When I first started researching Restoration Hardware (RH), I assumed it would be like the other stories we’ve heard in other industries: High-end companies with affluent customers are doing well, while others are not.
That’s what we saw with LuluLemon (LULU) last week, and we enjoyed a nice earnings pop as a result.
But the home furniture business is…well…different.
Macro trends, not customer demographics, are the dominant factor in the success or failure of these companies.
And right now, most are struggling.
As you can see from the famous LikeFolio Outlier Grid above… almost every company in this sector is seeing LOWER consumer demand (horizontal axis) in 2022 than they had a year ago.
That is, all except one… Williams-Sonoma (WSM).
Driving this outperformance for WSM is its West Elm brand… a furniture and home-décor store that you can think of as “Restoration Hardware Light”. Very nice stuff, quality stores… and significantly lower prices than you’ll see at RH.
According to LikeFolio data, this RH-Light strategy is working, as the West Elm brand is posting stronger consumer demand levels than the rest of the industry:
As for Restoration Hardware… we would advise shareholders to be patient.
The company still has an incredibly loyal following, with the highest LikeFolio Consumer Happiness rating in the industry at nearly 80%.