The net of RH's announcements this morning are positive.
Specifically, the company announced that Gary Friedman, who had 'stepped down' from CEO to be 'Chairman Emeritus, Creator and Curator' changed his title to Co-CEO alongside Carlos Alberini. Let's be clear about something…what Friedman does on a day to day basis won't change. The reality is that the Board stepped up and changed his title at the time of the IPO to draw a line between the company, his personal life, and percieved surrounding conflicts. But from the Board's perspective, with the stock up 150% since the IPO and the quality of the long-term growth story becoming more apparent over the past six months, it's fair to say that any credibility issues associated with his role in the company are more than ameliorated.
Over the past nine months, Friedman and Carlos Alberini have been operating much like how we see Ralph Lauren (Right half of the brain) and Roger Farrah (Left half), which represents one of the best and most successful creative vs. operating relationships the retail world has ever seen. Friedman and Alberini have the potential to mirror that success.
Our point is that the only thing that changed pre-IPO was Friedman's title. Day-to-day he has always donned the role that represents the Right half of the brain. Alberini was the Left half. Use the title of Curator, CEO, COO, or Chief Janitor…it really does not matter. Both gentlemen are doing the same thing today that they did yesterday, but simply with more recognized confidence by the Board (the statement in the press release from Michael Chu -- former RH Chairman -- lends ultimate support).
The other announcement is that RH is going to begin to curate apparel, footwear, accessories, and jewelry under the brand 'RH Atelier'. By no stretch are we going to treat this as a layup for RH, as it is a category where more concepts have failed than succeeded. But the reality is that the company already has the operating infrastructure to slowly and deliberately test the concept -- and alter it as the market opportunity dictates.
We continue to believe that one of the few things that can derail RH is the company's execution of the numerous business opportunities it has in the air.
Ultimately, we think this is all consistent with our view that the company will be viewed as having $5+ in earnings power.