August 2019
Only in Marin
Title: RH, the Company Formerly Known as Restoration Hardware, is a High Flyer
By Bill Meagher
As I watch my postal carrier limp from the truck, I know it can only mean one thing, RH has delivered another ginormous catalog, 700 pages packed with leather chairs that would make a dominatrix scream a safe word.
With the unlikely corporate address of 15 Koch Road, Suite K, in Corte Madera, the furniture company also delivered something else, its first quarter earnings results. Don’t look now, but the company that decided rebranding from Restoration Hardware to the brand known as RH—and selling furniture to the uber rich is making cash. For the quarter ending May 4, the company posted $35.7 million in net income.
Even with dressers made from reclaimed, organic-unborn-fair trade-sustainably harvested wood, that figure means you are selling more than a couple nightstands from the St. James Collection.
The company also reported having $37.5 million in cash on hand and used almost $8 million in cash for operations in the first quarter. The company had earnings of $1.43 per share.
The luxury furniture company continues to support its share price and long-term investors by buying back stock. Since 2017, the company has purchased 24.4 million shares at an average share price of $61.40. But the company has used debt to make those moves, which has some investors worried. At the time of this writing, RH shares were selling around $111.
RH has 70 RH Galleries and 40 RH outlet stores in 32 states and Canada, but the company has plans much larger than that. In a statement that accompanied its earnings release in June, RH said going forward it sees a “clear path to $4 billion to $5 billion in North America revenues, and an international opportunity that could lead to RH becoming a $7 to $10 billion-dollar global brand.”
That’s a fair amount of enthusiasm as the company posted about $599 million in net revenues for the quarter. Still, that number is $41 million higher year over year.
The numbers become more impressive when you consider the retail sector has been reeling for months and President Trump has jacked around with tariffs in China, one of the key sourcing countries for RH.
The company said it had renegotiated product costs and selectively raised prices to lessen the blow as tariffs climb from 10 percent to 25 percent. The company is also moving some production and product development out of China.
But there is no argument that RH has chosen a path in the opposite direction from others in its sector. It is opening expensive stores at a time when others are closing locations. The company is also courting customers with annual memberships that get them a 25 percent discount in exchange for an annual fee of $100. Meanwhile, other retailers are driving sales via promotions or sales, and positioning the company via products, not prices.
For now, the company is a high flyer.
Your Marin moment
The Sausalito City Council can’t decide how to promote the city’s business community, typical of a place that always seems in the middle of a fight.
And I say that as a former resident and someone who worked there. In a past life I lived on a houseboat and managed the Casa Madrona Hotel.
The struggle has always been between the city that loves the sales tax generated by tourists, and the residents, who resent the congestion on Bridgeway and stores crowded with visitors. The bad blood is so prominent that a few years back the Chamber of Commerce published a visitor’s map that didn’t list Caledonia Street, so residents didn’t have to share that boulevard with the out of towners.
The city council was unhappy as the summer began with efforts to market the city for conferences and retreats that would put heads in beds and fill restaurants.
Meanwhile, Book Passage’s Sausalito outpost is closing. The Petrocelli’s, owners of Book Passage, said they discovered that visitors don’t buy many books. Another way of saying that is that the business residents brought to the store wasn’t enough to keep the lights on.
Book Passage has a store at the San Francisco Ferry Building, a place with plenty of visitors, so the Petrocelli’s know how to sell books to non-locals.
My point is that Sausalito has historically spent so much time trying to pry dollars from visitors, it may have forgotten how to tend to local merchants.
Book Passage in Corte Madera continues to thrive, even as Amazon thunders on. So, the issue of the bookstore moving out has more to do with location and environment than the ownership—a lesson the city council would be wise to consider.
