This company is the “best idea in retail, hands down” over a six-month, one-year, three-year, and five-year time duration.

“No company has more torque in their model.”

And the Chairman and CEO, who is “very macro aware and pragmatic”, had a dramatic change in tone in the company’s earnings conference call during which he outlined a “major inflection” coming for the luxury home furnishings retailer in 2024 while acknowledging a still negative macro environment.

I visited this firm’s first overseas gallery outside of London this summer, the start of its international expansion.

I came away impressed and took a few pictures.

Find out more about this unique retailer, which is well-positioned for long-term growth.


RH. Restoration Hardware.

It’s the “best idea in retail hands down” over a six-month, one-year, three-year, and five-year time duration, according to Brian McGough, Hedgeye Sector Head, Retail.

Yes, the same McGough who recommended Playboy, which he admits is one of the worst calls of his career.

But McGough is a well-respected analyst who has an encyclopedic knowledge of retail companies large and small.

He’s been right on RH before when he made a contrarian call on the company in 2017 and the stock was trading under $40 per share.

It wound up peaking at more than $700.

Following RH’s fiscal Q2 earnings report, the stock is trading at just under $311 after dropping 15.6 per cent on Friday on six times the average daily trading volume of 830,000.

That decline was based on what many investors perceived to be a weak outlook but McGough calls conservative guidance from the company.

McGough gave his take on RH Friday morning on Hedgeye’s The Call.

Here’s a brief summation of his comments: 

  • RH FQ2 earnings handily beat Wall Street expectations of $2.65 a share, and McGough’s estimate of $3.75, coming in at $3.90.


  • The company’s Q3 guidance is “conservative”.


  • For all of 2023, Wall Street estimates $11 per share in earnings, McGough is at $14.


  • RH is spending on marketing in Europe as they launch new galleries in Dusseldorf and Munich before the end of this year, which includes massive source books that arrive at the door of hundreds of millions of consumers.


  • RH is also launching a new contemporary line of furniture and conducting their first product refresh in eight years.


  • Chairman and CEO Gary Friedman had a “dramatic” change in tone from previous conference calls whereby he projects a “major inflection point” coming for the business in 2024, while acknowledging a still negative macro environment.


  • RH “has so many idiosyncratic drivers” including eight new stores opening in Europe through 2025.


  • McGough believes there will be a wave of analyst upgrades for RH over the next 12 months once the stock hits the $500 level and analysts better appreciate the growth potential.


  • McGough estimates fiscal 2024 earnings of $24 per share. Wall Street’s estimate is $15.


  • “No company has this much torque in their model” with this much high-quality square footage growth coming.


Note that Hedgeye’s CEO Keith McCullough would not likely recommend RH at this point because it’s not bullish trade (three weeks) or trend (three months) in his volatility adjusted signalling process (VASP).

But McGough said he would be buying RH on this recent sell-off.



Below are a series of tweets I sent out after my visit, with my daughter who lives in London, to RH England:


Disclosure: I bought a small amount of RH stock on Friday’s pullback after waiting several months for a better entry point.