Soho House seeks to fend off its critics

Since going public nearly two years ago, members club chain Soho House has suffered a sharp drop in its stock price, economic turmoil and a short seller declaring its shares worthless.

But the company's chief executive, Andrew Carnie, insists it is on the right track, even though its major shareholders are considering privatizing the business again.

“There’s no going back,” Mr. Carnie said in an interview. “We have been pretty consistent over the last 12 months in terms of results. »

The company released its latest quarterly financial results on Friday, showing it lost $118 million last year, compared with a loss of $220.6 million in 2022. Using the pro forma profit measure known as name adjusted EBITDA, which excludes certain expenses, it doubled its profit. at $128 million.

These results come as part of a change in strategy since the company's IPO in July 2021.

At the time, the company was still facing pandemic restrictions and said it was focusing on new offerings such as digital memberships in countries without clubs, as well as its burgeoning coworking business.

Soho House now believes its core business, high-end private clubs in big cities, is enough to generate the robust growth demanded by stock markets and maintain its reputation for cool.

Soho House continued to grow. Over the past year, it has opened branches in Mexico City; Portland, Oregon; and other cities. It manages 43 homes and has a waiting list of more than 100,000 people.

In its results on Friday, Soho House reported an increase in income from both membership fees and expenses at its houses.

But the company's shares are down nearly 60 percent from their initial offering price. Developer partners have been impacted by the decline in commercial real estate and rising labor costs. And in November, the company blamed poor weather conditions and the temporary closure of its Tel Aviv site for its disappointing quarterly results.

The announcement of the results on Friday will be closely scrutinized in light of a report published last month by the short seller Glasshouse Research who derided the company as a “broken business model and terrible accounting” and compared it to WeWork. Short sellers take advantage of a company's stock price decline.

“The report is quite false and inaccurate,” Mr Carnie said. “The way it was written, it was designed to make headlines. » (Soho House's share price fell after the report was published, but it has largely recovered.)

A bigger question is what Soho House's major shareholders, including billionaire Ron Burkle, have in mind for the company. In its rebuttal to the Glasshouse report, Soho House revealed that a special committee of its board had been evaluate potential transactionsincluding the privatization of the company.

Mr Carnie declined to comment on these deliberations, but said he would be happy to continue to run Soho House as a listed company.

“There are no regrets,” he said. “I’m really pleased with our progress over the last 12 months.”

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