Will supersizing Restoration Hardware stores backfire for CEO Gary Friedman? by samsharf
Share to linkedineaning forward in a wing chair upholstered in Belgian linen, at the head of the distressed pine dining table he uses as a desk, Gary Friedman, chief executive of, swipes at an iPad in search of a video. Unsuccessful, he hollers to an assistant sitting outside his Corte Madera, California, office, which has no door.
Sales increased 14% in fiscal 2017 to $2.44 billion. In the third quarter of fiscal 2018, profits grew 70% from the year prior to $22.4 million. With shares quintupling from their low to end 2018 at $120 while worldwide stock markets were tumbling, RH investors who stayed the course have been handsomely rewarded. Friedman’s 10% stake is worth some $280 million. What’s more, he has options that, were he to exercise them, could raise his share of the company to 27%.
“These are complicated financials for what should not be a very complicated business, which is putting some crap in a store,” says Todd Fernandez, who runs Forensic Research Group, which has followed RH since 2014. “If the unit economics made sense, someone probably would have built stores like this.”
By age 27 Friedman was overseeing 63 stores as a Southern California regional manager. He thought life couldn’t get any better, until 1988 when a recruiter offered him a chance to return north to run operations for Williams-Sonoma. The cookware chain doubled his salary and gave him a car allowance large enough to pay for a Porsche: “All the things you dreamed of when you're a poor kid like me.” He eventually rose to president of the company.
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