partners, and shareholders, we are pleased to report that our demand trends inflected positive in the first quarter and continue to build momentum despite operating in the most challenging housing market in three decades. We believe our investments in the most prolific product transformation and platform expansion in our history has positioned RH to gain significant market share in North America while building the foundation for our long-term global expansion across the United Kingdom, Europe, Australia, and the Middle East over the next several years. Our results for the first quarter largely reflected expectations with revenues of $727 million, adjusted operating margin of 6.5%, and adjusted EBITDA margin of 12.3%. Demand was up 3% in the quarter, slightly below our guidance, as growth softened when interest rates once again exceeded 7% post the hawkish Fed commentary throughout April. While aggressively investing during a downturn has put pressure on short-term results, it also positions us to capitalize on the long-term opportunities that present themselves during times of disruption and dislocation. Those opportunities are beginning to materialize as a growing number of online furniture brands have ceased operations, as the vast majority have demonstrated difficulty reaching profitability. We do expect the constantly changing outlook regarding monetary policy will continue to weigh on the housing market through the second half of 2024 and possibly into 2025. Nonetheless, we remain confident that our continued investments towards transforming our product and expanding our platform will generate significant long-term value for our shareholders. "Every act of creation is first an act of destruction," Pablo Picasso. We have worked hard to destroy the former version of ourselves and are in the process of unleashing what we believe is an exponentially more inspiring and disruptive RH brand, inclusive of the most prolific product transformation and platform expansion in the history of our industry. Our product transformation plans for 2024 include the launch of our new RH Outdoor Sourcebook, the most dominant collection of luxury outdoor furniture in the market, arrived in homes in the first quarter with 14 new collections. Outdoor trends continue to remain strong, and we expect to gain significant market share in fiscal 2024. The unveiling of our new RH Modern Sourcebook arrived in homes throughout early June with 30 new collections across living, dining, bedroom, and bathroom. We expect the launch of RH Modern will further accelerate our demand trends in the second quarter and throughout the second half of fiscal 2024. The second mailing of our new RH Interior Sourcebook is now planned to be in homes starting July, with new collections and improved in-stocks, which should also provide an additional lift to demand in the third quarter and continue to build through the remainder of the year. We will be mailing an updated RH Contemporary Sourcebook in early August with new collections and a compelling value proposition, which we believe will also accelerate demand trends. A second mailing of the RH Modern Sourcebook and third mailing of RH Interior Sourcebook are expected in the second half of 2024, with additional new collections, refreshed galleries, and improved in-stocks. These mailings will result in a doubling of our Source Book circulation and customer contacts in 2024 versus 2023. Our data would suggest that the increased number of contacts alone should provide another lift factor for our business. As you know, we acquired Waterworks in 2016, arguably the most desired brand in the luxury bath and kitchen category. The Waterworks team has done an outstanding job over the past eight years, further elevating the brand and building a highly profitable business model that can scale. Waterworks, like most other luxury brands in the home space, generates the vast majority of their revenues from the trade market, selling to architects, designers, developers, and builders. While RH has a meaningful trade business, the vast majority of our revenues are generated by consumers. We believe there's a significant opportunity to amplify the Waterworks business on the RH platform by exposing the brand to a much larger audience, similar to, to how we've expanded other trade-focused businesses and brands over the years. Our plan is to launch with a 3,500 sq ft Waterworks showroom in our largest new design gallery in Newport Beach, California, opening in the fourth quarter of 2024. We will also be developing a Waterworks Sourceb ook with plans for a test mailing in 2025. Waterworks today is just shy of a $200 million business with mid- to high-teens EBITDA margin that we believe has the potential to become a billion-dollar global brand on our platform. Let me shift your attention to the expansion of our platform. Our plan to expand the RH brand globally, address new markets locally, and transform our North American galleries represents a multibillion-dollar opportunity. Our platform expansion plans for 2024 include: the opening of five North American design galleries, including Cleveland and Palo Alto, which are now open, plus Raleigh, Newport Beach, and Montecito, all with integrated RH interior design offices, restaurants, and wine bars. The opening of two international galleries in Brussels, which opened in the first quarter, and in Madrid, where we hosted a well-attended opening event last night. Both galleries are located in beautiful historic buildings that elevate our product and render our brand more valuable. The opening of our first RH interior design studio in Palm Desert, California. We believe there is an opportunity to address new markets locally by opening design studios in neighborhoods, towns, and small cities where the wealthy and affluent live, visit, and vacation, as we've done in East Hampton and the Napa Valley, as well as augmenting some of our design galleries in larger markets with additional design services and standalone design studios. Outlook. While we expect business conditions to remain challenging until interest rates ease and the housing market begins to rebound, we expect our business trends to accelerate throughout fiscal 2024. As previously communicated, due to the extensive transformation of our assortment, we expect revenue to lag demand during the year by approximately four to eight points until we read and react to the new collections, reduce back orders, and shorten special order lead times. Therefore, we will be guiding and reporting both demand and revenue growth each quarter during fiscal 2024, so shareholders and investors can accurately analyze our business. We believe it's also important to note that we are forecasting to end the year with an increased backlog of approximately $110 million-$130 million due to revenue lag in demand throughout fiscal 2024, which will negatively impact operating margin and adjusted EBITDA margin by approximately 140 basis points. Additionally, investments and start-up costs to support our international expansion are estimated to be an approximately 200 basis point drag for fiscal 2024. We continue to expect demand growth in the range of 12%-14% and revenue growth of 8%-10% on a 52 versus 52-week basis. We are forecasting adjusted operating margin to be in the range of 13%-14% and adjusted EBITDA margin in the range of 18%-19%. For the second quarter of fiscal 2024, we are forecasting demand growth in the range of 9%-10% and revenue growth of 3%-4%. We are forecasting adjusted operating margin to be in the range of 11%-12% and adjusted EBITDA margin of 17%-18%. RH business vision and ecosystem: the long view. We believe there are those with taste and no scale, and those with scale and no taste, and the idea of scaling taste is large and far-reaching. Our goal to position RH as the arbiter of taste for the home has proven to be both disruptive and lucrative as we continue our quest to build the most admired brand in the world. Our brand attracts the leading designers, artisans, and manufacturers, scaling and rendering their work more valuable across our integrated platform, enabling RH to curate the most compelling collection of luxury home products on the planet. Our efforts to elevate and expand our collection will continue with the introductions of RH Couture, RH Bespoke, RH Color, RH Antiques & Artifacts, RH Atelier, and other new collections scheduled to launch over the next decade. Our plan to open immersive design galleries in every major market will unlock the value of our vast assortment, generating revenues of $5 billion-$6 billion in North America and $20 billion-$25 billion globally. Our strategy is to move the brand beyond curating and selling product, to conceptualizing and selling spaces by building an ecosystem of products, places, services, and spaces that establishes the RH brand as a global thought leader, taste, and placemaker. Our products are elevated and rendered more valuable by our architecturally inspiring galleries, which are further elevated and rendered more valuable by our interior design services and seamlessly integrated hospitality experience. Our hospitality efforts will continue to elevate the RH brand as we extend beyond the four walls of our galleries into RH guest houses, where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion North American hotel industry. Additionally, we are creating bespoke experiences like RH Yountville, an integration of food, wine, art, and design in the Napa Valley. RH One and RH Two are private jets, and RH Three, our luxury yacht that is available for charter in the Caribbean and Mediterranean, where the wealthy and affluent visit and vacation. These immersive experiences expose new and existing customers to our evolving authority in architecture, interior design, and landscape architecture. This leads to our long-term strategy of building the world's first consumer-facing architecture, interior design, and landscape architecture services platform inside our galleries, elevating the brand and amplifying our core business while adding new revenue streams, while disrupting and redefining multiple industries. Our strategy comes full circle as we begin to conceptualize and sell spaces, moving beyond the $170 billion home furnishings market into the $1.7 trillion North American housing market with the launch of RH Residences, fully furnished luxury homes, condominiums, and apartments with integrated services that deliver taste and time value to discerning, time-starved consumers. The entirety of our strategy comes to life digitally with the World of RH, an online portal where customers can explore and be inspired by the depth and dimension of our brand. Our authority as an arbiter of taste will be further amplified when we introduce RH Media, a content platform that will celebrate the most innovative and influential leaders who are shaping the world of architecture and design. Our plan to expand the RH ecosystem globally multiplies the market opportunity to $7 trillion-$10 trillion, one of the largest and most valuable addressed by any brand in the world today. A 1% share of the global market represents a $70 billion-$100 billion opportunity. Our ecosystem of products, places, services, and spaces inspires customers to dream, design, dine, travel, and live in a world thoughtfully curated by RH, creating an emotional connection unlike any other brand in the world. Taste can be elusive, and we believe there is no one better positioned than RH to create an ecosystem that makes taste inclusive, and by doing so, elevating and rendering our way of life more valuable. Never underestimate the power of a few good people who don't know what can't be done. For the past 23 years, we've heard others tell us what can't be done, and for the past 23 years, we've failed to listen. We avoided bankruptcy by, while being accused of lunacy. While others have been shrinking and closing stores, we've been building the largest and most inspiring spaces in the world. When Wall Street didn't think our stock was worth buying, we bought 60% of it ourselves. When everyone told us we should be working from home, we were in the center of innovation, working on rebuilding our new home, and it's almost ready for prime time. From the largest product transformation in our history to the most inspiring retail experiences in the world, from couches to caviar, beds to bellinis, architecture to airplanes, homes to hotels, guesthouses. From Pittsburgh to Paris, Los Angeles to London, Boston to Brussels, Miami to Munich, and San Francisco to Sydney, soon the world will be within our reach. Never underestimate the power of a few good people who don't know what can't be done, especially these people. Onward, Team RH. Carpe diem. Now, operator, we'll open up the call to questions. Thank you. At this time, if you would like to ask a question, please press the star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. Our first question will come from Steven Forbes with Guggenheim Securities. Please go ahead. Hey, Gary, Jack, Allison. Obviously, Gary, nice to see the business returning to growth here. So I was curious if you maybe can help us contextualize the success of the new collections as you see it today, realizing it's early. But can you speak to sort of how many collections are showing signs of resonating with the consumer? And what maybe some of the early learnings are around the designs themselves, as it relates to sort of product expansion opportunities or, you know, sort of broadening out the exposure, right, of the designs to different pieces? Sure, Steve. As it relates to, you know, resonating. One, we have a lot of new collections being introduced. And so, you know, we are reading and responding to all those and trying to put those into context. And we have many more coming just in the modern book alone, which is just now getting into homes. And we're getting some early reads on that. I think that the best news is we have a few collections that are new number one collections, big, broad, broad collections. And, you know, I tell the team here, you get a new number one collection generally once every seven to 12 years. You know, something that really is a market mover, that resonates broadly across the entire platform. And those things, you know, permanently move the business. The way we think about, you know, our business and think about our assortments, we talk a lot here about the thirds. We talk about the top third of the assortment, or the top third, the top third in any part of our assortment, not just overall, but if you're looking in the dining business, the living room business, the bedroom business, the outdoor business, the lighting business, the rug business, et cetera, et cetera. And if you think about our, you know, our business or any retail business, and if you try to simplify it down to what's in the top third, what's in the middle third, and what's in the bottom third, and how to think about those thirds. If you can introduce newness in the top third, that'll lift the entire company, right? It'll lift the entire category, it'll lift the entire company. If you introduce newness in the middle third, you're gonna mostly be neutral unless it's in the top portion of that middle third. You know, we also talk about the top half and the bottom half, but the thirds is really the way we mostly focus on this. If you introduce anything in the bottom third, you're gonna likely pull down the company's business. The great news is, we have the majority of the newness, the vast majority of the newness is in the top half, and a big percentage is in the top third. In some cases, there's the top collections in the top third, and that's what's really gonna pull the business forward. So, we really like the early reads of the business, but you're always gonna have, you know, you're always gonna have a top third, middle third, and bottom third. So, you know, you've, you've got to be disciplined of out of, you know, if you have, you have 90 new collections, 30, you know, Well, not, not necessarily the way to think about it, but if you have 90 total collections, you're gonna have 30, 30, and 30. So you have to kind of recalibrate and recalculate it. But our initial reads are really quite good. We're, you know, we're really excited about, the vast majority of what we're introducing. And then as we, as we think about how do you dimensionalize the best, you know, the best collection, the key is like, you know, how do you, how do you optimize it? You optimize it by, one, moving from, you know, just the books and online into the galleries. That gives us the biggest lift factor. And then you look at things like, how do you dimensionalize, you know, is the collection fully dimensionalized? Is it in all the finishes it could be? Is it in all the silhouettes, and functions it can be? You know, are there other variations you can create within that collection? You know, or even if you have key items, it's the same kind of questions. You know, how many finishes? How many fabrics? How are we presented it? How many times are we presenting it? How many sizes is it in? So on and so forth. So there's, you know, a lot of work to do. Just, you know, the work doesn't stop with just launching new product. Actually, one of the biggest ways to grow the business is dimensionalizing that product and optimizing that product. And so, you know, we've been going through, you know, since, you know, our new book started really meaningfully hitting the market and the new collections last year, you know, reacting to dimensionalizing and optimizing the assortment and getting in stock in those things. That's, you know, a meaningful lift factor. So, you know, lots of things as you think about it. You know, so we're not here just watching it. You know, it's really, think about it, as we're, you know, we're analyzing, and then we're reprioritizing, and we're reacting to it from the sense of how do we dimensionalize and optimize the best work and anything in the, you know, in the top half, which will move the business. That's helpful. And then maybe just a quick follow-up, right? There's so many, so many different contributors to demand this year and, and the idea of sort of scaling it as we move throughout the year. I don't know if you can maybe, like, help us digest, you know, the visibility into demand scaling into the back half. Like, how many sort of factors do you have a large degree of confidence around? How many factors or what percentage of the demand scaling is still sort of a large sort of forecast? You know, you think about, like, RH Modern's contribution to demand scaling. Like, any way to sort of just shore up the confidence in the demand revenue build into the back half for investors here? Of course. Yeah, no, really good, really good question. First, I'd say it's, you, you've got to really think about kind of like what's year-over-year, you know, you know, or kind of season-over-season, you know, first half versus second half, and how do you think about the lift factor? So there's, there's seven significant lift factors that we're focused on. And those factors have kind of multiple, some have multiple dimensions. So the, the first is the, just the books year-over-year, right? So, and the circulation year-over-year. So we have a more than doubling of the circulation and contacts year-over-year. That's meaningful. You, you don't have that many times in the growth of a business. Usually, you only see that at the very early stages of business, you know, business development, when brands are in the early stages. Well, the way to think about it is you relate it to RH, 'cause you say, "Well, we're not really in the early stages of this brand, but we're in the early stages of the product transformation and the platform expansion." Right? So you want to think about, you know, what's happening here. Because we were, you know, we had kind of pulled back during COVID, and we had, you know, we had very little newness, and we had, you know, little circulation and contacts. Now, you know, we're past the midpoint, we're at the probably the 2/3 point of the product transformation, and you're gonna see a, you know, there's, you know, past the halfway point, it just, You know, with modern, we're, you know, kind of now past the halfway point, heading to the 1/3 point. So we still have, yeah, you're looking at the second half here. Modern's really gonna impact the second half. You also, you know, you also have the outdoor book, right? That, that we had 14 new collections in. You know, that's going to be meaningful in the second half. A lot of people think about outdoor as just a first half business. Yes, it's got a peak season, but we're a year-round outdoor business. We're very different than anybody else in the outdoor business because of our new design galleries, which have anywhere from 24 to 36 collections presented year round. So we're a true destination for outdoors. So for us, you have to think about the outdoor business, not as a seasonal business. You know, some companies, they, you know, bring out a collection or two on the floor, and then they take them off, you know, or they set up some umbrellas and folding chairs, and then they take them off. We're a year-round outdoor business in a good portion of our galleries. And that portion of the galleries are just growing. So you have, you know, you have the modern book, which is, you know, one of the seven significant lift factors. You've got the interiors book that's gonna be mailed, significant lift factor, you know, in newness and contacts, right? You've got the contemporary book in newness and contacts. You've got the second mailing of the modern book that will happen in the second half, the second mailing of the interiors book that will happen in the second half. Then you've got this factor of more than doubling the circulation and contacts in the second half. And then you've got the seventh one, which is really the increase in store months in the second half versus a year ago. So we have 48 new store months in the second half of this year versus 12 new store months in the second half of last year, which is a 4x factor in new store months, year-over-year. So this is really unusual, right? It's like, I'd say if you took anybody else, you know, any other furniture retailer or furniture and home furnishings retailer, or home furnishings retailer, any of the mature ones, they may say, "Hey, we have two new collections year-over-year," you know, furniture collections. You know, we might have three, you know, somebody might have one. You know, we, we have a massive amount. I don't have that data right in front of me, but, you know, it's, it's like 40. You know, they're gonna have a, maybe they're gonna have a little bit of circulation year-over-year. We're gonna have a doubling of circulation and contacts year-over-year. You know, they may have, you know, so you're looking at, you know, circulation, you're looking at contacts, you're looking at circulated pages. And then the other one that I didn't mention as a significant lift factor, but it is, you know, is really what are in stocks year-over-year? Right? So we've had a lot of newness introduced. And, you know, I like to say, you know, every plan we have in this company, whether it's new products, new, any, you know, every plan we have is some degree of wrong, right? When you're looking into the future, it's a plan. It's your best educated and informed guess. I've never seen anybody take the dart and hit the exact middle of the dartboard. Okay? But the key is, are you directionally right? Are the darts on the dartboard, are they moving towards the center? And how are you optimizing it? So, you know, we just have you know, quite a lot of collections. I mean, you know, just I've told you we have a few things that are at the very top. When you get anything in the top third, you're generally not gonna have enough inventory. I mean, you know, unless you just take a lot of risk up front. That's why we don't introduce a lot of newness in our galleries, because it's expensive to transform our galleries, to change out our galleries. It's expensive to change out all the product, and we test everything in the books and online first. And we get a read, and when you get a read and you know, something is a hit, you generally don't have enough inventory to move into the galleries right away. Or you might have, in our case, with, you know, take the biggest collection. We have a new biggest collection in the history of the company, probably by a factor of 40%, and it might be more than 40% or 50% because we're in the process of dimensionalizing that and optimizing that, right? So it's moving into different big finishes, configurations, different materials, and so on and so forth. And then we'll ride, you know, we'll ride those things. But no different than think about the Cloud Sofa. The Cloud Sofa is by far the best-selling sofa. It's a higher end of the market, the better end of the market by a factor of three, probably, of anything in the world, you know, and the Cloud Sofa will move the market. We have what we believe is likely the Cloud Sofa of the wood furniture business. And the Cloud Sofa, we introduced it, and we had it in one fabric, and then we had, you know, however many fabrics in special order. And then we dimensionalized the Cloud Sofa. You looked at the history of our Source Books once we introduced it, then we moved it, we dimensionalized it to multiple sizes. We had, we put it from the luxe sit to the. We did the classic sit. We then put it in 16-inch stock fabrics, right? You know, moved the business greatly. We dimensionalized it into different arm configurations. We did, you know, instead of a wide track, we did a thin track, we did a slope, so on and so forth. So all of those kind of moves are moves you make. And what's different and what might be hard for people to wrap their head around is, God, this is a mature business, and how do you move a mature business in a big way? You make big moves. You know, the only way you can do this is making big moves. So that's really the key. You know, I don't know anybody who's attempted a product transformation of this size and scale in a business at scale. I never have. You know, I feel fortunate, you know, that I have the years of experience in this category, and I've got a team that has years of experience in this category doing this. But this is, you know, it's like a new company again, and is what we're unveiling. And so, you know, when you think it's just a little different to scale. If we were building this in early stages, we might see a doubling of our business. You know, but we're doing it at scale, so we think it's gonna build into the 20-point range in demand build. And it, and it could be bigger, depending on, you know, how quickly we move, how well we, you know, dimensionalize and optimize, the business and opportunities, and, and then, you know, and, and then put the right aggressive marketing behind it. You know, meaning store presentation, finishes we're presenting it in, where in our galleries, you know, how in our galleries, how much space we're giving it in our source books, the amount of circulation it's gonna get, what's going into advertising campaigns, email campaigns, so on and so forth. So, that's how to think about it. You know, so this is, this is something I've never been through at scale, a move this big, and I'm sure you guys have never seen it scale. But when you just do the math, which we spend a lot of time doing, and you know, dimensionalize the math, just like you dimensionalize the ideas, you know, you can kind of you know, build into you know, these lift factors and say, the business should be here. And you've got some things that are more you know, more concrete. Yeah, and the real concrete you've got some super concrete things like store months, year-over-year, you know, 48 over 12 in the second half. You know, we know what happens when we take you know, a legacy gallery to a design gallery. We know what happens when we open a new gallery in a market. You know, we're pretty close. We're within points, you know, of that. We've got a lot of data, and we're not doing a lot of really different things there. But we also have, you know, I would point out, you know, all the galleries this year that are new all have hospitality. So hospitality gives you an added layer of business also. Thank you. Sure. Our next question will come from Steven Zaccone with Citi. Please go ahead. Great. Thank you for taking my question. Maybe to follow up on Steve's question, I was curious for commentary on pricing. You know, Gary, you've talked about it in the past, that pricing had gotten too high, and more broadly, the industry has gotten promotional. How do you feel about pricing now on the new products? Where are you seeing some customer adoption, and do you feel like some of the pricing challenges for the business are in the rearview mirror? Yeah. Hi, Steve. Good questions. We've been doing a lot of work about, around, you know, value, right? You know, the way we think about our business and the way we think about how consumers respond is, we're not in a portion of the market, the first thing on the consumer's mind is price, right? No one walks into our galleries or looks at anything in our Source Book that they, you know, think the design is ugly and they buy it because of price. I don't think any of our customers, you know, say, "Hey, I don't mind how the product looks, you know, at that price, I'll buy it." I think people come to RH because, you know, we are a design-driven business, we are a curation-driven business, and we're an integrator of, you know, a business. We sell you the end result. We sell you the whole, not the drill. And so we look through a lens of design, quality, and value in that order. You know, what is, You know, is the design great? That's what consumers are responding to. If the design's not great, nobody walks up to it, or nobody clicks closer to it online, to try to perceive the quality, right? If they love the design and they you know think it's really good quality, they make an equation in their mind for this design at this quality, what price is a good value to me, right? The consumer will then make that calculation. And so value is really you know the pricing is a result of design and quality. And so you know if the design is great and people love the design, and they think the quality is you know at the level they expect or above the level they expect, you know you've got a lot of room in pricing you know there. Now you know of course there's price elasticity. There's you know if you price things you know lower and lower and lower, you can appeal to a bigger and bigger market, right? If we price things higher and higher and higher, we, you know, you know, we might appeal to a smaller market, but you've also got a margin lever you're, you know, using in there. Like, a what margin, you know, where do I optimize, you know, size of business, profitability of business, and so on and so forth. So we've, we've done a lot of work. We feel like we're in a really good place. We feel for, for our design and our quality, we're at really good values, and in some cases, we're at disruptive values. If you, you look at it. You know, you're always gonna have some, you know, in today's world, I, I don't know if I just read some famous designer just not, you know, just made a dupe of his own product because he knew the product was gonna get copied. You know, we're in a world where, you know, the copies happen so fast, almost instantly. You can look at anybody's product. I don't care, you know what, you know, what. Excuse me. I've lost my voice from the Madrid party last night. I had to talk to a lot of people. I didn't have to talk to a lot of people. I did talk to a lot of people. I don't want anybody to think I was not happy talking to them, but I talked to quite a few people. So my voice is going a little bit. But the key here is you know, how do you create an optimal model? And we're constantly testing those things. But the idea with the dupes, we, I think it was Tom Dixon. Maybe it was, right? He designed something, a light or something, and then he immediately did a dupe of his own light at a cheaper price. And he said he wasn't gonna waste, but I don't care at what level the market is, you're gonna see it. If Chanel does something today, I mean, in a very short amount of time, you know, you can go on Alibaba and see copies of almost anything in the world. You know, you can see things online. I mean, they're just so fast. But you can't always perceive the quality, you know, with the fast followers, the knockoffs, and. But, you know, we kind of look at, you know, the most of the market that's most relevant. Where's our customer going? You know, I don't think our customer is waking up, searching in the internet for the best price. I think their time is really valuable to them. And you know, higher-end customers are shopping at places that are editing and integrating for them, that are selling them the end result. You know, it's no different than, you know, just participation at restaurants, right? If you look at, you know, the wealthier people get, somebody else is making their food. They're either going to really nice restaurants, or they might have a home chef, right? Because time becomes more valuable to them, you know, so they're not. Unless they're real, you know, a foodie and someone who, you know, that's their hobby, is cooking for themselves, but generally, higher demographics are eating out more, and they're, you know, and they might be eating at home, but it's being delivered, or they have a chef at home, and somebody else is cooking for them. You know, I think at the higher ends of, you know, apparel and home goods and other categories, people pay more when you do more work for them, when you create time value for them. And, you know, and I think that's what we do. I think we're, we are, you know, integrators for the consumer, and we're selling them as close to an end product as you can. In many ways, sometimes it's a complete end product. If they're engaging our interior design teams, we're doing their whole house in a beautifully integrated way. You know, we're coming in, and we're organizing the install, and organizing, you know, lights being hung by on ceilings, and pictures being put on walls, and so on and so forth. You know, a lot of our customers, you know, come home to a fully furnished, detailed home, and we'll, we'll go as far as they want us to go. You know, in some cases, we're buying antiques for them, you know, and, and so on and so forth. So, so when you're doing that kind of work, you know, people pay for it, right? But, but in a general sense, I'd say, I think our pricing is in a really good spot. You know, with newness, you know, you never know. You may think, this is so good, it's so unique, nobody else has it, I'm gonna price it here, and you might have priced it too low, you know, and it blows out too fast. You know, and you could have got a higher margin. You might take prices up. You might have priced it a bit too high, and it's a little under what you thought, and you adjust the pricing. So you're always kind of trying to fine-tune and optimize. So, you know, I wouldn't let like, You know, I made comments about the contemporary book, I don't know, what was that? A year and a half ago. I mean, it's quite a long time ago. And I thought, you know, I thought we were overpriced. We just didn't pay close enough attention and challenge enough about, you know, the fabrics on the sofas, things like that. We just had some things that just kind of went to a level where, it's not that the product wasn't worth it. The product at that price created a smaller market than we would have liked. It's not that we're not gonna sell product at that price, it's just you want to not make sure that's Like, we had some sofas that were introduced in a Holland & Sherry fabric that were only available in that fabric when we launched. It was in stock in that fabric. Well, you know, that made a sectional in our source book $24,000. Now, it was made in Italy. It was the highest quality. It's as high quality you can make it in the world with Holland & Sherry fabric. So if you would have made that same sofa to the trade, and you would have made it in a workshop, it would have probably been, I don't know, $36,000-$40,000. We had it for $22,000. It was a good value. It was just a smaller market than we generally address. And so, you know, so I thought we kind of jumped too far. We still have many of those products. You know, we may have maybe showing them in a different fabric. You know, we may have optimized them, as far as how we're buying them, you know, and have better values, and, you know, some of them we may not have went forward with them. But for the most part, I mean, when I think about the main things, I think we still have them all. You know, they're just smaller volume than we anticipated, and we wouldn't have made them, like, the very front of the source book. You know, it's like, we would have teased those things throughout and presented them as, you know, really, really unique items and communicating, you know, what we're capable of as far as design and quality and, you know, and use them in that sense, but not to drive the business. So, you know, we made some mistakes. They were a year and a half ago. We learned from them. We've, you know, we've now, evolved and, you know, we, we have that data. You know, we won't make that mistake again. Okay, I appreciate all the detail. Hopefully, a quick follow-up here, but from a macro perspective, what are you most focused on here to see engagement in the category return? You know, we've seen somewhat of an inflection in, you know, luxury price homes turnover. I mean, is that the key metric you're looking for here? Anything else you could share on the macro would be helpful. You know, it's funny. I don't know what metric everybody's looking at because they vary greatly, right? There's you know, Association of Retailers or some have some number that luxury homes inflected up and, you know, other numbers say it was 2%, you know, and so, you know, I don't know whose data is right. I don't think that there's been a meaningful move, a sustained move in the luxury home sales. You know, it might be a little ticking up, and that's 'cause some of the pricing is starting to come down, in some cases, and it's starting to come down because of holding power. Especially if you had a, Excuse me. Especially if you had a developer, you know, someone who is building homes to sell them, or if you've got, you know, a home flipper who, you know, bought something to remodel and, you know, fix up, and then they go to sell it. And you know, in a market like this, where you've got high interest rates, you know, your consumer base shrunk meaningfully and you've got a burn rate, depending on how long you hold it. But I don't think that there's, you know, a meaningful, sustained move in the home market. I think you've got little ticks up here and there, and it's kind of bouncing around the bottom, and I think it will be until we have a meaningful move in interest rates. And I think we began this year, what everybody expected, six interest rate cuts. I think that was the number that, you know, if you, if you looked at, how the market was betting. I think the Fed was pointing to kind of four cuts, and the market priced in six cuts because they figure the Fed is always very conservative, right? And I think that, where are we now today? The map says, I think there's a 90-something% chance based on yesterday's comments that, we're going to have one interest rate cut. You know, that's like way off. That's only, you know, a few months, right? Like not that many months, like, way off. If you think about the Fed's forecast of going from four to one, I mean, think about last quarter, you know, Powell went on, and I think he shocked the world. He said, for the first time in his commentary in a while, "I don't think we'll need to hike rates." Everybody who's listening to him talk about, they're waiting for him to say how many rate cuts we would have, and he says, "I don't think we'll need to hike rates." And then you got Jamie Dimon out there saying, you know, "You should not be cutting interest rates. You should not be cutting interest rates." I mean, as much as the Fed's supposed to be independent, if the best banker in the world, the best bank in the world, is on TV multiple times saying, "You should not cut rates," I think that has a little influence on what the Fed thinks. They may not listen to Gary Friedman's point of view, you know, because I put it out there when I told them they were behind the curve on inflation. You know, I said they should call some business people and, you know, we saw massive inflation, and they thought, oh, it's what do they call it? Transitory. Transitory, and interest rates will go from four back to two in a couple of months, then they went to nine, you know? And so, we saw that coming. But, you know, I just think that there's a lot of noise out there right now. I think there's a lot of pressure on the Fed. I think the Fed is gonna be massively data dependent, which means the Fed will be behind the curve, right? And so they were behind the curve on seeing inflation. I think they'll be behind the curve as it relates to assessing is inflation under control, and I think they'll be behind the curve as it relates to, you know, it's time to cut interest rates. So our view is probably a little bit more negative than it was a quarter ago. You know, I think a quarter ago, we were feeling a little bit more optimistic that there'd be rate cuts and the housing market would begin to meaningfully move in a sustained manner. I think it may not be until, you know, 2025 or, you know, second quarter 2025, maybe. You know, so I think I don't think there's going to be a sustained inflection in luxury home sales at these interest rates. You know, so yeah, not with interest rates like around. It's just an affordability factor. You've got home prices up 50%, you know, or more, 50%, 60% since post-COVID. Home prices went up 42% in the two years of COVID, and then they've continued to compound the last two years. So you've, home prices are up roughly 50%-60%, and now you've got interest rates, you know, seven points, you know, 7% or higher when they were, you know, 2.6-3.3. I mean, it's just, it's just simple affordability now. You know, yeah, there's some silly people to buy a home at any price they can, but the other thing you can't trust, by the way, that's wrong in the data externally, is when they talk about cash sales. It's such a stupid number to focus on. You know, they say, "Oh, like, there's, there's more cash home buyers, you know, there's people who are wealthy paying cash on homes." I don't care how wealthy you are. No, not a lot of people own their homes that don't have a mortgage on them. You know, I'm relatively wealthy. You know, I mean, you know, The New York Times just reported I bought a couple of homes in Malibu. Did I pay cash for them? Yes. Did I pay cash for my Beverly Hills home? Yes. Did I get mortgages put on them? Yes. But does the Association of Retail Real Estate Brokers, who reports on any of this stuff, they record me as a cash buyer. I'm not gonna... You know, that, that no one's gonna really pay cash. You, you know, you're gonna, you're gonna have a mortgage on your homes because you think your money can generally make more money somewhere else, right? And so, you know, that data is never right either. So, you know, you just got to parse out the data and say, what, you know, what, what, what is real credibility? Because the data we get on from the Fed isn't very reliable right now. You know, like, I don't know, you know, there's some hard facts, but numbers on homes sometimes, you know, people are. You know, I don't know. I, you know, I saw a report that Redfin said, luxury homes were up 2% or something like that. Another report said, you know, luxury homes were up like 30%. I don't know which one's right. I appreciate all the comments. Thank you. Okay. Our next question comes from Simeon Gutman with Morgan Stanley. Please go ahead. Thank you. It's Simeon Gutman. Guys, I want to ask about the gross margin outlook, and if I could segment it into two pieces. First, the new product lines and launches, and then everything else. I'm curious if gross margins are roughly stable, and then thinking about the guidance and the torque in it in the back half, is it simply better sales and then better expense leverage, or is there some variability that could still happen with gross margin of the business? Thank you. I'd say gross margins are relatively stable. We do have a lot of new, you know, goods coming in. You're gonna be right on some, you're gonna be wrong on others. And, you know, you're in a, you know, you're in one of the worst housing markets in 30 years, the worst one I've had seen in my career. And, you know, so there's always gonna be just a higher promotional environment than, you know, across the industry, and you're gonna have to react to some of that stuff. You know, so, you know, you're always gonna carry a higher percentage of promotional mix, you know, during market times like this, right? Because you've got to kind of keep the inventory moving and, you know, so, But I think we're pretty confident about what our, you know, margin mix is gonna look like, you know, unless something happens meaningfully. You know, if we're meaningfully wrong on demand, you know, margins likely go down a little bit. If we're meaningfully right on demand, margins go up a little. You know, it's no different than buying a product that's really performs well, you're gonna have higher margins than if it performs poorly. So, but I'd say, I don't think we have a lot of risk in margins in the second half. Simeon, just, you know, obviously, as you guys build your models and do and look at our margins, just note that there's, you know, we have growing variability in our quarterly revenues, so it can only remain stable to the extent the revenues are the same in a sense. You know, I think there's a different nuance here when you're talking about product margins versus gross margins, which have fixed occupancy. I know it's a firm grasp of the obvious, but, you know, obviously, when a quarter is lower, you know, Good point. Example, like Q1, you know, Again, if I'm building a model, I'm not taking Q1's gross margin and saying that's flat. I don't think that's necessarily what Gary was saying. You know, we're gonna have a growing revenue throughout the year. You know, our trends, just build your models and make sure you're looking at fixed occupancy. Yep, that's helpful. So I guess just related to that, and then I'll include the follow-up. I guess I meant that there isn't some piece of clearance that has to occur with older legacy lines. Like, we're through that part, and now the normal cadence of the business as planned and the variability will be based on, you know, the mix of promotions with current product. But we're through the worst of whatever clearance that you were trying to do to clean up the portfolio ahead of all these new launches. Right. And the We're not- Yeah. We're going through the biggest product transformation in our history. We're in the middle of that. I wouldn't say what, I don't know why you think we're through the worst of it. Like, you know, we're in the middle of the product transformation. We're just kind of going on to the second half of it. So, yeah, the clearance doesn't just go away in a business like ours. This isn't selling T-shirts and sweaters where, you know, you put it on a clearance table and it flies off. You know, the home business, when you're transforming it like we are and you're making big moves, you know, you put things on clearance, but it's limited. People don't buy a new bed if they don't need a new bed. People will buy a new sweater if they don't need a new sweater. It's on sale. I'll have another sweater. You don't buy another bed just because it's on sale. So sale and clearance in categories like ours are very different, you know, than other categories. You know, so they take a longer time to move through and cycle through, you know? Okay. I'll leave it there. Thank you. Yeah, sure. Our next question will come from Max Rakhlenko with TD Cowen. Please go ahead. Great. Thanks a lot, guys. So first, just curious, how much of the assortment in galleries today comes from the new launches over the past year versus the legacy product? And then when will we get more of the outdoor and the modern products inside the galleries? And then just how should we think about the evolution over the years as far as the new products being shown in the galleries? But we're in a level of new today on about 60% new in the bigger galleries. 50% new? Yeah, I'd say 50%. Yeah, about 50% new in the bigger galleries, and the legacy galleries, probably, probably about the same, same amount. So think about something like outdoor, you know, that we're generally not buying newness to put in galleries unless we think that it is a sure winner, because that's how you can really negatively impact margins, right? If you buy something up front, really big, and you think, you know, you're gonna buy all the display quantity, and you're gonna buy to that level of volume, and you're wrong, you're gonna be really wrong. So we're constantly, for the most part, we're buying newness, and we may buy it bigger, you know, and anticipate, you know, they wanna be somewhat heavier, that if it's if we're right and it's gonna be big, we're gonna move it out to the galleries more quickly than less quickly. But we, you know, we're reading. I mean, modern is just kind of getting out there, right? It's the book's complete. It's all in home this week. Complete? Yeah, so started, you know, mailing first week of the month, and it takes a couple weeks to get in and get out there, and then we're kind of reading it, you know, reading the online and response to the books. And then we're probably about week six or something. You know, we have a pretty good sense of the early, early reads. Because consumers, again, with this, you gotta think about a lot of our business is kind of already booked. You know, a lot of our demand is already, it's already kind of been decided. You know, we've, we've got projects that are in the pipeline that our designers are working on over three to, you know, three weeks to three month periods. And so they're building those orders. They're. They've got all those quotes. And you may get, you know, consumer sees the newness and says, "Oh, change that," or, "Change this," or, you know, or designer may say, "Change this or change that." For the most part, that's, that's work that's already done. So a big part of our demand is kind of already in the pipeline. And, you know, it takes you, you know, like about 6 weeks to kind of see what those early trends look like versus the early trends of other things. And then, you know, you start to kind of see it build. It usually takes us about three months to get the full run rate. And but we're making kind of early bets probably by weeks six to 12. You know, do we think that's going in the galleries? And then we'll, you know, start to write new orders, and those new orders will take, you know, four to five months to, to get d epending on how big we're buying, right? If it's, you know, like some of the collections that I said were just, you know, huge collections, you know, those, the vendor, you know, the vendor's capacity may take a while to ramp up. You know, on the one big collection that we think is, you know, the new redefining collection for us, that vendor had to open two additional buildings, two additional factories, to ramp up to make the kind of demand that we're seeing. You know, so that takes you a much longer time. There's a lot of factors to it. So I'd say, you know, we're about 50% newness on the gallery floors today. And then you're, You know, because we have so much newness coming in, you're gonna have other newness that comes in that might be better than the first newness you put out there, so you might transition that, you know, as you're, as you're going. So there's gonna be a lot of data. You know, will there be something in the new modern book that displaces something that we just put into the galleries? Maybe. You know, so, you know, the math will kind of tell us what to do. Got it. Maybe just a follow-up to that, but some of the books are being delayed, or not delayed, but coming out a little bit later than you initially thought. Then one key demand was a little bit softer than what you thought. So just given how the business does remain somewhat choppy, and there's been, you know, a little bit maybe demand pushed out, just given the timing of the source books, curious to your level of confidence that you'll be able to maintain the full-year demand guide. Then just separately, it does look like you stopped releasing the outlet revenue. So if you could share what that revenue was in first quarter, that'd be great. Well, yeah, we usually don't do one-off. Yeah, we don't do one-off, you know. If we're not reporting it, like, you know, we're not generally doing one-off things like that. But the books coming with books slightly later and level of confidence. Well, you know, I think I talked a lot on, based on Steve's first questions about, you know, how we think about the lift factors in the business, and the lift factors, you know, all look good. And, you know, the key is gonna be, you know, what is the consumer response to the newness, and to the additional contacts? So, you know, we've got a, we have a lot of data on that. We don't have a lot of data on the newness. But, you know, we're generally taking a kind of down the middle view of kind of what it should be. So we, you know, we feel confident that the numbers we're putting out there are achievable numbers. And, you know, if we get any kind of tailwind behind us, if for some reason, you know, we see some interest rate cuts or other things, that you know prices dropping meaningfully in the housing market and the housing market picking up, that could be some tailwind. Can we have more headwind macro-wise? I don't know. Maybe. You know, it looked a little worrisome when inflation, about a couple of months ago, was kicking up. You know, would they have to raise interest rates? But right now, you know, the latest report says no. But we, you know, we feel generally confident about what we're doing. You know, we've been here. we've all been here a long time building this company and building this business, so we have a lot of experience doing it. But at the same time, you know, I just say it's the first time we've been through a transformation this large. So it's, it's unlike, and it's not unlike anything else you do that's new and different and innovative and inventive. You know, there's the greater level of reward and a greater level of risk. So, but it's our best view today. Got it. That's helpful, thanks a lot, and safe travels. Thank you. Our next question will come from Curtis Nagle with Bank of America. Please go ahead. Great, thanks very much for taking the question. So, yeah, just changing gears slightly, Gary, just curious if we could get an update, I guess, on the progression and the timing of the Aspen ecosystem, and then the concept more generally. I don't think that's something we've talked about on the call in a little bit. I mean, at the what? Aspen ecosystem? Oh More generally the concept, yeah. Yeah, yeah. Yeah, it's going slower than we anticipated. You know, our development partner, you know, likes to say, probably easier to develop on the moon than it is in Aspen, and things are, you know, taking more time. And, you know, Aspen was. It's a, look, it's a small town, and during COVID, they had a lot of disruption, and it backed up everything. And, you know, we got really slowed down, because of that. And then, and then they had a lot of turnover in their whole planning group, and that's kind of slowed us down a bit. But we're up and moving. You know, our mountain house is kind of on track. Our mountain house is the name for the big gallery we're building there. It's on the best corner in Aspen. It'll be a three-level experience, and two levels of retail. And, we're gonna, I think, get a whole World of RH kind of concept there, 'cause you get such a global customer coming into Aspen, you know, wealthy and affluent global customer. And we've got a, you know, great restaurant, you know, hospitality experience. So that's on track for next year, right? So that'll open next year. We're, you know, kind of at a standoff with the city on the Guest House and some, arguments on, if the wall that they want us to keep is historic or not historic. And, you know, we believe it's not historic, and, proof of that, that's slowed us down and, you know, versus what we want to build. And then we, you know, getting into process of the plans on the homes and things like that, we slowed some of it down just because of uncertainty in the market right now. You know, like, do we want to build homes and put them in the market when the interest rates are this high? So, but, you know, it'll be progressing. It's all kind of going a lot slower than I think we thought. But, you know, COVID, you know, happened, and you're in a small town, and difficult to build and develop there. And, you know, things are taking longer. And you also have, you know, an interest rate move. You know, when you're a developer, we're now a developer, so your, you know, your cost to capital is gonna be higher and things like that for us and for our partner. You know, so, you know, it's time usually on some of the homes and things like that, you know, we're taking our time a little bit. We don't think that there, you know, there's a long-term value issue with anything in Aspen. If anything, we've had a great timing. We invested before the COVID boom, you know, I mean, invested kind of before anybody had clarity on that. So we, you know, we believe our portfolio and investment we made, probably made two or three times our money already, you know. So if we wanted to liquidate our portfolio today, everything we have is worth a heck of a lot more. But we didn't just do it for that. I mean, you know, we did it to see what we can learn about, you know, the idea of space and some places and, you know, so on and so forth. So, but all good. We're excited about it. We'd like to go a little faster, but the mountain house is taking shape and moving quickly now, finally. And we hope the guest house will resume construction soon. Okay, great to hear. Then just a quick follow-up. I just want to make sure I caught your comment correctly. It sounds like... I think you said, Gary, that in terms of, you know, just new products alone, that could grow the business by, I think, 20 points or more. I also heard maybe two or 2x. So just, would you be able to clarify just, you know, I guess, kind of the range or just maybe I just misheard? You mean as far as how we think it lifts factors, Curtis? Yeah, exactly. Yeah. Yeah. Yeah. I think, I think when you start to, you know, take it all into account, right? We, we, we can see, you know, lift factors getting us, you know, lifting the business, you know, in the 20-point range, right? And, you know, as we, you know, as we move through the second half and all the circulation hits, and, you know, and there's just gonna be a lot more people that are gonna be aware of the business. And, and we have 48 store months versus 12, you know, just in the second half. And, you know, we have a lot of new restaurants that, you know, they don't do zero, right? Well, they may not, you know, do as much volume as the new galleries. They're, you know, they're not bad. And so, you know, even things that you might think are small, we're opening Waterworks, I think, with our highest volume showroom. New York and L.A. New York and L.A. and Long Beach. I think L.A. is the center, more than one, I'm pretty sure. Totality with modern. Totality, yeah. Yep. And so, you know, we're opening a kind of a Waterworks gallery within our Newport Beach Gallery. The Newport Beach Gallery is the biggest gallery we've ever built. And, you know, we're gonna have, you know, 90,000 sq ft. It's got incred. Yeah, what do we have? Like, 40 collections of outdoor furniture. We've got, I think, 22,000 sq ft of outdoor furniture space, and probably the best outdoor furniture market there. So we're gonna have 3,500 feet of Waterworks, and Waterworks doesn't have a footprint in Orange County. So it's like opening a Orange County, generally, for a lot of brands, you do about as much business as Los Angeles, right? And so, you know, Orange County is gonna be big, but Waterworks, even that, you know, if it does anywhere near what the Waterworks brand does in Los Angeles, it's a meaningful number. You know, so they're really excited about it, you know, and we're really excited about it. And we're excited to launch it. We think it's gonna be a good validation. But there's just a lot, right? You've got the modern book, interiors book, contemporary book, you know, the second mailing of modern, the second mailing of interiors. You know, there's a lot of newness when you count all that up. But there's a lot of also in getting in stock and all that stuff, and the cycling, all those, you know, first-round collections we now have read and we're reacting to, you know, and we're ordering into newness. Some might have missed, and we're, you know, marking it down and cycling it out. And then we've got a doubling of circulation and, and, you know, 4x in new store months. And, you know, it's just, there's a lot of lift factors. I've been, you know, as many as you have ever seen, as many of I, as I've ever seen in a, you know, in, in this stage of the, you know, business like this. So it's just, you know, it's different. I know it looks, you know, it looks different. It should be different, you know? So, you know, appreciate all the questions, and, you know, none of them surprise me. I'd be asked the same questions if I was you guys, so. Okay. Thanks, Gary. Thank you. Our next question comes from Michael Lasser with UBS. Please go ahead. Good evening. Good evening. Thank you so much for taking my question. Gary, are you getting as much of a lift from the newness and innovation that you've been introducing as you might have in the past? And does it make sense to delay further some of the introductions in light of how challenging the market is? Because maybe you would not get as much credit now from, or recognition now from your customer, given what's going on. Let's see, make sure I get that right, Michael. Thanks for the question. Let's see here. Are we getting as much of a lift from the newness as you did in the past? Yeah, in fact, in some cases, we're getting better lift, right? When it, Like I said, you get a new one in a business of kind of our size and maturity, you don't get new best sellers very often. You get a new one probably every seven or 12 years, like a big furniture collection or a big upholstery collection, right? So, we're, you know, getting, I think, as, you know, we're getting as much right as we kind of ever have. You know, we always get a certain amount right and a certain amount wrong. So I think we're probably similar to how we've been in the past. Maybe we're a little better because, you know, when you get a new all-time number one, you kind of go like, that kind of changes everything. Does it make sense to further delay some of the new introductions, I think was the question, right? In light of the challenging market. We're not really trying to delay anything. Usually, when we push the modern book by a month, which then, you know, kind of pushes the next book by a month. We didn't push contemporary, we just pushed modern and interiors. We wanted to have a certain amount of spacing between those two, so we didn't overwhelm the customer with too many pages and, you know, too much product. But the reason we delayed modern is because some dots connected while we were working on it. It's a whole new design. It's a you know, whole new format, and you know, we're working with an exciting graphic designer from Madrid, who spent a couple of months living with us, two or three months, and you know, we just saw him last night at the party. But you know, some dots connected, and we figured out how we could make it, we thought, significantly better. And we said, "Look, yeah, do the math. Is it worth doing this and changing this? And, you know, we're gonna take a four-week delay." We believed it was worth it, and I think it's the most exciting new book we've put out there, you know, ever in our history. I think it elevates the RH brand. I think it's gonna attract, you know, a higher level of consumer and interior designers and, you know, I think it's merchandised beautifully. It's graphically presented beautifully. You know, so that's why, that's why we spent more time. I mean, I don't think, Like, we usually don't, like, go, "Oh, yeah, let's just kind of delay it." You know, like, we want to get our work done as, you know, we can. You know, I think, you know, when you're innovating and inventing, You know, if you know, you're gonna see new things all the time. You know, you're working on new things, you got new data, you know, you turn and look around another corner, and you see a new opportunity, and, you know, you're deciding, okay, do we pursue that? Do we integrate that in? Is that, you know, how important is it? And we thought it was important enough to, you know, take four more weeks and work on, you know, work on the book and take it to this new level and, you know, actualize the vision we had. And that's it. I'm sure that's, you know, no different than anybody that's working on new products. You know, I don't know if, you know, Apple knows exactly when the new iPhone's coming. You know, there's not usually a schedule. We're introducing the iPhone on this date, or we're introducing this, you know, iPod or something, you know, on this date. You know, while you might think it's just a book, you know, it's a book with a lot of newness. You know, we're trying to present it in the newest, compelling way, and you're kind of building and learning and making decisions, and that's why, yeah, that's why we just took more time. We thought, you know, we thought we could see a way to make it significantly better, and we said, "Let's keep going. You know, let's take the time. It's gonna be worth it, because it's gonna be how the consumer now sees it, how it's presented, what's presented, which way, and, you know, for the whole life of the book. So the book is [inaudible] Four weeks later, okay, you know, does a little bit of demand move from one month, then does it move forward? You know, if you, if you thought it was worth zero, you wouldn't have done it, right? Like, if you thought, "Hey, this is gonna be X, and we're gonna move things around and take four more weeks, and it's gonna still be worth X," you wouldn't do it. But if you think, "It's now gonna be worth Y," and, you know, and over the life of that book or, you know, those collections and how they're presented that way, you know, you, you, you pick the one that you think is gonna give you a better return. So that's, that's how we make decisions like that. I mean, look, I, I almost, I mean, you know, I love what Elon Musk is doing and is doing incredible things to change our world and change, you know, carbon footprint and the energy, and, you know, make this world much more sustainable, going and doing all kinds of nutty things, right? You know, creating places to live on Mars and, you know, ways to change the satellite networks and tunneling and all those things that, you know. But I was gonna order the, you know, the, when the Roadster came out, right? I was all excited. I wanted the Tesla Roadster, and I, You know, they wanted you to put, to get the founder's one, I think you had to put $250,000 down or something like that. And I almost did, you know, I thought, "Ah, you know, but I gotta wait, like, a year." Well, I don't know, what has it been, seven years? Since it happened, the Tesla Roadster has. Now, now I'm happy I didn't give them my money, you know? But I'm thinking like, that's, now, that's a real delay, you know? And I don't know why he delayed it that long. You know, maybe it's gonna come out and be rocket-propelled, and it's gonna be worthwhile. But you know, usually we don't have, like, massive delays on things, but you know, you don't wanna, you don't want rigidity to get in the way of evolution and innovation and better ways. You know, you just wanna do the math and say, "Okay, you know," like, think about this. Let's say we have a new product, and it comes down the pipe, and we're working on a, you know, book and a season, and we're gonna, we're either gonna launch that product, and it's not gonna come in for, I don't know, three months. And you say, you know, "Gosh, wait for the next book." Say, "Yeah, wait for the next book," or you can put it in that book, and you can be consumer, you know, responsive, you know, the consumer can see it, they can order it, and it, it's gonna get in. If the next book's a year later, it's gonna get in 26 weeks early, not, you know, not really, you know, three months late or something like that. It's all kind of simple math, you know, the way we look at it. You know, so, you know, we made a decision to make the book better. It took us four weeks longer. We think it's gonna be better forever, or it would've been not as good forever, you know? So that's the lens we look at it through. Got you. My follow-up question is: It sounded like earlier in our conversation this evening that you mentioned the consumer is buying more on promotion. So, A, is that right? And B, if that persists, does that change how you think about the path to RH's long-term margin aspiration? Well, I think. Yeah, I think in massively down housing markets like this or down, you know, it's like, you know, if we're in a recession in any category, you know, or an entire, entire recession. Right now, we're in a massive housing recession in anything that's tied to housing, right? Apparel has benefited based on that. Like, instead of people buying homes, and they're saving a lot of money, not buying a new home, so it's easy to go spend some money on apparel. You know, you know, "Hey, honey, we, you know, we didn't buy that new home, but heck, do you wanna buy, wanna buy a new purse?" "Sure!" You know, so it's an easy trade-off. You know, it, you always are going to have a higher degree of sale goods in a down market. Always. You know, and because just demand's slower, you're going to have more markdowns. You got to keep inventory moving, so on and so forth. You know, so that's all factored into the margin guidance short term, but it doesn't change the margin guidance long term. You know, it's just based on the demand environment. You know, how strong is the demand environment? I mean, as an example, the demand environment for our category in the COVID years was unbelievable. You know, margins went way up. The demand environment post-COVID, not so good because, you know, up against those numbers. So margins go down. Then on top of that, you compound that you're in the worst housing market in 30 years, and margins are going to go down again. You know, so it's, it's all relative to demand, nothing more than that. I hope that makes sense. Totally. Thank you very much. Thank you, Michael. Our next question will come from Jonathan Matuszewski with Jefferies. Please go ahead. Hey, good evening, and thanks for taking my question. Gary, can we get an update on how the brand is resonating with the end consumer in Europe? I think on the last call, you mentioned satisfaction with some of the momentum with, you know, trade customers, so acknowledged a bit slower progress with the end consumer. So anything you could share in terms of maybe what your customer insights group is seeing as it relates to brand awareness or intent to purchase or overall perception would be helpful. Thank you. You're talking to the consumer insights group. We're all sitting around the table. Yeah, what's great is we just got back, you know, before we went to RH England, RH Madrid, for the event, we were in RH England for a visit there, and we sat with the team there for several hours, just trying to listen and learn. And you know, as you know, just kind of, We just celebrated our one-year anniversary in RH England, and you know, just identifying opportunities. And we, you know, we think that Look, we've never done this before, right? So we don't, we didn't know exactly, I don't know, what it would look like. You know, we could have guessed at what it's going to look like, but we don't know. We're opening in new countries. We've never sold there. You know, you couldn't even buy direct from our brand in any of those countries, so why would anybody know RH? And so, you know, we're just learning a lot about consumer awareness there. How do we build it? What are the right ways to market the brand? You know, we always believe that, look, the fastest way to build the brand, we think, is through a physical presence, and people can see it, touch it, respond to it, you know, be served in a way, have interior design services, all kinds of things. I'd say after a year of being open in RH England, we're kind of where we thought we'd be. You know, we're trending at a level for opening a gallery in the middle of the countryside that we said we're opening through a lens of conversation versus commerce. It's not where you would have started if you were trying to optimize commerce, right? We, You know, London is where you'd start, but we knew London was going to be several years later, and we thought, like, let's do something, you know, inspiring and elevating and something that would create an incredible first impression and to the brand. And that, and we decided to open in a seventeenth-century estate on 73 acres with a deer park and, you know, an architecture and design library and, you know, three restaurants and wine lounge and a tea salon and a juicery. And what else do we have there? You know- Yeah. Yeah, we've got... Yeah. Yeah. You know, Soane exhibit, you know, Sir John Soane exhibit, one of the great, greatest English architects that ever lived. And, and like, there's a lot of wealthy people that go to the Cotswolds, spend weekends out there and weeks out there, especially during summertime. And, you know, we want to create conversation, and we think we've created a really great first conversation. You know, and, you know, the business, you know, trend in this first year now is kind of where we thought. I would say, you know, Munich and Düsseldorf, you know, Brussels were not really going to be first, you know, on our list, but we had an opportunity to get some good locations in a deal where Abercrombie was closing some of their flagships, and we thought they were good locations. And, you know, we opened those. They wouldn't have been strategically in the order. We would've, you know, liked to probably be in Paris and London first, build the brand awareness, but, you know, they were convenient and we could get into them for not a lot of, you know, investment, as a lot of the infrastructure and stuff was done by Abercrombie. And we've gotten open, you know, in those places, but not knowing really what to expect. I think that for us, the real key is get open in Paris and London and Milan and even Madrid. You know, Madrid's one of the biggest cities in Europe and the biggest city in Spain. So I think, you know, we're gonna learn more. Just from our conversations yesterday with the team, we got some great feedback and great ideas on how to build the business and get more people to the gallery and so on and so forth. And some of them, we think can work across the entire, not only entire Europe, but actually across the entire US market. So that was really great, and, an incredible investment of our time and, you know, great, great insights from our people and some of the people in our, you know, design team. And, and so, you know, and then just even things like the products and, and, you know, having the right kind of products for the right markets, right sizes, the right delivery times. You know, what, what are we stocking, you know, in, in the U.K., versus, you know, what we're stocking in the U.S.? And what, you know, what sizes, what shapes, what things, and, you know, how do we ship faster on certain things and, you know, supply chain lead times to different countries. So there's a lot to learn. But I'd say, you know, I feel better and better about it, as we go, 'cause we're learning more and more, and, you know, we've got some really great people on the team, really smart, intelligent, passionate people on the team. You know, we got a lot of great feedback yesterday. You know, the teams in all the galleries, I think, are just outstanding. I think, you know, the galleries look great. I mean, we're in Madrid and, you know, may have been the best work we've ever done from a presentation point of view and interior design and styling and stuff like that. I mean, just breathtaking. I think Madrid, like, set a new standard in our company and gave us a vision of where to take all the galleries, you know, and how to execute at that level everywhere, and we think it'll impact the whole company. So, we're, You know, look, we're opening, we're learning, our business is building. Every one of our galleries, you know, the design pipeline is building. And, you know, we'll, you know, we're in kind of this spring-summer period now, so, we're gonna start learning a lot more in England, 'cause when people really start going out there again, and, you know, we're learning across the platform. So, I'd say all's good. And, you know, hopefully, as we get Paris and London open, and Paris will open next year in the spring, and London, hopefully at the end of next year, you know, that one's a little complex. We're stringing together four buildings and different store plates and stuff. But right now, we, you know, we believe it looks like next year. And I think those are gonna, you know, really raise the brand awareness, you know, massively for us, and then Milan after that. That's really helpful. Thanks, Gary. And then just a quick follow-up. In the prepared remarks, you mentioned a growing number of online furniture brands that ceased operations. We've witnessed this trend as well. You know, based on our observations, it felt like disruption was more concentrated at those mid-tier price points. So are you seeing super premium online brands in your space, you know, vanishing, or was that comment more so, you know, foreshadowing disruption that you see on the horizon for upscale competitors? Thanks. Yeah, I think, I think there's a lot of. I think, I know, you know, mid-tier is kind of like, you know, that's. I don't know what's. I don't know your def. What's your definition of mid-tier? Because we. You know, I think there's more online players that are going to, what I'd call, a higher end market. May not be luxury market, but, you know, you know, there's a lot of overlap. You know, a lot of people doing a lot of look-alike things at, you know, price points that are overlapping ours, that we've seen. You know, there's some of them, one of the ones that's having a lot of disruption, you know, getting a lot of press, is, you know, a lot of it's targeted to the trade, you know, and stuff like that. So many of the ones like we're referencing are what I call higher end brands that are targeting trade customers and higher end consumers. You know, but there's a lot of them. Like, out of the probably 100, you know, I don't know, about probably 25% have kind of, you know, 20% are probably blown up now or, you know, teetering, not blowing up. You know, but I think there's a market like this, you know, especially when you have, you know, the compounding nature of really tough housing market with a really difficult credit market or capital market, you know, like, they just can't get easy money anymore. You know, so there's no free money to kind of just grow brand and not make money. You know, so in a, in a market like this, you gotta, you gotta figure out how to get to profitability real quick because there's, you know, the odds of someone else giving you money is very low. And that's why I think a lot, there's, you know, there's just gonna be a lot kind of, you know, imploding. And even, you know, even in the, you've got furniture retailers, you know, regional people blowing up. You've got higher-end people like, you know, you know, Mitchell Gold, you know, didn't make it through the last management changes, you know, that they went through in their business in a market like this. You know, so it's. You know, and I think we're, we're gonna see more disruption. You know, it doesn't look like that the housing market's gonna snap back anytime soon. So I think there's a lot of businesses that are, you know, undercapitalized, not making money, that you're gonna see more and more disruption, and that's gonna all be opportunity. Yeah. And we've got. You know, we're just so much better positioned today, from a value point of view, you know, the value of our product and the disruptive nature of kind of how we're attacking the market in some cases, that we're gonna be able to get some of that share. That's helpful. Thanks, Gary. Yep. Our next question will come from Seth Basham with Wedbush Securities. Please go ahead. Thanks a lot, and good evening. Just to clarify, Gary, you've seen a little bit more negative on the macro than a quarter ago, but you didn't reduce the outlook for the year financially. Is that just because you see more benefits from some of your initiatives, or is there something else? Yeah, I just think we haven't really, you know, put a lot of factor in the, You know, the macro steps can bounce us around a little bit, you know, but I don't think it's gonna, unless there's a real, you know, another step down, I don't think it's gonna move us off our, you know, off our lift factors or builds in our business. So, you know, there may be some shorter-term noise, you know, within quarters, things might move a little bit. You know, housing market might be a little tougher or not tougher. If you look at, you know, mortgage applications and things like that, you know, those can fluctuate, you know, a bit in there. So, you know, there'll be some macro noise within a year. But I just don't think that, We didn't really think that the macro was gonna get a lot better. And so, I think we're more right than not, than wrong about what the macro is gonna do. And, you know, I mean, even if we get one interest rate cut this year, if they go a quarter or even 50 basis points, it's not gonna move the needle, you know? And so, But, you know, it's interesting, you know, we might get a point, you know, everybody thinks we're gonna get a, you know, it's a 95% chance for one cut. I don't know. There was a 95% chance for five or six cuts not too long ago. So I, You know, we'll give you our view on the macro. But, you know, we and we take it into account on our business. But, you know, we're not. When you're bouncing around the bottom like we are, in the housing market today, you know, we kinda think we're gonna probably bounce around the bottom for a while. We hope the bottom doesn't go lower. I mean, could it? It could. But, you know, we're not really macro experts. You know, we're kind of try to interpret what we see and look at the trends and take all the data in and, you know, use our best views on just directionally. You know, is it gonna get worse? Is it gonna get better? Right now, we don't think it's gonna get worse, and we don't think it's gonna get better. I think it's gonna stay about the same through probably Q1 of next year. Got it. That's helpful. And just a related clarifying question: You previously had talked to peak inflection or peak year-over-year growth, you know, first being Q2 this year. Now, I'm not sure if it's back half of 2024, whether you actually see the peak sometime in early 2025? Yeah, I think the, I mean, it's interesting, you know, when we're kind of seeing that. We see a lot more now, and we, you know, we can connect a lot more dots now. We can. We've got some real product, you know, winners and things that are emerging, and we can see how to dimensionalize and optimize those now. So, so that, yeah, that's gonna, you know, But when I say peak, well, let's first define peak inflection. I'm talking about kind of peak inflection of RH, sans the macro, right? Forget the macro. Like, when, like, our product, you know, peak will look like what? You know, so, so I'd say, I think it's likely for us looking like late 2024, early 2025, I think. You know, it's, But then again, you know, I could you could say, "Oh, well, the peak's gonna be 10 years from now," 'cause we're gonna keep getting better, right? So it's not like we stop. But I'm talking about, like, the big moves, you know, the big moves we're making, you know, I'd say, yeah, there's more we can see today, and I'd say it looks more like, you know, kinda late 2024 or early 2025, just because we can see more and we have more news. Like we've got a big development pipeline from a new product point of view, and we've got a really a pretty big development pipeline from a platform point of view, right? You know, probably in the next quarter or two, we'll give you some updates on, you know, like, just new galleries and how many we can do. You know, we're feeling more optimistic, but less optimistic about what that pipeline looks like. You know, that'll, you know, that'll give us, you know, some more lifts and things like that. You know, and at some point here, we'll get Paris and London and, you know, we just got Madrid open, we'll have Milan open, and, you know, we'll start. I think that business will all start to inflect. You know, what you'll get, you know, there's a compounding effect of consumer awareness that happens with a brand. You know, like, once you start to really acquire customers, you know, customers beget more customers, you know, if you're doing a good job. You know, it's like, you know, you open a restaurant, and turn around and people come eat with you, and opening night, and the next night, and next night, and then they tell more friends, and they tell more friends, and pretty soon you've got a full restaurant, right? It becomes a compounding factor. And, I think we're gonna have a compounding factor in Europe, where, you know, our biggest, when Europe starts to inflect from that compounding factor of awareness, I think, you know, it'll grow faster than the core business. You know, it'll grow significantly faster. You know, it's, you know, no different than kind of the compounding factor that's happening in our guest house. You know, our guest house, you know, we ran it at relatively lower occupancy rates in the beginning because we only sent out one email, and we wanted it to be about privacy and luxury, and we didn't wanna, You know, it wasn't about filling it up. It was about having it be full of the right people at the wrong time, and a level of, you know, desirability to it and, even accessibility to it, right? Not making it too accessible. And now we've got, you know, we got the who's who of people staying here and, because, you know, you get someone stays here, and they tell four friends, and, you know, and then you get two of those friends to stay, and they tell four friends, and, you know, it just compounds. And, you know, pretty soon, something's doing significantly better. And I think that's an important thing about, you know, building a brand like ours. You gotta build it the right way. Like, the investments we're making now into physical locations in Europe, you know, even in the U.S. and, you know, especially Europe, because Europe's new. U.S. is really hard to compare to Europe because, you know, everybody knows us in every market. You know, there's no market we have in the U.S. that we don't have customers. We have customers in every market. And so, you know, when we open in a new market, we kinda know exactly what's gonna happen within, you know, 10% variance. When you're opening in a new country where no one knows you, you know, there's and you don't know what you're gonna exactly do, but that awareness build is gonna be exponential versus the builds in the U.S., you know, once it gets going. You know, it's like that tipping point, you know, that people talk about it. What is it? Simon Sinek talks about it. You know, the conversion point of a brand starts to get X% of a market, and it tips, and your awareness starts to exponentially grow. So, yeah. But, you know, directionally, that, yeah, late 2024, you know, early 2025, is what we see today, but, you know, I might be telling you 2026, 2027, because we see more, and we're dimensionalizing more opportunities and optimizing more of the things, and it's worth more, you know, so. Helpful. Makes sense. Thanks for the color. And if I may, one last quick one for Jack. For, with the delay in the modern source book, what was the impact on margin in the first quarter from lower source book mailing costs? And will there be any negative impact in the second quarter from the delay relative to your prior expectations? Again, we had minimal impact. Yeah, nothing, because we were gonna, you know, it was gonna start to get in in the last week, I think of, Yeah, okay, it was, yeah. It was in the last week of the quarter. Minimal, but minimal part, minimal of the expense was in here. Minimal, yeah. It was most of the ad cost, almost all of it was in Q2. But, Thank you. Yeah. Okay, any other questions? Our final question will come from Brian Nagel with Oppenheimer. Please go ahead. Hey, guys, good evening. So I have a couple of really quick questions that should be quick. So one, just, and then again, this is a follow-up too, but you know, Gary, you talked a lot about you know, the tone of the business and your letter, you mentioned the strength in Europe. I mean, should we interpret the better trends lately as a direct reflection of the new products you have in the stores? Is that what's happening? And then the second question I have, you know, just what explains the, I guess, the widening gap between sales growth and demand growth? Yeah, no, I think that's, you're right. You know, it's - I mean, the new product is, you know, creating the inflection point, right? And whether it's a new product that's just in the books and online, or it's a new product that we've also now put in the stores, that is creating a bigger lift. And then the other piece of, I'd say, not to minimize, is just getting in stock in the new product, right? You know, you're just not gonna buy it, right, and you're not gonna really buy it for all stores right up front. And so, even if you decided to take an early bet and say, "Hey, I'm gonna buy this one for half the galleries up front," but your demand hits and it you're selling way more than you thought, it doesn't even get to those galleries. It, you know, gets, it gets to those galleries six months later, and then it doesn't get to all galleries until six months after that. And, and even if you once you get it into the galleries, your, your list might be bigger, and then you're out of stock again. You know, so it takes a while, you know, when, you know, in a business like this to kind of get ramped up because, you know, it's, you know, the factories can't move that fast against big numbers. I mean, we're, we're a, we're a big, You know, we're the biggest business at the high end. You know, so, you know, it, it was easier when we were smaller to move more quickly, I'd say. It's, it's harder to move more quickly when you, when you start to have our scale, 'cause no one makes scale. Like I said, one of the collections that we did that, you know, became out of the gate, you could, you could kind of forecast it and just dimensionalize it based on the, the early demand trends, that, wow, this is gonna be our best collection. I mean, the manufacturer had to triple the building. Like, they, they had to open two more buildings of the same size that they were, that they were manufacturing in. It's good from one to three factories. So that, you know, that just takes a while. So you gotta really think about in stocks. Like, when we look at some of our lift factors, one of the biggest is, God, when we get in stock in that, when back orders come down, our back orders are record highs right now. And so that's really the, the gap between demand and sales, is back orders and special order, lead times and wait times. And then you've got, you know, you've got some permanent, not permanent, but like, you know, the, the issues in the Red Sea that have cost, you know, that caused us to go around the tip of, Africa and to put almost two weeks, you know, 10 days on the product, which basically is two weeks. That just creates a backlog itself. You know, so you know, a lot of our goods are going that way, and so you take two weeks, and you know, that's demand that doesn't turn into revenue, and it doesn't turn into revenue. You don't ever catch up on that until we can access the Red Sea again, right? And so it's, you know, it's the manufacturer is catching up, and it's getting in stock, and it's shortening lead times and shortening special order turnaround times on new product. You know, yeah, you're just gonna create a big delta. You know, it's kind of no different really than kind of COVID, right? Like, you had, you know, a lot of demand happened, and people can't ramp fast enough, and then you've got a kind of a hangover for a while. We're gonna have some of that kind of noise here until we kind of catch up, and then go in a regular cadence of, you know, 15%-20% newness. That's very helpful. I appreciate it. Thank you. Thank you. Thanks, Brian. Is that our last, That was our last question, right? Okay. Well, thank you, everyone, yeah, for your time and attention today. We're, you know, really excited about this transformation in our business and the evolution of the brand and the platform. We think we're doing some of the best work we've ever done. And you know, there are people who are just doing an incredible job bringing this new vision to life. And we think, you know, very soon, you know, our shareholders will feel, you know, really rewarded for this work that we're doing, and we appreciate all of your support. So thank you, and we will talk to you next quarter. This will conclude today's conference. Thank you for your participation, and you may now disconnect.