Soho House’s Q1 Surge: Revenue Growth and Strategic Gains Amid Challenges

Soho House & Co Inc. (SHCO) delivered a robust first-quarter performance, posting an 8% year-over-year revenue increase to $282.9 million and surpassing market expectations. The luxury membership-based hospitality company’s results, marked by strong membership growth and operational improvements, signal resilience in a challenging economic environment. However, lingering risks—from geographic disruptions to a pending acquisition—underscore the need for cautious optimism.

Breaking Down the Q1 Numbers

Soho House’s revenue streams showed uneven but encouraging progress:
- Membership Revenues: The core segment surged 14.1% to $112.9 million, driven by a 7.1% rise in Soho House members to 212,011. This growth reflects strong demand for the brand’s curated, members-only experience. However, non-core memberships (Soho Friends and Works) declined 9.3%, suggesting a strategic refocus on premium offerings.
- In-House Revenues: Rose 1.9% to $112.4 million, aided by a 4% RevPAR increase in accommodations and improved Food & Beverage margins. Los Angeles wildfires caused a $3 million insurance claim, but the company remains optimistic about new openings like Soho Farmhouse Ibiza.
- Other Revenues: Grew 9.1% to $57.5 million, fueled by Soho Home’s lifestyle retail arm, which continues to expand its product lines and global reach.

Profitability and One-Time Gains

Adjusted EBITDA jumped to $47.0 million from $19.8 million in Q1 2024, a 137% increase. A significant portion of this came from a $22.9 million pandemic-related insurance payout. Excluding this, EBITDA still rose to 16.6% of revenue, reflecting operational efficiencies. Net income turned positive at $8.2 million ($0.04 per share), compared to a $0.24 loss a year earlier.

Beating Estimates: A Positive Signal

Soho House’s results beat consensus estimates handily. Analysts had projected a loss of $0.14 per share, but the company delivered a $0.04 EPS profit—a 128.5% positive surprise. Revenue also topped expectations by 2.6%, signaling stronger demand than anticipated. This outperformance likely boosted investor confidence, though shares have underperformed the broader market year-to-date, down 17% versus the S&P 500’s 3.7% decline.

Strategic Moves and Risks Ahead

CEO Andrew Carnie highlighted progress in member satisfaction and global expansion. With 45 Houses worldwide—up from 43 in 2024—the company is targeting markets like Ibiza and Asia. However, challenges persist:
- Geographic Volatility: Wildfires in LA and prior UK pandemic disruptions underscore the risks of relying on location-based revenue.
- Acquisition Uncertainty: A $9.00-per-share buyout offer from a third-party consortium remains under review, with no guarantee of closure. This uncertainty could deter long-term investment.
- Membership Dynamics: While core memberships grew, declines in secondary programs may require strategic adjustments to maintain momentum.

Conclusion: A Growth Story with Caveats

Soho House’s Q1 results demonstrate its ability to capitalize on premium hospitality demand and operational improvements. The 8% revenue growth, membership expansion, and EBITDA gains suggest a path to sustained profitability. However, investors must weigh these positives against external risks—from geopolitical disruptions to the pending acquisition—and the company’s reliance on one-time gains like insurance proceeds.

With cash reserves at $155 million and plans for new openings, Soho House is well-positioned to navigate near-term challenges. Yet, its valuation hinges on whether it can convert short-term wins into long-term loyalty and profitability. For now, the company’s Q1 performance offers a promising, if cautious, outlook.

Final Note: The stock’s performance will likely hinge on two factors: execution of global expansion plans and clarity on the acquisition’s fate. Investors should monitor both closely as the year unfolds.