Restoration Hardware (RH) has a High-Quality Edge

March 24, 2021

Restoration Hardware (RH) has a High-Quality Edge

While the rest of the retail world scrambles to refine ecommerce offerings, Restoration Hardware is taking a difference approach. In fact, Restoration Hardware (RH) may be the home furnishing name with the most significant "reopening" edge.

LikeFolio data shows that Restoration Hardware has outperformed peers in the last month, showing significant QoQ improvement. How is Restoration Hardware different?

  1. Restoration Hardware is all about the experience. It has 10 restaurant locations in affluent neighborhoods. I don't know if any of you have been to the one of these locations, but they are a sight to behold. Essentially, part of the massive gallery is blocked off for dining -- and you get a high-quality, instagramable experience using products actually sold by the retailer.

  1. RH retail locations are "Galleries". It's almost like walking through a museum, except shopping for home furnishings. Transforming furniture shopping into a cultural experience is definitely a distinguisher vs. peers. Restoration Hardware is opening 4 new galleries this year.
  2. Restoration Hardware is catering to a high-end target audience. Translation: An audience who is willing to pay a premium for high quality products, and a high quality experience. The infamous "cloud" collection offers a sofa starting at $4395. Restoration Hardware also boasts "second house" offerings (i.e. Beach House and Ski House specific products).

There's an argument that this demographic could help insulate Restoration Hardware from short-term economic strain, and even the "stimmy" effect. In fact, reports show the affluent housing market is thriving as wealthy consumers ditch urban cores in favor of suburban life -- with larger yards. In addition, Restoration Hardware has created an incentive for loyalty via its membership program. For $100 annually, members receive 25% off on all full-priced items, 20% off on sale items, early access to clearance events, and complimentary RH Interior Design services. All of these factors contribute to high Consumer Happiness: 83% positive (a large uptrend in the past month alongside returning demand). Restoration Hardware reports Q4 earnings March 24 after the bell...and they may have overshared...

Hat tip aside, we're not betting against this story long-term: "The first two decades saw us evolve from a nearly bankrupt business with a $20 million market cap and a box of Oxydol laundry detergent on the cover of its catalog, to the leading luxury home brand in the world with a market value approaching $10 billion."

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