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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

RH Brand Awareness Stabilizes, Offering the Potential for Consistent Performance Going Forward

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We previously believed that RH’s no-moat position had been improving, as we thought efforts to reach into the luxury landscape would elevate the profit and return profile.  We believe such efforts have largely been realized, which should lead to more consistent operating margins ahead. As such, we have reset our trend outlook to stable from positive as we believe the brand has healthy recognition in the niche demographic cohort it caters to (high income, luxury clientele) that should prove unwavering. The firm is proving that it can operate in different verticals to promote its brand, including both retailing and hospitality, with ventures into homebuilding and guesthouses ahead, supporting existing awareness. Moreover, while the expansion into guesthouses, private jets, and yachts could be margin accretive, that aspect of the business is too new and not substantial enough to add materially to the firm’s competitive edge yet.

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Company Profile

Business Description

RH is a luxury retailer operating in the $112 billion furniture and home furnishing industry. The company offers merchandise across many categories including furniture, lighting, textiles, bath, decor, children, and more and is growing the presence of its hospitality business (with 11 restaurant locations). RH innovates, curates, and integrates products, categories, services, and businesses across channels and brand extensions (RH Teen, RH Modern, and Waterworks, for example). The company is fully integrated across store, Web, and catalog channels, and is positioned to broaden its total addressable market with the launch of its World of RH digital platform in 2022, along with future offerings in contemporary, antique, bespoke furniture, couture upholstery, and more.

Contact
15 Koch Road, Suite K
Corte Madera, CA, 94925
T +1 415 924-1005
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 30, 2022
Stock Type Cyclical
Employees 5,000

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