This is Matt Reustle and today we are breaking down Restoration Hardware. We cover how Gary Friedman took Restoration Hardware from the brink of bankruptcy and has built it into a luxury brand. We also go deep on the business model, why has RH been leaning into this in-person experience despite a massive e-commerce boom, the reality of interior designers, inventory management, and orchestrating a supply chain when you sell monstrous couches.
Our guest is Drew Cohen of Speedwell Research, who previously covered Floor & Decor. Show Notes
(00:00:00) – Introduction
(00:02:27) – (First question) – Restoration Hardware’s relevance in the market
(00:04:37) – The origin story of Restoration Hardware
(00:07:58) – Insight into Gary Friedman’s backstory and his entry into RH
(00:09:52) – The current RH business model and how Gary has shaped that over time
(00:17:14) – Their unique marketing funnels
(00:19:47) – Their move into the luxury brand market
(00:21:24) – Explaining how the product collections are made up
(00:22:32) – Updated supplier relations model
(00:25:25) – Insight into the RH sales model
(00:28:04) – Overview of the membership model and how it impacts the business
(00:31:42) – Peers within the industry that are using similar business models
(00:32:49) – Cyclical macro exposure sales growth over time
(00:34:09) – Their operations and logistics model
(00:39:03) – The impact of COVID-19
(00:40:15) – Expected working capital for RH and other furniture peers
(00:42:36) – Peer group average margin growth
(00:45:56) – Key decisions and investments that need to go right
(00:48:41) – European housing sizes and issues with American furniture
(00:49:52) – Capital allocation history within RH
(00:51:15) – How RH stays in style as decor tastes change over time
(00:54:02) – His overall insight towards Gary’s ideas and risky business experiments
(00:55:37) – His capital structure perspective for the future
(00:58:09) – How RH is moving into the luxury market as other brands move out
(00:59:09) – Lessons learned from studying Restoration Hardware