What Will Happen to RH Stock in 5 Years?
Investors need to pay special attention because the home products company has entirely redesigned its operations and has ambitious aims.
RH (RH 2.06%) is still up about 900% since the beginning of 2017, a recent low point, although having dropped more than 50% from its 2021 high-water record. There’s a lot going on here, but what has already happened is not the main story. What management still aims to accomplish in the future should be taken into account by investors.
An alteration
RH was once known as Restoration Hardware, a mall-based retail outlet that offered home furnishings and other trinkets. After experiencing some difficulties, management went back to the drawing board and came up with a more ambitious plan. In 2012, it underwent a rebranding as RH, left the mall, and built its own footprint of destination-based stores with a strong focus on design.
Demand was boosted by the work-from-home fad that emerged soon after the 2020 coronavirus epidemic. The stock price increased as investors piled on. The euphoria has subsided as people are getting used to living with the coronavirus, and investors have stopped buying RH stock. But compared to when it was known as Restoration Hardware, the business is still in a far stronger position.
The vision of management is audacious. That is what has led to the success thus far, with the pandemic interlude being best understood as an odd and singular time frame. However, considering the company’s recent aggressive actions, investors should focus on the following developments.
How to proceed from here
Under the heading “RH Business Vision & Ecosystem — The Long View,” the business included what could be considered a corporate manifesto in its third-quarter 2022 financial announcement. The firm claims: “As we keep working to make RH the most respected brand in the world, our plan to make it the judge of home style has been both disruptive and profitable.” It’s a rather bold statement to refer to a business as “the arbiter of taste.”
The company says it will keep working to improve and expand its collection with the release of RH Couture, RH Bespoke, RH Color, RH Antiques & Artifacts, RH Atelier, and other new collections over the next ten years. The business also intends to keep opening “immersive Design Galleries in every major market.” Therefore, the company’s shop footprint will increase along with the number of niches it targets in five years.
The business only has further plans for its stores and product lines. The brand will transition from product curation and sales to space conceptualization and sales as part of our plan. This entails extending into the realm of hospitality, which encompasses aircraft and yachts. Oh, and don’t think that RH has forgotten to sell full homes because that is also on the list of things to do. The targets include houses, apartments, and condominiums. These are ambitious aims.
A grain of salt
What will RH be doing in five years? It’s difficult to say with those high expectations. RH wants to expand rapidly beyond its existing retail concentration; that much is apparent. It would be irrational to assume that it can’t accomplish at least some of these high goals, given its success in design. The expected future for RH over the next five years is so much greater and broader.
However, for investors, it will be crucial to pay close attention to what management actually accomplishes. The company currently appears to be hurling macaroni at a wall; the success of RH as a corporation will depend on what sticks. The business must also learn when to abandon concepts that are simply overly ambitious, which is arguably just as crucial.
The next five years will show whether management can genuinely achieve RH’s lofty aims as it diversifies into new markets. Investors should keep tabs on management’s track record of accomplishment and be open-minded to the possibility that not everything may go according to plan.
