RH (RH) earns its revenue from direct sales and store sales. By the end of 2Q17, the company operated 85 retail galleries, which generated 57% of the total sales. The company’s direct sales generated 43% of sales in 2Q17.
In 2Q17, RH posted adjusted revenue of $619.1 million, which represents growth of 13.9% from $543.4 million in 2Q16. During the quarter, the company’s direct sales rose 13.5%, while store sales rose 13.0%. The comparable brand revenues rose 7.0%, during the quarter.
Revenues from the RH segment rose 11.7% to $583.8 million during the quarter. The revenue growth was driven by the company’s decision to mail its 2016 Interiors Source Book in the fall of 2016 and its growth in outlet sales due to inventory optimization efforts and higher discounts. However, some of the revenue growth was offset by product recalls.
RH acquired a controlling stake in Waterworks on May 27, 2016. The acquisition gave the company control of 15 Waterworks showrooms. During the quarter, the revenue from Waterworks rose 51.9% to $31.5 million. The 2Q17 revenue includes sales from the Waterworks showroom for 13 weeks. However, in 2Q16, the sales of only nine weeks were considered. This difference was the primary contributor to Waterworks’s revenue growth.