Shares of Soho House (SHCO 0.34%) 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.
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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."
NYSE: SHCO
Key Data Points
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.
