Soho House’s appeal still stands despite expansion plans being scaled back

The company offers a fleet of private members’ clubs around the world, including locations in Israel, Sweden, India, the United Kingdom and the United States, all of which offer a “lifestyle brand” experience, where customers have access to “homes” and other restaurant and gym.

Under the Soho House umbrella are The Ned, Soho Home, Soho Works, Soho Skin, Scorpios, The Line, and Saguaro Hotels, all offering similar luxury membership perks.

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The company’s original “home” was 40 Greek Street, Soho in London and was opened by designer Nick Jones in 1995. Today, there are more than 40 Soho homes, with plans to launch new locations in Washington, D.C., Glasgow, Miami, Oregon and Mexico City on their way. actually.

It had set a target of opening five to seven sites annually in 2021, but in recent second-quarter results the company lowered that target to four sites in 2023, with the Manchester project pushed back to next year.

Bank of America senior research analyst Sean Kelly was not put off by the shift, arguing that the move was predictable and that the company “remained constructive” for two reasons.

Membership and revenue guidance increased 1% each during the period, as the group reported 95,000 people on a waiting list, an increase of 6,000 pending applications in the quarter.

Kelly also noted “an increase of 15 new home openings since 2019,” which he said allows for “healthy organic growth in the second half of 2023 and beyond.”

Although it fell short of the number of new locations opened this year, Soho House reiterated its previous goal for the next three years.

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Bank of America rated Soho House as a “Buy” in April, which maintained its subsequent results.

While the company opened its first members’ site in 1995, it wasn’t publicly listed until 2021 in New York. Originally under the name Collective Membership Group, it debuted at $14 per share — a value it currently trades 46.2% below.

It rebranded to the current Soho House name earlier this year to highlight its major global membership business.

At the time, CEO Andrew Carney said the move “takes us back to our roots and reflects the unique brand Nick Jones has spent 28 years creating.”

The company did well against a generally challenging backdrop for consumer stocks, as investors sought refuge from broader market volatility in more defensive assets.

Although the S&P 500 discretionary consumer sub-index has risen more than 30% since the start of the year, according to data from Bloomberg, that wasn’t a reflection of more cautious asset allocation, with Amazon and Tesla accounting for more than three-quarters of that rise.

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A Lansdowne Partners spokesperson said that although it had not looked at the UK hospitality business, the company believed the members club was “a unique and very special investment that we believe is undervalued”.

And they noted that recent results beat analyst expectations, with membership growth of 28% year-over-year and adjusted EBITDA of 17% prior to consensus ($32 million vs. $27 million).

On the trading results, CEO Carney said this was the first time the group’s adjusted EBITDA had exceeded £30m in a quarter, and it was also the first time it had achieved more than 10% in its EBITDA margins.

“We’re proud of these milestones, and we expect to maintain the momentum we’ve built,” Carney said on the call.

“These strong results delivered positive cash flow from operations in the quarter.”

As a result, shares were up 14.9% on the day it released its results (Aug. 11), according to data from Morningstar Direct, and over the past month its share price is up 20.2%.

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