The coronavirus pandemic may have knocked the world on its heels, but it certainly hasn’t dampened RH CEO Gary Friedman’s ambition. Yesterday he released his annual letter to shareholders, outlining the company’s prospects ahead of its second-quarter earnings announcement, and far from the somber “we’ll get through this” tone of most corporate communications in the COVID-19 era, Friedman’s letter is more akin to a plan for world domination. In addition to quoting Albert Einstein and Steve Jobs, he promised to treat the moment as an opportunity for RH to “expand and shine … destroying today’s reality to create tomorrow’s future.” Investors were clearly energized by the enthusiasm—following the release of the letter, RH’s stock jumped 4 percent.
Perhaps unsurprising for a CEO who has long defied conventional thinking, Friedman’s letter was also full of plans that go against the grain of COVID-era received wisdom. For example, we all know that the pandemic has hastened the death of physical retail, and only e-commerce matters now ... right? Wrong, says Friedman. “Our strategy to open new design galleries in every major market will unlock the value of our vast assortment, generating revenues of $5 to $6 billion in North America, with the long term potential to become a $20 billion dollar global brand.”
Another: Surely, hospitality, that’s an industry that’s going to suffer for years, right? Wrong again. “Our hospitality efforts will continue to elevate the RH brand as we move beyond the four walls of our galleries into RH guesthouses, where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion hotel industry,” writes Friedman.
But after the Diamond Princess debacle, at the very least people aren’t going to want to get on boats—right? “We are creating bespoke hospitality experiences like RH Yountville, an integration of food, wine, art and design in the Napa Valley, and RH3, our luxury yacht that is available for charter in the Caribbean and Mediterranean where the wealthy and affluent visit and vacation."
You get the picture. Though he announces plans to revamp RH’s website, at every turn, Friedman’s letter bristles with confidence that the brand can successfully double down on its pre-pandemic plans and continue to dominate a segment of the market for home furnishings it has largely defined. Which isn’t to say the letter contains no new plans. RH, writes Friedman, is getting into the housing market.
“Our ecosystem will come full circle as we begin to conceptualize and sell spaces, moving the brand beyond the $200 billion home furnishings market into the $1.7 trillion North American housing market by offering beautifully designed and furnished turnkey homes and condominiums with the introduction of RH Residences,” writes Friedman. “We believe the ecosystem can be expanded globally, multiplying the market opportunity to approximately $7 to $10 trillion … A one percent share of the global market represents a $70 to $100 billion opportunity.”
Those who doubt Friedman can pull it off would be wise to take a quick look at history. Under his leadership, the company has risen from languishing in mid-market purgatory to one of the most recognized consumer brands in the design industry. Last year, the company’s revenue grew 5.4 percent to $2.6 billion, and after a mid-March cliff dive, RH’s stock price is nearing its all-time high. Though the retailer did lay off more than 400 workers (and temporarily furloughed more than 2,000) in April, Friedman is coming out swinging from what appear to be his company’s pandemic nadir.
Oh, and another area he sees as crucial to RH’s continued growth? Interior design services. “Services like RH Interior Design … render our brand more valuable while creating a customer experience that cannot be replicated online,” he writes. “We believe the combination of our luxury positioning, the inspiring presentation of our collections across all channels, and the fact that we control our brand from concept to customer, will enable RH to continue to disrupt the highly fragmented luxury home furnishings market, expand our operating margins, and take share for years to come.”
Homepage photo: RH's New York Gallery | Courtesy of RH