Buffet Radar: Buy RH.com (RH)
In the third quarter, Buffett increased his holdings in $RH, the high-end home furnishings business is formerly known as Restoration Hardware. Berkshire now owns 2.36 million shares, or about $580 million.
Buffett's third-quarter purchase may have been timely, given that the stock is down 51% YTD and is in the process of becoming a diversified luxury brand. Specifically, RH is expanding the reach of its brand beyond home furnishings by creating test programs for dining establishments and lodging establishments, leasing aircraft and yachts, and launching a streaming service focusing on architecture and design. These actions take advantage of a consumer base that has grown to adore its aesthetic and will strengthen its brand even more.
However, RH appears to be in a good position for a comeback once the economy improves and the demand for home furnishings increases. Thanks to a marketing strategy centered on its vast galleries and sourcebooks, it has developed a distinctive brand in the home furnishings industry.
It has found success with a distinctive membership model that provides customers with discounts of 20% to 25% on merchandise in exchange for an annual fee of $175. This gives it an extra revenue stream and encourages customer loyalty from a base of clients who have already shown a preference for its products.
Source: Yahoo Finance