Soho House Sees Red Ink Flow Despite Membership Surge at Clubs

Soho House, a brand offering members’ clubs and hotels, reported Friday that it lost $57 million in the fourth quarter but had seen a significant increase in its membership count.

The travel brand continues to struggle with profitability, having not earned a profit in 28 years. It said its adjusted EBITDA was $36.6 million in the quarter, up from $13.4 million a year earlier.

Soho House’s financial report came a month after short-seller Glasshouse Research questioned the company’s accounting practices.

“I want to acknowledge our continued confidence in how we run our business and our accounting practices,” said CEO Andrew Carnie. He said his company commissioned an audit by a forensic accounting firm and a law firm, and that they found “no material issues.”

Glasshouse Research also alleged that Soho House wasn’t on track to meet its promises of profitability and debt reduction.

In the quarter, the company reported a significant increase in membership and noted a substantial increase in its debt load.

Membership grew 20% year-over-year to 193,865, and revenue from paying members grew 32.5%. Yet the company also said that new members won’t be accepted this year at properties in London, New York City, and Los Angeles, which are some of its biggest markets.

Net debt widened to $638 million, up 20% from a year earlier.

“We’ve seen improved house contribution margins in our mature houses, at over 40% across each of London, New York, and L.A., and we’re seeing strong growth in profitability in our newer houses in line with expected maturation curves,” Carnie said.

The public company’s controlling shareholders are billionaire Ron Burkle, Richard Caring, and founder Nick Jones. The company said last month its board had formed a committee to consider selling itself or going private.

Less Alcohol Sold in January

Carnie said Soho House’s sales of alcoholic beverages, a key upsell, plummeted in January.

“January was a much bigger spike in non-alcoholic beverage consumption, much more than we’ve ever seen before,” Carnie said.

An annual January fad in cutting back on alcohol intake had wider adoption by Soho House’s customer base this year.

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