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Takeaway: RH's New Financing program + growth in In-House Interior Design gives us greater confidence in our long-term revenue model.

Last night RH announced a long-term financing program that we think is positive news for its top line. The company already offers a credit card, but that carries a much higher interest rate (24.99%) and is a shorter-term financing bridge for consumers. With the new RH program, consumers can finance purchases at 5.99% for a duration ranging from 24 months to 7-years.

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There's no question for us that this is a positive for RH's top line. In our latest RH consumer survey, we asked 1,000 consumers how important it is for a furniture store to offer store credit -- on small, medium and large purchases.  Interestingly, it is 'Very Important' to only 13.6% of consumers for 'Small Purchases' and only '18.8% for 'Medium Purchases'. But once we get into the 'Large Purchase' classification, it is 'Very Important' for 41.7% of customers. Even 33.4% of the $100k+ demographic said that it Very Important to their purchasing decision.

RH - Stealth Revenue Driver - chart2 10 3 14

An interesting note is the screen shot below that 'advertises' consumers to meet with RH designers. This is the first time we EVER saw this advertised by the company. Approximately 40% of RH's business comes from designers, but they are largely third party designers. These are people that are hired by a customer and shop dozens of stores, where they pick and choose assortments that work -- maybe including RH, maybe not.

RH - Stealth Revenue Driver - CHART4 10 3 14

But now RH not only has a massive product assortment (i.e. 3,300 pages), but a stepped-up in-house Interior Design team AND  a superior long-term financing program. Add all that up and you get a stealth revenue driver that will build meaningfully.  We're not taking up our estimates (which are already high on the street by a country mile) but these factors give us more confidence that the company will get there.