Friedman: RH Ready For Business Transformation

Restoration Hardware has released a copy of chairman and CEO Gary Friedman’s annual letter to shareholders addressing what he sees as the next phase of the company’s development including housing and international initiatives.

Friedman declared that fiscal 2019 was an outstanding year for the team at RH, with revenues up 5.4% over the year earlier to $2.65 billion, adjusted operating margins reaching 14.3% and adjusted diluted earnings per share increasing 49% to $11.66. The company, he stated, also generated $330 million of free cash flow in 2019 and achieved return on invested capital of 35.3%.

Under the influence of the COVID-19 pandemic, Friedman noted that RH had deferred new business introductions and capital spending, while reducing costs to navigate through the short-term challenges of the crisis. He added, though, that RH is well positioned to take advantage of the many opportunities that present themselves during times of dislocation particularly due to the means most of the company’s customers can tap at a time when they may be considering their domestic spaces whether on their own or through interior professionals. He asserted that the company strategy of opening new design galleries in every major market will unlock the value of a vast assortment, generating revenues of $5 to $6 billion in North America and positioning RH to become a $20 billion dollar global brand.

Friedman asserted that the company envisions:

  • Moving RH beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of products, places, services and spaces that elevates and establishes the brand as a global thought leader.
  • Driving hospitality efforts that will continue to elevate the RH brand and create a new market for travelers seeking privacy and luxury in the $200 billion hotel industry.
  • Establishing the world’s first consumer facing interior design, architecture and landscape architecture services platform inside RH galleries, amplifying the core business by adding new revenue streams while disrupting and redefining multiple industries.
  • Conceptualizing and selling spaces via RH Residences in the $1.7 trillion North American housing market with a focus on furnished turnkey homes and condominiums.

Friedman added that the entire business ecosystem will come to life digitally as the company transforms its website into The World of RH, a portal presenting products, places, services, and spaces. He asserted that the ecosystem RH plans to create can expand globally, multiplying the market opportunity to $7 to $10 trillion.