Warren Buffet just cast a vote of no confidence in Gary Friedman's vision for RH. It's bad news for RH and worse news for the home furnishings market.
In addition, Buffett has bandwidth across other categories that reflect consumers’ plans for home improvements, which track home furnishings sales. Berkshire Hathaway owns the Benjamin Moore & Co paint company and Shaw Industries in carpet and flooring.
RH is the canary in the coal mine of what’s ahead in the home furnishings retail market. It ended fiscal 2022 down 4.4%, falling from $3.8 billion in 2021 to $3.6 billion. And fourth quarter was down 17% from $902 million to $772 million in 2022. It’s up against even stronger comparables in the coming first quarter which brought in $957 million last year. As its current outlook stands, RH is guiding on first quarter 2023 revenues in the $720 to $735 million range and year-end between $2.9 to $3.1 billion, a precipitous drop from 2021.
Nonetheless, Friedman remains on course. “We’re not panicked. We’re not nervous. We had the best model going into the pandemic. We have the best model coming out of the pandemic. And we will leapfrog even farther ahead when we get to ‘24 and ‘25,” he said in the most recent earnings call.“RH’s Friedman is a savvy visionary category leader, which in this case means he takes the first hit,” Ramey concluded. “Ultimately, the firms behind RH should be most concerned.
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