What’s in store this year for the newly transformed RH, the high-end, home-furnishing retailer formerly known as Restoration Hardware?
Moving into 2019, the company is on track to unveil another of its reimagined stores, referred to as a gallery, at its Corte Madera headquarters. RH Yountville opened in September.
RH already has opened dozens of gallery stores — a luxury retail model comprised of a structure that CEO Gary Friedman describes as blurring the line between residential and retail. Each gallery store includes a restaurant, wine vault, barista bar, garden courtyard and a rooftop park. RH still sells everything from sofas, beds, linens, lighting and more.
Last week, the retailer’s stock (RH:NYSE) was trading north of $90 per share, compared with $30.70 per share at the close of 2016, when the company was struggling. On Dec. 3, RH reported its third-quarter fiscal 2018 results, which included net income of $22.4 million and $636.6 million in revenue.
Over the course of its reinvention, RH has moved from a traditional retail-store model to one that is membership-based. (Anyone can join for $100 per year.) The company also has reduced its inventory and streamlined operations, including laying off dozens of employees.
RH in November filed a state-required notice of its intent to lay off 81 employees by Dec. 31. The company last week wouldn’t confirm the final tally, instead reiterating an expected cost savings of $24 million.
Friedman said last month during the company’s third-quarter call that he believes the new RH will result in it “leapfrogging far past comparable companies, and create the kind of separation in our industry that only brands like Apple, Nike, LVMH, Berkshire, and a few others have enjoyed in theirs.”
The company also said at the time that its long-term strategy includes net revenue growth of 8 percent to 12 percent annually; adjusted operating margins in the mid-to-high teens; adjusted earnings growth of 15 percent to 20 percent annually, and return on invested capital in excess of 50 percent.
“We believe when you step back and consider: one, we are building a brand with no peer; two, we are creating a customer experience that cannot be replicated online; and three, we have total control of our brand from concept to customer, you realize what we are building is extremely rare in today’s retail landscape, and we would argue, will also prove to be equally valuable,” Friedman stated.
RH is forecast to continue gaining shares in 2019, even if the luxury-housing market remains soft, according to Friedman. With regard to China tariffs, the company has been working with its vendor partners on mitigation strategies, he said.
RH’s fourth-quarter fiscal year ends on Feb. 2.