News

Shares of Soho House (NYSE: SHCO) were heading lower today after the global membership club posted disappointing results on the top and bottom lines in its fourth-quarter earnings report.

As of 1:32 p.m. ET, the stock was down 9.7% on the news.

Soho House misses the mark

Soho House continued to expand in the quarter, but its growth came up short of expectations. Revenue in the quarter rose 7.5% to $290.8 million, which missed estimates at $304.5 million.

Membership increased 19.7% year over year to 193,865, and its wait list reached an all-time high of 99,000. That drove membership revenue up 24.2% to $95.8 million, but in-house revenue rose 3.8% to $125.2 million, showing slowing demand for its hotels and restaurants.

On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from $13.4 million to $36.6 million.

An impairment charge of $47.5 million, most of which was related to a reduction in the value of its Soho Works North America business, weighed on the bottom line, and it reported a generally accepted accounting principles (GAAP) loss of $0.29 in the quarter, which compared to estimates at a loss of $0.07 per share and a profit of $0.07 per share in the quarter a year ago.

CEO Andrew Carnie said, "The strong results we delivered in 2023 demonstrate our continued focus on driving a better member experience and significant progress on improving profitability."

What's next for Soho House?

Management expects the slower pace of growth to continue in 2024, but still expects at least 210,000 members, up at least 9% from 2023, and expects total revenue to grow from $1.14 billion to $1.2 billion-$1.25 billion, though that was below the consensus at $1.3 billion.

While that slower growth rate is disappointing, the profitability improvement shouldn't be overlooked, as the company is targeting $155 million-$165 million in adjusted EBITDA this year. At that level, the stock is trading at less than 7 times EBITDA, which looks like a good value for Soho House, considering underlying member growth is still strong.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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