In this podcast on RH, Speedwell Research covers everything from Restoration Hardware’s beginnings as just a catalog in a personal living room to massive multi-story Galleries with restaurants that generate >$10mn. Investors can learn much from the early business failings, as well as the incredible turnaround and business transformation Gary Friedman led. We draw on Speedwell’s 86 page research report, released in March 2023, to teach you not just about RH, but also about novel customer acquisition strategies, the dangers of promotions, how to build a coherent consumer value prop, and show how changing a business’s strategy requires reworking every element of the company. Enjoy!

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Show Notes

(0:00) Intro

(1:31) Early Founding History, Novel Customer Acquisition Strategy

(5:48) First IPO in 1998

(8:23) Restoration Hardware Model Starts to Break

(9:29) Gary Friedman Background and Takeover of Restoration Hardware

(14:43) Initial Business Changes Friedman Makes

(18:32) Second IPO in 2012, Starting to Envision a Luxury Retailer

(24:27) Ascent of Luxury Mountain, The Mega Gallery Strategy

(26:43) Solving a Key Business Shortcoming, The King Midas Problem, What Meituan has in Common with RH

(32:26) Source Book Strategy and When Mailing a 540 Page Catalog Makes Sense

(35:12) Growing Pain Period, Reworking Key Elements of the Business

(45:13) RH Membership and the Problems with Promotions

(52:07) What Job RH Does, The Consumer’s Hierarchy of Preference

(54:35) The Value Capture Index and How to Assess Retailer’s Pricing Strategies, Competition, Disadvantages of Ecommerce

(1:06:03) ROIC and Margins, Reverse DCF, Revenue Build

(1:14:50) RH Brand Extensions, Private Jets and Yacht, Guesthouse

(1:20:45) Acquisitions, Waterworks, Apple vs LVMH Model

(1:26:05) What Could the Business Look Like in 10 Years?

(1:27:46) Pre-Mortem

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Purchase Speedwell's full ~21,000 word RH report here: https://speedwellresearch.com/2023/03/22/rh-deep-dive/

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Free Piece on The Value Capture Index: https://speedwellsnippets.substack.com/p/the-consumers-hierarchy-of-preferences-dc6

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Twitter: @Speedwell_LLC 

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Email us at info@speedwellresearch.com for any questions, comments, or feedback

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Disclaimer

Nothing in this podcast is investment advice nor should be construed as such. At the time of publishing, one or more contributors to the podcast had a position in RH. Furthermore, accounts one or more contributors advise on may also have a position in RH. This may change without notice. Please see our full disclaimers here:  https://speedwellresearch.com/disclaimer/