A luxury-furniture stock backed by Warren Buffett has rocketed up 1,600% in the past four years, and hit a new high on Thursday.
RH, formerly known as Restoration Hardware, has surged in value from $31 a share in March 2017 to as high as $529 this week. The stock has soared roughly five-fold in the past year alone, after falling as low as $82 when pandemic fears tanked markets in March 2020.
CEO Gary Friedman underscored the stock’s outperformance since its listing in November 2012 during RH’s earnings call on Wednesday.
“RH has outperformed Apple, Amazon, Google, Facebook, Nike, Starbucks, LVMH, Home Depot, Hermes and just about everyone else, but Tesla,” he said, according to a transcript on Sentieo, a financial-research site.
“Warren Buffett says time favors the well-managed company,” he said. “We believe our performance has, and will, continue to prove that point.”
Buffett’s Berkshire Hathaway first invested in RH in the third quarter of 2019, snapping up about 1.1 million shares. The investor and his team grew their stake to around 1.7 million shares during the next quarter, or more than 8% of the retailer’s outstanding shares.
Berkshire’s position has more than doubled in value since then, to $775 million as of December 31.
RH shares climbed 9% on Thursday as investors cheered its latest earnings. The company grew net revenues by 8% and widened its adjusted operating margin from 14.3% to 21.8% last year, resulting in a 64% increase in operating income to $621 million.
It might be tempting to classify RH as a “stay-at-home winner” that cashed in on inflated demand for home furnishings during the pandemic. Friedman resisted that notion on the earnings call, pointing to the company’s new product lines and expansion plans.
He also highlighted his team’s resourcefulness in transforming a “nearly bankrupt business selling nostalgic discovery items with a $20 million market cap into the leading luxury home brand in the world, with a market value in excess of $10 billion.”
Here’s a chart showing RH’s stock price over the past five years: