Retail Check Up: Restoration Hardware

NASHVILLE, TN – JUNE 14: Signage seen during Restoration Hardware\’s unveiling at The Gallery at … [+] Green Hills at RH on June 14, 2018 in Nashville, Tennessee. (Photo by Jason Kempin/Getty Images for RH)


Getty Images for RH

The consumer cyclical sector is a thing of fascination in times like these and the results companies have reported over the past 24 months lend plenty of narrative to that picture. So, let’s take a look at home furnishings, but not just any ole home furnishings. Let’s take a look at none other than Restoration Hardware.

With its high-end furnishings and designs and mission to provide “an exceptionally well merchandised world of high quality textiles, furniture, lighting, bathware, hardware and amusements,” Restoration Hardware sets itself apart from the pack. And despite obstacles, it seems that this year has been good for the company. 

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Earlier in the month on December 9, Restoration Hardware reported robust third-quarter 2021 earnings that included an earnings-per-share beat, ($7.03 vs. consensus at $6.59) a revenue beat, and 19% growth in sales to $1.01 billion.  On the call, Chairman and CEO Gary Friedman underscored the company’s enthusiastic journey.

Regarding delayed plans because of COVID-19 complications, he said, “we refused to shelter and shrink, not allowing our culture to be shaped by stay-at-home mandates or let collaboration be replaced by Zoom calls in isolation. No leaders of team RH made their summer home, their permanent home. There were no debates if we would return to work, only discussions of when we could. We wasted no time allowing ourselves to be victims of the current reality. We chose to be visionaries, destroying today’s reality to create tomorrow’s future.”

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Friedman continued, “We used our time to reimagine and reinvent ourselves once again. We said let this be remembered as the time Restoration Hardware unleashed the greatest display of innovation our industry has ever seen. That’s why we referred to 2022 as the year of the new and it will include the following: the introduction of RH Contemporary, the most meaningful new product launch in our history, inclusive of a 500 plus page source book, a freestanding RH Contemporary gallery, a dedicated website and a national advertising campaign.”

While enthusiasm from consumers and a dedicated upper management team are part of the story, analyst sentiment rounds out and completes the package where the company is concerned. Their bullishness on Restoration Hardware was clear in their updated notes. Here are some ideas from reports that stand out following earnings:

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1. The High-End Nest Feathering Game Is Strong. 

Plenty of consumers have worked on their homes in one way or another over the past few months. Restoration Hardware, with its high-end offerings, has also capitalized on this trend. On December 9, CFRA analyst Kenneth Leon updated sentiment, and writes, “​​We think the home lifestyle is a multiyear secular trend whereby families want to spend more time at home to live, work, and play. Restoration Hardware has an impressive brand and merchandise offering that can be scaled and drive profitability, unlike most other home furnishings retailers.”

Restoration Hardware, Retail store, Seattle, Washington


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2. The Newness Factor. 

With several headwinds behind it, Restoration Hardware is ready to unleash its new offerings and Cowen & Company’s

COWN
Max Rakhlenko gave it a shout out, noting tht the company “is set to introduce significant newness next year across products, stores, digital, and lifestyle.” 

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He continues, “From a timing perspective, Restoration Hardware plans to launch Contemporary in late spring, followed by new product introductions in Interiors and Modern in late spring or early summer. We expect Contemporary will get its own sourcebook, and think the other collections will also likely get a book. Additionally, Restoration Hardware will launch the first phase of its new digital platform, and during the similar period will launch RH1, RH2, and RH3. Also, management plans to launch RH England during late spring to early summer dependent on weather conditions. Additionally, management plans to launch RH In-Your-Home in the near-term, and we think could introduce a second sourcebook in the fall.”

3. Patient Customers Make It Tick. 

If patience is a virtue, sign Restoration Hardware enthusiasts up. Telsey Advisory Group’s Cristina Fernandez noted that customers considered the delay in getting their goods still worth the extra wait time. “While Restoration Hardware is seeing delays in bringing in product (particularly from Vietnam, which accounts for 27% of imports), its consumers have been willing to wait, and Restoration Hardware has been able to pass through pricing to offset incremental freight costs,” she writes.

In the most recent Spending Breakdown, I noted that the home furnishings category had a strong November per the Census Bureau. The results and enthusiasm at Restoration Hardware absolutely bolster that report

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