RH Closes Record Year, Outlines Wildly Bullish Path For 2021 And Beyond

RH, the parent company of luxury furniture and home goods retailer Restoration Hardware, posted record fourth-quarter and full-year results Wednesday (March 24) while laying out a global expansion plan it said will deliver a 10x increase in sales in the years to come.

“We ended 2020 with just less than $3 billion in net revenues and believe the data supports the RH brand reaching $5 to $6 billion in North America and $20 to $25 billion globally,” Chairman and CEO Gary Friedman said in the company’s earnings release.

Although no time frame was given, Friedman pointed to a range of shorter term “RH ecosystem” expansion plans in the U.S. and abroad, including the introduction of RH Guesthouses and RH Residences this fall in New York City and Aspen followed by the openings of RH England and RH Paris in 2022.

Two-thirds of the way through Q1, RH’s 68 Galleries saw demand rise 73 percent in February and 96 percent for the first two weeks of March versus a year ago when stores were shut down.

With that in mind, Friedman told investors that 2021 had all the signs of being a very good year.

“While 2021 will surely be a tale of two halves, the fact that we have a booming housing market, a record stock market, low interest rates, the expectation of a rebound in the economy and jobs market, combined with the recent further acceleration in our demand trends, has us feeling more — rather than less — optimistic that it might just turn out to be two very good halves,” Friedman said.

Used Pandemic Time Wisely

As the country passes the one-year anniversary of the pandemic closures, Friedman noted that RH was also turning this corner knowing that it used the time wisely “to reimagine and reinvent ourselves once again.”

While the opening of a new 1 million square foot furniture distribution center in Southern California this spring will reduce delivery times by seven to 10 days for outdoor furniture and special order upholstery items, RH said it expects continued difficulties ramping up vendor production to meet demand, but no near-term resolution in sight for the current ocean freight and port congestion challenges it’s facing.

And yet, for the current quarter, Friedman told investors “it’s hard not to forecast first quarter revenue growth of at least 50 percent,” with full-year revenue pegged to grow 15 to 20 percent.

But it was the 50 percent increase in the company’s profit margins that most excited Friedman.

“Adjusted operating margins increased 750 basis points to 21.8 percent versus 14.3 percent last year on only 8 percent revenue growth,” Friedman said before elaborating. “750 basis points on only 8 percent revenue growth. It’s an operating margin never seen before in the furniture/home furnishings market, and more than 50 percent better than [our] closest competitor.”

RH’s record results and bullish outlook come in the wake of what has already been an incredible year for the company, in which its stock price has increased more than 500 percent in the past 12 months, pushing its market value to nearly $10 billion. It’s a milestone that Friedman said puts RH among the best performing consumer stocks of the past decade.

“Since our IPO on November 2, 2012 at $24 per share, RH has outperformed Apple, Amazon, Google, Facebook, Nike, Starbucks, LVMH, Home Depot, Hermès and just about everyone else but Tesla,” Friedman said, before ending with a quote from RH shareholder Warren Buffett. “‘Time favors the well-managed company,’ and we believe our performance has and will continue to prove that point.”

For the fourth quarter RH reported earnings per share of $5.07 on $812 million in revenues.