Shocking: Proxy Shows Gary Friedman Actually Did Use RH As Personal Fiefdom

U.S. Retail/Consumer - Restoration Hardware (RH)

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Related party disclosures at Restoration Hardware (RH) exploded in the proxy filed last evening. Many fun things to discuss. A bit of a victory lap for those that do fundamental work over the FOMO/MOMO types.

First let’s talk about RH Guesthouse. No disclosure last year. Wasn’t even a section in the proxy. This year “Mr. Friedman reimbursed the Company an amount of $133,314 for personal use of the RH Guesthouse in New York during fiscal 2024 and fiscal 2023, which, together with amounts previously paid by Mr. Friedman for such personal use, represented aggregate total reimbursement of $184,062 for Mr. Friedman’s personal use of the RH Guesthouse.”

Oops, PricewaterhouseCoopers must have missed something in 2023! Does anyone believe the going rate for Gary’s personal penthouse in the middle of the Meatpacking District NYC is anything less than $20k a night? Let’s make that number $10k – I mean I paid $4k a night for the Four Seasons Bosporus way back in 2019 and barely had 400 sq. ft. in my ground floor room. I don’t know about you but am pretty sure Gary used that place significantly more than 18 nights in total since it opened.

Next up you have to love the “Charters of RH3” disclosure, because Gary in the past adamantly defended against the RH yacht being solely for him because “he gets seasick”. “Mr. Friedman paid an aggregate amount of approximately $311,000 for such use of RH3 during fiscal 2024 (up from $302,000 in FY23) based upon the Company’s standard charter rates.” That likely would pay for several “Below Deck” episodes each year – certainly more than you would expect for a guy that proclaims he hates the ocean. The whole point here is that if RH doesn’t let anyone else use the yacht, the standard charter rate doesn’t really reflect reality. You have to fill in an application before they are willing to give you a charter rate for the boat. It's not like they are advertising the yacht anywhere to maximize the ROIC of this shareholder owned asset. The big question is – was the yacht ever used by anyone else and how much? I know there is data showing it stayed moored in I think Malta for a very long time period (see Hunterbrook Media for more).

Everyone and their mother knew Gary at RH was abusing the “Corporate Aircraft Time Sharing Agreement”. What do you know. PricewaterhouseCoopers missed something else in 2023! “In addition, during fiscal 2025, Mr. Friedman was charged an additional amount of $176,699 under the Time Sharing Agreement in respect of certain travel involving the Corporate Aircraft during fiscal 2023 that was reclassified upon additional review under the Related Party Policy as primarily personal versus the prior classification of such travel as primarily business.” Same thing as the corporate yacht, you have to put the corporate airplane into the market to determine an actual charter rate. The big question here is the same – how many times was it actually used by non related entities of RH.

In closing, the entire point here is not to focus on a few million dollars of expense. The simple fact is RH under Gary’s leadership does this all the time. He simply doesn’t care about shareholders. If the story is so strong, why does he feel the need to nickel and dime his investor base to absurd levels? In comparison, real companies get rid of any and all distractions that might derail the story. IMO, I think we saw something to this effect at Floor & Decor (FND) last summer, however unfair I think that was. Did anyone actually think RH doesn’t understand convertible math when they restated their financials in early 2023? Or could that entire episode simply be him managing the dilution narrative of taking $1 billion in stock out of the company? To be clear, this is the exact moment when Warren Buffet had enough of him. I have written extensively on the international bait and switch. As well as the massive lawsuit payout related to the original Modern launch. There are other examples but why bother? Bulls are going to ignore all of this and bears were already there.

FIN