Restoration Hardware CEO: We're A "Lovestyle," Not Just A Lifestyle
Gary Friedman, Restoration Hardware's chairman and CEO, filmed an unusual video for Wall Street yesterday.
Restoration Hardware isn't just a chain that sells $5,400 couches and $2,500 dining tables.
It's an innovator like Apple, Tesla and Google, a brand "worthy of loving" — a place that gives people "goosebumps," according to Gary Friedman, the chief executive officer, chairman and face of the brand.
In an unusual style for a third-quarter earnings report, Friedman and his chief financial officer released a video for analysts and investors yesterday ahead of its earnings call.
For seven minutes, light piano music plays while Friedman -- tanned, fingertips touching -- talks to the camera from a cream-colored armchair about the power of brands.
"People can fall in love with a brand, just like they can a person, or a passion," Friedman explains. "And it's not always rational, nor is their behavior. People camping out for days in a line to be the first to buy a new phone, when they could have easily ordered one online is not rational, but they do it. It's a customer saying: 'I believe what you believe.'"
Black and white pictures of a young Steve Jobs and Albert Einstein float across the screen, as he continues: "They, too, see themselves as the crazy ones, the misfits, the rebels, the round pegs in the square holes, the ones who see things differently, because they too believe that the ones who are crazy enough to change the world are the ones who do. That's why they stand in line for days. It's about much more than a product."
He then explained why this was relevant to Wall Street.
"Why am I on a conference call with investors and analysts talking about love and buying with our eyes?" he said. "I'm talking about these things because we believe RH is in the early stages of becoming a brand worthy of loving. We believe what we are doing is moving beyond an intellectual connection to an emotional one. We are beginning to express those things we deeply believe in a way you can see it. it's becoming tangible. There's physical evidence and we have given ourselves and others goosebumps."
And the company doesn't plan to change its style to cater to analysts, even though it's been public since the end of 2012.
"I know some of you would like us to stop innovating and start duplicating so you can build a simple model," he said. "It's not going to happen. We refuse to follow in the footsteps of others. We refuse to be confined by conventional wisdom or be victims of other people's thinking."
Restoration Hardware, he said, recently closed a successful store to build something better in its place, and that's an example of the company's thinking: "This is not going to be a retail model you can fit into a simple spreadsheet. We are not going to keep doing the same thing over and over again because we would get bored, and so would our guests. You can't build a simple model of true innovators like Apple, Tesla, Google or Facebook, and you won't be able to build one for our age, because we won't sit still. We will be forever unsatisfied and forever on the move."
"This is not a lifestyle," he said. "It is a lovestyle."
Restoration Hardware, a luxury home goods company which pulled in $1.6 billion in sales last year, doesn't call itself a retailer. It self-describes as "a curator of design, taste and style in the luxury lifestyle market." Its stores are "galleries," its enormous catalog a "source book."
Friedman is a colorful character — a Bloomberg Businessweek profile notes he wears a brown woven bracelet with the word "Believe," starts most mornings with raw coconut water, and requires green or white flowers in his home and cream-colored books for his library. He joined Restoration Hardware from Williams-Sonoma in 2001, transforming it from a chain close to bankruptcy into a haven for furniture so pricey you can buy it on a monthly financing plan. The executive was forced to briefly resign in 2012 after a board inquiry into his personal relationship with a young woman employee, an investigation spurrred by the woman's ex-boyfriend. But Friedman, considered the curator of the brand, and the face of its catalogs, was was reinstated last year.
On the conference call after the video, one analyst said the presentation was "original and interesting," and another told management, "Love this format." The stock has shot up 10% today to $94.87 a share after the report, which showed comparable brand sales rising 22% after a 38% surge last year, and a 56% rise in adjusted net profit to $20.3 million.
Restoration Hardware is known for the aesthetic of its vast, beautiful stores, which serve to showcase its luxury goods and a certain kind of unfettered lifestyle; they're often created in historic buildings and feature stunning accents that aren't for sale. Cash registers are hidden from view. Friedman, in yesterday's video, urged analysts and investors to visit the company's newest stores in Los Angeles and Atlanta.
"If you want to buy our stock, or follow our company, then put down your spreadsheet and fly to Los Angeles and Atlanta," he said. "You have to see it to believe it. Then and only then, you should decide to buy with your eyes...you too might see what we see, believe what we believe, and also fall in love."
"The heart is said to be 10,000 times more powerful than the mind," he told the camera. "You can't give yourself goosebumps, because it needs to come from the heart. we need to connect to something we deeply believe in to become emotional, to get goosebumps, butterflies or tears. It has to be authentic."