Please note we are adding RH to Investing Ideas today. CEO Keith McCullough explains why below and a Stock Report detailing the fundamental view will be published later.
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The week started with momentum guys chasing U.S. Retailer charts on the "lower gas prices" meme (and it ended in tears). But we don't want to be sad about that. We want to be glad and celebrate the end to a good week by doing the one thing that so many Americans should love - buying things on sale (at the low-end of the risk range).
Our Retail & Apparel analyst, Brian McGough, has been bullish on RH for a very long time. His long-term bull case is now considering whether or not this is going to be a $300 stock. Last month he published a "Black Book" (deep dive) to our Institutional Research subscribers that considered some of the following topics:
- Why Wall Street is looking at the business wrong, and therefore underestimating the revenue opportunity.
- Quantifying the opportunity for RH Modern.
- Comparing the size of new Design Galleries to consumer spending levels around each new store.
- Is the introduction of these new concepts/classifications changing the growth algorithm and required footprint of each store? (Answer: Yes). Both a challenge and opportunity.
- New stores we're most excited about, and stores where we're more concerned.
- New market pipeline -- how many stores, how big, and how much revenue?
- Competitive landscape -- and how it's changing
- Gross Margin impact from occupancy leverage, and why we think the Street is too low.