COMPANY PROFILE

“The world IS about Global Brands...Getting ready to go on 10 city international trip to identify our international expansion plans. We will spend our money (and other peoples money) to build this brands global presence. Goal: $7-$10B brand. High-end luxury market is enormous outside of the U.S. We should live in the world of other lux brands (LVMH, Kering,etc). We should be able to be at $20B if we look like other luxury brand models. ” CEO Gary Freidman.

RH is a curator of design, taste and style in the luxury lifestyle market, offering furniture, lighting, textiles, rugs, bathware, décor and outdoor, as well as baby & child and teen products. Our collections of timeless, updated classics and authentic reproductions provide a unique point of view and an unmatched combination of inspired design and unparalleled quality. Each season brings a wealth of new ideas culled from our partnerships with the world's most renowned artisans, allowing us to showcase their unique products, passion and vision.

RH has galleries and outlets throughout the US and Canada, while our source books and websites serve as virtual extensions and compelling tours of the brand. We publish RH Interiors, RH Modern, RH Outdoor, RH Lighting, RH Rugs, RH Baby & Child and RH TEEN source books.Todays RH is nothing like the Restoration Hardware we all used to know. The old RH went away for a while and got a new lease on life from current CEO Gary Freidman. In the early days, it was touch and go but Gary had a vision and it was a big vision: To create a 1-of-a-kind home furnishings brand by breaking all the traditional retail rules. Well, in 2019, I’d say mission accomplished.

Style Factor Benefits

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where RH scores well as of 12/28/21:

• 88% high margins versus industry peers

• 87% high margin expansion

• 71% high FCF yield - an important value metric

• 74% high FCF growth

• 80% high operating ROIC

• 99% top 5 year ROIC growth

• 85% high % change in estimates for EPS, last 4 weeks

• 88% high % change in estimates for revenue growth, last 4 weeks

• 96% high short squeeze potential

• 100% analysts being furthest away from our internal long-term price targets

12/28/21 Update

This is my favorite stock for 2022 from a revenue acceleration and stock price catch-up potential. The stock has been a monster but it’s taken a breather in 2022 as supply chain issues have created big headaches for all home furnishing brands. RH has grand plans and some of them have had to be pushed out do to local restrictions but make no mistake, these will become massive revenue generators for RH once they open. The most recent quarter saw RH have their first $1B+ revenue quarter, that’s especially impressive given all the headwinds their business has faced since the pandemic started. I suspect this quarter would have been 1.5x+ more without these issues. This brand is well on its way to a much bigger revenue ramp and analysts don’t seem to get it yet. 14% of the shares are held short and the float in small so shorts can push the stock around on these delays but once we get closer to spring and the revenue ramp is in sight, there should be one wicked short covering event. The short thesis is simply bunk unless one believes the luxury consumer will freeze up and I simply do not see any evidence of this currently. With more people working from home part of the time, the demand for high-end home furnishings will sustain itself for much longer than people think. We don’t own WSM currently but my comments here also can be connected to WSM and that stock is even cheaper than RH. But RH is my horse in this spending category because their model is 100% unique and tough to replicate and their global expansion is just beginning.

RH is building a one-of-a-kind home furnishings brand while blurring the lines between traditional in-store, experiential retail, online retail and hospitality & lodging. Nothing like this currently exists and there will be massive demand from global consumers. RH is using a different playbook so they should garner a premium valuation. There’s much more to go over the next 5 years, there will be bumps along the way but make no mistake, this company should continue to be a monster performer because they are building something special and one-of-a-kind. When we look back 5 years from now, I suspect we will say RH had the the brand relevancy and business model with global scope that ultimately make this a $20+ billion market cap global brand. When you’re talking about a one-of-a-kind model, you have to think outside the box. This is the most important factor for RH as a stock - The model they have in the U.S. will be scaled across the globe and it’s just beginning. This asset light model being deployed across all the major cities in the world, has a very bright future.

Product elevation + Gallery transformation + Hospitality + Residences & Lodging + Global expansion = $20 billion opportunity in a stock at $12B in market cap today.

The Real Estate Story: This is #1 and there will surely be more once this property proves the concept.

RH (NYSE: RH) announced today the Company is making an initial equity investment of approximately $105 million in connection with real estate development initiatives in Aspen, Colorado. The investment includes properties that will be developed into retail locations, hospitality concepts, residential developments, and workforce housing projects.

Aspen has been selected to develop the first RH ecosystem inclusive of an RH Bespoke Gallery, RH Guesthouse, RH Bath House & Spa, RH Restaurants, and our first RH Residences. The RH Gallery on Galena, currently under development, will offer two floors of the RH Interiors, Contemporary, Modern, and RH Ski House collections, plus Interior Design, Architecture, and Landscape Architecture services. Additionally, the Gallery will include a transparent glass rooftop restaurant with views of Aspen Mountain, a Wine & Barista Bar, plus two private dining rooms with fireplaces and retractable roofs. The RH Guesthouse at the Historic Crystal Palace, also currently under construction, will feature guest suites with fireplaces, a live fire restaurant, wine vault, private rooftop pool and dining terrace with views of Aspen Mountain, and the brand’s first RH Bath House & Spa. The RH Residences at the Historic Boomerang Lodge will include up to five fully furnished four bedroom custom homes, and The RH Residence on Red Mountain will be a fully furnished six bedroom home with multiple terraces and an infinity pool with views of downtown, Aspen Mountain and Independence Pass. All of the RH Residences will include membership to the RH Bath House & Spa, plus priority reservations at the brand’s restaurants and private dining venues.