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Takeaway: Restoration Hardware is one of the most transformational business models in retail.

Editor's Note: Below is a brief excerpt from our Retail analyst Brian McGough's daily note "Retail Direct." It is sent to institutional customers before the market open. For more information on accessing our institutional research email sales@hedgeye.com.

RH: Bullish Into the Print - zzrh

Restoration Hardware (RH) pulled forward its reporting date by a day given exchanges closed on Wednesday. Let’s be clear about something…out of every company I traffic in – and there’s a lot of them – RH is the one that keeps me on the highest alert headed into every print.

That said, I feel good about this one based on what I know today.

The company has absolutely crushed each of the past two quarters – entirely because of margin and financial engineering.

I think that the difference this time is that we begin to see a top-line-driven earnings algorithm that shows us that RH is egregiously undervalued at $116.

The 36% of the float that’s short is going to have to face the music that there’s $12 in EPS power here…

One of the most transformational business models in retail. 

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