Restoration Hardware's greatness is just beginning
CEO Gary Friedman has the time, inclination, vision, smarts and cash to pull off a revolution in retail.
In the time since that 17-pound Restoration Hardware (RH) catalog arrived at your house, the stock has rallied by 17 points.
Coincidence? Of course.
But when you sit down with CEO Gary Friedman, you begin to wonder whether his catalog and brick-and-mortar throwback approach to business isn't better than the Web. After all, only 8% of retail is done on the Web. Why not figure out how to master the 92 percent that's left.
That's exactly what Restoration Hardware, with its high-teens comparable-store numbers, is doing. RH has developed a hybrid approach to retail that seems very 21st century, kind of the way a Cezanne may have been to a Rembrandt, a breakthrough look at the art of retailing that is no longer constrained by the old model.
Don't sniff at this notion. It is not high minded. We know the mall has become a challenged place to shop. Some people, like Starbucks CEO Howard Schultz, say it is a fact of life because online shopping is easier and faster and often cheaper.
Friedman, on the other hand, says that perhaps it is just soulless. Who wants to go to windowless box that couldn't even sustain plant life and spend a lot of money in a totally dreary session? Who wants to go on the Web, where every retailer is created equal because of the size and flatness of the computer screen? Why not design stores that look and feel different than all others, that look and feel like an art gallery and a home. Why not have terrific-looking catalogs, even if some customers got more than they asked for -- or didn't even ask for -- when the tomes arrived.
I think Friedman is on to something. I think his vision and his desire to disrupt the model -- including even some of his own earlier stores -- are visionary and, yes, will be successful. Will the stock market give him a chance to build out the stores he needs? I think until this most recent quarter the jury was out.
Now it is back.
It says he has the time, the inclination, the vision, the smarts and the cash to pull it off.
He's certainly persuasive. Friedman went on the road recently to talk to buyers of a Restoration Hardware convertible bond. I always hate it when companies do these converts, because the buyers often turn right around and short the common, putting instant pressure on the stock. Not this time. The stock went higher after the convert. That's a sign that the convert buyers not only didn't short the stock but, most likely, they might have augmented their convert positions with common in the aftermarket.
To me that means stop betting against him, as so many hedge funds have, and start betting with him. His company is just starting its journey toward greatness, and right now the market capitalization is way too small for the story he has to tell, the vision he believes in and the execution capabilities he has demonstrated both here and at William-Sonoma (WSM), where he worked before he took this job in 2001. Even after those 17 pounds, I think the story has much further to fly.
Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners.
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I still haven't seen one around where I live. so who cares?
17 pound catalog! as idiotic as the Uline packing material people who send me their catalog 8 times a year while I spend $50 every 2 years on their products.
What - Didn't sell enough suckers with the first article?
That's because this is a loser ! Stick with quality large cap stocks and leave this one for Cramer to enjoy!
Not a single number about finances. Not a single mention of durable competitive advantages. Not a single mention of exact what's being sold and competitors.
To me that means there's not much thinking done here!
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