Soho House & Co Inc (SHCO) Announces Q1 2024 Earnings: Skip EPS Estimates,…

  • Income: It amounted to $263.1 million, up 3.1% year over year and just above the estimate of $262.60 million.

  • Net loss: An amount of $46.0 million was recorded, which was significantly greater than the estimated loss of $42.72 million.

  • Earnings per share (EPS): It reported a loss of $0.24 per share, below the estimated loss of $0.22 per share.

  • Membership growth: Total membership increased to 261,571, up 9.9% year-on-year, and Soho House membership increased 17.4% to 198,021.

  • Adjusted EBITDA: It was $19.3 million, down slightly from $20.1 million the previous year, reflecting a decline in margin.

  • New locations: He opened Soho House Portland and announced the upcoming opening of Soho House Sao Paulo.

  • Membership revenue: It grew to $100.2 million, a significant increase of 20.4% year-over-year, and now represents 38.1% of total revenues.

Soho House & Co Inc (NYSE:SHCO) published its 8-K filing on May 10, 2024, reporting financial results for the first quarter ended March 31, 2024. The company, a global membership platform that connects diverse members around the world, revealed a net loss of $46.0 million and earnings per share (EPS) of -$0.24, which was lower than the estimated EPS of -$0.22. However, total revenues reached $263.1 million, slightly ahead of the forecast of $262.6 million, representing a 3.1% year-over-year increase.

Soho House & Co Inc (SHCO) Reports Q1 2024 Earnings: Misses EPS Estimates, Revenues Grow ModestlySoho House & Co Inc (SHCO) Reports Q1 2024 Earnings: Misses EPS Estimates, Revenues Grow Modestly

Soho House & Co Inc (SHCO) Reports Q1 2024 Earnings: Misses EPS Estimates, Revenues Grow Modestly

Informations about company

Soho House & Co Inc operates a network of membership-based properties including Soho Houses, independent restaurants in the U.S. and Willows Inn in Palm Springs. The company’s primary revenue sources are divided into the UK, North America, and Europe and Rest of the World, with North America being the dominant revenue source.

Key events and financial challenges

The first quarter saw significant growth in membership, with total membership rising to 261,571, an increase of 9.9% year-on-year. Premium revenue also increased 20.4% to $100.2 million, now representing 38.1% of total revenue. Despite this growth, the company faced a 5% decline in internal revenue to $110.4 million, with a noticeable decline in revenue per available room (RevPAR) of -3% compared to the same periods.

The reported net loss of $46.0 million compares unfavorably with the prior-year loss of $15.95 million, highlighting continued profitability challenges. Adjusted EBITDA also saw a slight decline from $20.1 million in Q1 2023 to $19.3 million in Q1 2024. These numbers suggest that while membership growth is solid, profitability from core businesses such as service hotel and catering industry, is under pressure, likely due to cost inflation and operational inefficiencies.

Strategic development and future prospects

Soho House & Co Inc continues to expand its global footprint with new openings such as Soho House Portland and the upcoming Soho House Sao Paulo. The company’s strategic goal remains to drive membership value and operational excellence. Despite the current financial setbacks, management remains optimistic about improving fundamental trends and has consequently raised the midpoint of its adjusted EBITDA guidance for fiscal year 2024.

CEO Andrew Carnie expressed confidence in the brand’s appeal and operational strategy, stating:

Our first quarter results demonstrate Soho House’s strong global appeal, with Soho House membership growing 17% year-on-year and our waiting list exceeding 100,000 people for the first time.”

Analysis and implications for investors

While Soho House & Co Inc’s revenue growth is in line with market expectations, the deeper-than-expected net loss is a concern. Investors may be cautious about the company’s ability to translate membership growth into improved financial performance. Continued challenges in improving the profitability of internal operations may be a critical area for potential investors to pay attention to, particularly in the context of economic uncertainty that may impact discretionary spending on luxury and leisure services.

Overall, Soho House & Co Inc’s first quarter 2024 results illustrate a diversified financial landscape in which significant membership growth is tempered by profitability challenges. The company’s next quarters will be key to demonstrating the effectiveness of the company’s strategic initiatives in reversing the current declining trend in profitability.

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This article first appeared on GuruFocus.