• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Jim Cramer

Jim Cramer: Hands Down, RH Had the Best Quarter vs Expectations

Before I tell you exactly how Gary Friedman created this greatness let me tell you why it may be one of the best second half stocks to buy.
By JIM CRAMER Jun 30, 2021 | 06:30 AM EDT
Stocks quotes in this article: RH

As the first half draws to a close I like to sit back and talk about who truly did have the best quarter versus expectations. I am not talking about the 10% to 15% better. I am talking about the companies that simply weren't in the ballpark of what was thought possible.

The winner? Pretty clear, actually: RH (RH) . The company reported 78% revenue growth when Wall Street was looking for 56%. RH core demand, what matters when you are doing apples to apples, increased 109%, "the strongest demand trends in our industry," as the shareholder letter pointed out. Gross margins expanded 550 basis points and adjusted operating margins increased 1,260 basis points, to 22.6% versus 10%.

There.

I just gave you all the gobbledygook, all the authentic Wall Street gibberish you need to be able to hang your hat on why would want to buy the highest end furnishings and food in gorgeous galleries all over the country and soon Europe.

I could make a gazillion projections about how this company, at $14 billion, is ridiculously small considering that I expect it to do $6 billion in sales in just a couple of years' time.

Or I can talk about how the company "did" the quarter, I mean, really did the quarter.

It accomplished these numbers because there is a merchant at the helm, Gary Friedman, I mean a real live merchant who bleeds RH and wants you to do, too. We do. We're one of the more than 400,000 members of the RH club.

Now before I tell you exactly how Gary created this greatness let me tell you why it may be one of the best second half stocks to buy. Oh, let me let him tell it: "the unmasking of the general public could lead to a Roaring Twenties type of consumer exuberance" and given the "strong housing and renovation market, both with pent up demand and a long tail, a record stock market, low interest rates and the reopening of large parts of the economy." Gary believes it could be like a Town & Country cover: "Remember Fun? Get Ready for the Comeback."

I struggle to say why Gary and RH are so special. In some ways it's best to say what it isn't: a company with seasonal inventory, a Valentine's Day, Easter, July 4th, a company with fashion risk, no more than classics can have that risk, and a clientele that's well, rich, which means they have staying power and like the membership model that Gary converted to in 2016.

Most of all RH is like no other retailer. Or as he puts it: "All you need to do is walk a mall to notice most retail stores are archaic windowless boxes that lack any sense of humanity. There's generally no fresh air or natural light, plants die in most retail stores and they can't be a good environment for humans either."

It's tough to pin down what to call RH's places. Stores seems too limiting. Gary calls them galleries but I think that implies too little given all the incredible spaces, and places to eat and furniture to gawk at. It's hard because, let's say, there were Michelin books for retailers. RH would get three stars and everyone else would get no stars. They are experiences. They are dreamy. They are the type of spaces that are like fabulous writing: you know it when you read it and the British manor and French Champs Elysees place will enhance the story-telling.

One thing is certain, it shouldn't be happening. There shouldn't be a place that offers amazing goods that could be priced like Lamborghinis or Brunello Cucinelli but are more likely priced the equivalent of BMW or Audi. I know, doesn't' seem like a bargain, but only to the uninitiated.

It's not easy getting to where RH is. Or as Gary puts it, "Hermes, Chanel Louis Vuitton, Gucci, Cartier, Tiffany and the rest of the finest luxury brands in the world were all born on the top of the luxury mountain. Never has a brand started at the base as we have and made the climb to the peak."

You know what happens when you get there? You can charge a lot more and people are a lot more proud when they buy something. I could go on and on about how this was the best quarter of the first half but I leave you with this: when the stock was in the 100s he and the company bought back millions of dollars worth of stock and he told us so. His confidence was ridiculously high and it seemed foolhardy in the midst of the pandemic. Now, it's just brilliant. And I don't think it is by any means finished climbing as long as this man stays as hungry and as talented as he is.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Earnings | Economy | Investing | Markets | Stocks | Trading | Retail | Jim Cramer

More from Jim Cramer

Jim Cramer: I'll Put My Money With 'Boring but Lucrative' Any Day

Jim Cramer
Sep 29, 2021 1:28 PM EDT

Let's look at that recent downgrade of 'dull' Morgan Stanley and see why exciting is best left for the stadiums and amusement parks -- and not stocks.

Jim Cramer: America's Toughest Job? Finding Workers

Jim Cramer
Sep 28, 2021 12:17 PM EDT

It's the question of our time: Where are the people willing to take on these better paying gigs? Let's see what's going on and what we need to happen.

Jim Cramer: Here's How Analysts Can Be Off By a Wide Margin

Jim Cramer
Sep 24, 2021 12:02 PM EDT

Let's look at the reactions to Nike, Costco and Salesforce to see what happens when they're viewed from a real world perspective.

Jim Cramer: It's Pure Insanity That We Don't Make Chips Here in the U.S.

Jim Cramer
Sep 23, 2021 11:05 AM EDT

While the big guns meet at the White House about the global chip shortage, the president and these companies are approaching this all wrong.

Jim Cramer: Go Ahead, Have a Cow, but I Say Powell and Xi Are Bulls

Jim Cramer
Sep 22, 2021 3:51 PM EDT

We rallied, because China's President Xi and Fed Chair Powell made decisions that they knew would lead to rallies.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:22 AM EST REAL MONEY

    LIVE EVENT: Bruce Kamich and Todd Campbell Share Their Stock Market Insights

    This Monday, Feb. 6 at 12 p.m., our very own exper...
  • 02:58 PM EST REAL MONEY

    Sarge Guilfoyle Breaks Down the Jobs Report, Fed Policy and Stocks!

    Watch it here!
  • 11:35 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Trading an Irrational Market
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login