Chairman & Chief Executive Officer, RH
RH CEO Gary Friedman sits down with Jim Cramer
RH Chairman and CEO Gary Friedman joins 'Mad Money' host Jim Cramer to talk quarterly results, global growth, the state of the ...
About Gary Friedman
During an April 2025 earnings call, Friedman reacted in real-time after being notified that RH's stock had fallen roughly 25% following the announcement of new tariffs and the company's earnings report. He stated that the stock "got killed because of" the tariffs and noted that the company's sourcing from China was disclosed in its 10-K filing, saying "it's not a secret." Friedman expressed that he felt worse for manufacturers and people invested in China who had "move manufacturing, move their lives." He also characterized the company's large inventory as a positive, saying "we happen to have a huge amount of inventory now," despite acknowledging that "the worst thing you could possibly have is inventory." Friedman has previously described RH's strategy as focused on long-term vision rather than short-term noise, stating the company does not have a marketing department but a "truth group" and does not maintain accounts on Instagram, Pinterest, or TikTok. He has emphasized the company's expansion into physical experiences, including restaurants, guesthouses, and a private jet, which he said are part of building an "ecosystem that elevates RH as a thought leader, a tastemaker, and a placemaker." He has also discussed the company's significant share buybacks, saying "we only bet on ourselves" and that "history would prove that we are generally, directionally right when we make bets of that size."
Transcript (20 segments)
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Narrator0:10
A grand design to spruce up your home and renovate your portfolio. Furnishing profits and letting investors in on high-end trends. Is RH the stock to give your portfolio a classy edge?
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Interviewer0:28
It has been a fabulous couple of weeks for RH, formerly known as Restoration Hardware. Soon I won't say that. Last week the company reported a magnificent quarter, up more than 25%. They spent years investing correctly, preparing for when the Fed would cut interest rates and kick housing into overdrive, which we have been waiting for. So the double rate cut was news for RH. The business was picking up before the Fed did this thing, but don't take it from me. Let's check in with the Chairman and CEO of RH. First of all, I want to congratulate you. You kept spending during the downturn, so when it turned up you had the right merchandise and therefore the right profits, and it looks like as you say the vector size, the margins, everything is in the right direction for you.
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Gary Friedman1:19
Well, look, there is no big reward without big risk, and we like to think deeply about making a few big moves. We have been working on this product transformation, platform expansion unveiling, and it has been a big investment. Also, we bought $2.2 billion of stock back. We would not do that unless we had a lot of confidence about what was coming, and while we can't control the interest rates or the housing market, it is a good sign to see the beginning.
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Interviewer1:53
You have been calling this the most challenging housing market in three decades, and yet you still brought back a lot of stock. Is that a bet on Gary and his team?
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Gary Friedman2:05
Look, we only bet on ourselves. We don't really make investments anywhere else. We don't make investments of that size without a lot of thought or confidence, and we just bought back 35% of the outstanding shares this time. In 2017, you know, we bought back I think $1 billion something in our stock. Since 2017, we have bought back $3.75 billion of our stock. History would prove that we are generally, directionally right when we make bets of that size. So are we excited? We could not be more excited.
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Interviewer2:52
September is continuing to be great.
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Gary Friedman2:54
We have said that our business accelerated throughout the second quarter, and even July up 10%, accelerated into the third quarter with August up 12%, and we expect it to continue to be positive throughout this year and next year.
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Interviewer3:13
You have a lot of things I find hard to describe. You have a 90,000 square foot property in Newport Beach, overlooking the ocean with bars, and I said what is it? What is the analogy? And the answer is so great: there is none, is there?
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Gary Friedman3:37
You have to think until it hurts so you can see what others can't see, so you do what others can do. If you want to be the best in the world, you can't be a follower; you have to be a leader, and that is sometimes a little confounding to people in the public market, because people tend to like duplication, not innovation. But if you want to lead, you have to innovate and take risks. Again, history proves all of these bets and all of these galleries that we have done are highly incremental and profitable. It comes from really deep thinking and not any kind of quick decision-making. I've been here as CEO for 25 years. We are not making this up. It is a lot of data, a lot of deep thinking, connecting a lot of dots, and being willing to place a few big bets that can change everything.
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Interviewer4:37
I think the data... I've been to Raleigh. I would not have thought it would sustain a 50,000 square foot RH. But you have data, and you know that there are cities like Raleigh that in New York we wouldn't know, that can be tremendous, can't it?
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Gary Friedman5:01
We are already there, that's the good news. Almost every market that we are opening these larger, more immersive galleries, we have the data on almost every market. One where we don't have data is Montreal, but we know Canada. We are in Vancouver, Toronto, so on and so forth. So we have data. We have been at this a long time, and it is about understanding the math, connecting the dots, conceptualizing new and bigger and better versions of ourselves. Somewhere like Raleigh, we know the volume we do. When we open a new gallery, when we open a new restaurant in a market like Raleigh, what is the restaurant going to do? We know what the incremental traffic that the restaurant drives is also going to drive incremental revenue in the gallery. All of that takes time. We opened our first restaurant in 2015. We have 22 restaurants today, so we have a real restaurant platform, too. That creates traffic and consumer awareness.
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Interviewer6:16
Now Europe really gets you. Everywhere you open, no one is further than you thought, but when you open, do they know it is American? Do they understand? It does not seem to be what we think of as what we make. You appeal to, I would say, a well-off group everywhere, but also to the artistry, to the belief that Picasso is right: you have to destroy to make, and it works in Europe almost perfectly.
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Gary Friedman6:46
Look, Europe, like any new market, do we have some brand recognition amongst designers and customers? Of course we do, but you know it is going to take time for Europe to scale and become known the way it is known in America. And I tell everybody that the time to really focus on Europe is when we open London, Paris, and Milan. Those are the three key cities to build the brand, and we open Paris next spring. We open London in late fall and Milan in 2026. Those are meaningful galleries, integrated restaurants, wine bars, you know, the whole experience. So we have not opened that yet. We opened in the English countryside, a 17th-century estate, 73 acres, but we said that was more for conversation than commerce, and we wanted to make an impression, an inspiring and unforgettable first impression in Europe, as I think we did. But we are going to know a lot more in the next 18 months.
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Interviewer7:58
Now, are you concerned about tariffs and what it will mean for a person who is on the edge, trying to figure out whether they should reach for RH? Which, by the way, I know this is hard for people who are not regular shoppers at RH, but you are actually reasonable for the incredibly beautiful stuff that you make. You are not outrageous, but tariffs can make you be outrageous.
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Gary Friedman8:22
I don't know if tariffs are an obstacle that are that difficult to overcome. Supply chases demand. We are really good at creating demand. Supply will move to appropriate places and countries. When the tariffs went up, we moved a significant part of our upholstery business back to America. We are now the biggest importer of Italian sofas in America, and we have our own factory in North Carolina making sofas. So you have to be flexible, you have to be fast. There are always going to be obstacles like that. There will be obstacles for everybody, so you have to be faster, smarter, more creative, taking lemons and turning them into lemonade.
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Interviewer9:16
You don't do it the way others do, which is why we love you, frankly. One of the things you pointed out is that you have a great take on society. For instance, you said that why do people pay a bunch of strangers, influencers, to say they love your brand on TikTok? I mean, we all know phony. Something happened. What happened to make it so absurd things like that have some cogency?
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Gary Friedman9:46
Look, we are in a world where there was an explosion of social media. The digital visualization and connectivity is real, but the great brands stand the test of time and they earn it. They tell the truth. You know, having fake fans and people you pay to talk about you on Instagram or TikTok or whatnot is not the truth. Like, we don't have a marketing department; we have a truth group. And I tell everybody, look, if people aren't talking about us, if people aren't interested in the brand, don't pay them to talk about us. Let's do better work. Let's do inspiring work and let the world talk about us. So we don't have an Instagram account, and we don't have a Pinterest account. We are not on TikTok or any of these. We are doing work that other people are talking about. So the key is, where do you want to focus your time and your money? I don't want to sit and think about what pictures are we going to put on Instagram next week. Let's talk about the product. Let's talk about the platform. Let's talk about creating authentic connections with consumers, and let's tell the truth. Let's not let somebody else that we don't really know make something up, talking about 100 brands, getting paid to get up and unbox something. It is a different world, and again, you can't be a leader if you follow the crowd. You know, you have to take the path, the road less traveled, and you have to define your brand your way and not let somebody trying to define hundreds of brands also define you.
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Interviewer11:38
Let me ask you a final question. What happens to people who wonder, who underestimate the power of good people who don't know what can be done?
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Gary Friedman11:52
You know, there is something about persistence and passion and deep belief in what you do that sometimes is tough to understand for other people who maybe don't have something like that that they feel that deeply about. A lot of people say you are a lifestyle brand. I say I don't even know what a lifestyle brand means. We do what we love with people that we love, for people that love what we do. It is that simple, and we are passionate about it. We will move mountains in our organization. It takes that kind of effort, and it is sometimes not understood. And if you want to do really great work, it is not work that somebody else has done, so you have to believe what hasn't been done, and you know you never want to bet against those kind of people; you will usually be wrong.
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Interviewer12:58
That is Gary Friedman, Chairman and CEO of RH. The numbers are getting better and better, and 'Mad Money' is back in a moment.