It’s back to the basics for Soho House parent company Membership Collective Group and its continued chase toward the profitability that has evaded it for nearly three decades.
MCG — which also owns brands like The Ned NoMad, as well as The Line and Saguaro hotel chains — reported a nearly $92 million loss for the third quarter on Wednesday. That’s a greater loss than the $77 million loss seen during the same time last year. Company leaders chalk up this year’s losses to a combination of inflation and FX, or the foreign exchange market. (Soho House has significant exposure in the United Kingdom and Europe, where currency values plummeted in recent months against the dollar.)
Although it’s very popular and currently sitting on its longest-ever waitlist, Soho House has never been a profitable enterprise in its 27 years in business. Company leaders previously told TPG they expected that to change by the end of this year. While that timeline might be pushed out a little bit, the company — which went public last year — appears to have a sharper-than-ever focus on profitability.
“If we went back to the beginning of this year, I don’t think anybody would have predicted the inflation that we’ve clearly gone through, nor the labor market,” MCG CEO Andrew Carnie said in an interview with TPG ahead of Wednesday morning’s earnings call. “If you take the [foreign exchange market] noise out of the last quarter, we were pretty close to breakeven.”
The company is likely to be in a similar position through early next year before moving into profitability, Carnie added. That’s where the company’s marquee brand has more importance than ever before.
Back to basics
Soho House might be the original brand of MCG, but recent years ushered in new offerings. Additions include Scorpios Beach Club in Greece and The Ned locations in London and New York City. Additionally, the company even began a tech offering to target digital memberships to Soho House and focus on editorial content. There was also a push to add more Soho House locations — as many as nine new properties a year.
Chasing profitability means shifting gears on what growth might look like going forward. What’s old is new again, some might say.
Many of the company’s brands are still part of MCG’s growth, but Soho House will attract most of the attention. The goals are expanding that brand with more efficiency and “making sure we’ve got great value for our members,” Carnie said.
That means opening a slightly smaller number of Soho Houses each year — between five and seven, which was a previous growth plan — and pulling the plug on the digital membership offering to instead focus on the physical clubs. The company also plans to rework staffing levels to better accommodate how members currently use the clubs. (For instance, this could mean staffing up while clubs are busy and having fewer workers during off-peak times.)
Some of these moves come on the heels of a companywide membership survey showing members preferred more focus at the property level instead of on a digital platform. While members liked the design of clubs, the atmosphere and the events, they wanted to see an improvement when it comes to service, programming and the choice of events, Carnie said.
Members also noted they wanted greater depth on food and beverage offerings. Keep in mind that MCG leaders on prior earnings calls noted that raising the price of food and drinks within individual clubs was one way members were likely to notice inflation.
“It’s just some basic things that we’re going to really focus on,” Carnie said.
CEO steps down
The company made a major leadership change announcement early Wednesday when it shared that founder and CEO Nick Jones was stepping back to a founder role following a prostate cancer diagnosis earlier this summer. Carnie became CEO as of Wednesday.
Jones is cancer-free following treatment and surgery, and he doesn’t appear to be moving into full retirement. However, he does plan to take on less of a corporate role moving forward.
“I’m just going back to doing exactly what is so special that needs to be delivered in our houses, which is designing fantastic spaces [and] always evolving, always trying to create something new and different [and] always thinking outside the box,” Jones told TPG. “I’ve spent a lot of time in the office over the last few years, and I’m going to get back into the houses, [which is] the reason I set it up in the first place.”