How to Spot a Winner

Apr 04, 2021

While the rest of the retail world scrambles to refine e-commerce offerings, Restoration Hardware is taking a different approach.

In fact, Restoration Hardware (RH) is the home furnishing name with the most significant “reopening” edge.

LikeFolio data demonstrates that Restoration Hardware has outperformed its peers in the last month.

Purchase Intent is showing significant improvement on a QoQ basis, while home furnishing peers lose steam.

How is Restoration Hardware different?

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 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, Instagrammable experience using products actually sold by the retailer.

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 four new galleries this year.

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 $4,395. 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 all full-priced items, 20% off 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 crushed Q4 earnings — and we aren’t surprised.

How do you bet 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.”

We like this name moving forward and are monitoring for any changes in consumer demand.

When we spot opportunities like this, members are the first to know.

Andy Swan,
Founder, LikeFolio