Restoration Hardware CEO Gary Friedman's Luxury Retail Ambitions

These are the original antique library chairs that are in our catalog. Those are the original antique tables that we have replicated, says Gary Friedman as he walks briskly through his home in Californias Marin County, passing low-slung brown leather chairs and unpolished wood tables. Friedman is the public face of RH (RH), formerly known as Restoration Hardware, and its guiding spirit. He has many dreams for RH, but the essential one is to create an endless reflection of hope, inspiration, passion, and love that will ignite the human spirit and change the world. Thats the companys vision statement.

Friedmans official title is chairman, chief executive, creator, and curator. He has an official moneymaking philosophy, too: You have to find people who believe what you believe, he says. If they believe in your taste, style, the way you do things, you can create an incredible business. He wears a brown woven bracelet with the word Believe. So do some employees.

Friedman, 56, is also wearing slim-cut khakis, shearling-lined high-tops, and a slate blue cashmere hoodie. Hes cheery and perpetually tanned and stubbled, and he drinks raw coconut water most mornings. His villa has views of the Golden Gate Bridge from almost every room, an architectural feat that required the builders to remove 330 truckloads of dirt from the site. The interior, designed by Friedman and his former wife, consolidates everything RH aims to be. The company no longer sells Quakenbush nut bowls, Boston Ranger pencil sharpeners, or anything else meant to evoke a simple, virtuous American past. It summons the elegance of a salvaged estate: perfectly worn, possibly haunted dining tables, English club chairs in taupe linen, Italian gas streetlights. Friedmans house is all neutral colors, unfinished wood, distressed leather, and Belgian linen. Flowers have to be green or white; books in his library are supposed to be cream-colored.

When Friedman joined Restoration Hardware from Williams-Sonoma as CEO in 2001, the company was near bankruptcy. Now his ambitions for it are vast and expensive. Friedman is planning grand stores in high-income Zip Codes across the country. So far the response from customers and investors has been enthusiastic; sales have been growing more than 20percent a year since 2010, shares are up 50percent in the past year, and analysts expect it to be profitable this fiscal year.

Jake Stangel for Bloomberg Businessweek

RHs store in Boston, which opened last April, is set in an 1862 Beaux-Arts building originally constructed for the Museum of Natural History. It is four stories and 40,000 square feet, with fully staged bedrooms and living rooms and dining rooms, a library, cinema room, billiard lounge, nursery, and conservatory. A glass elevator modeled after one built in 1893 moves between the floors. There is a 24-foot-tall steel replica of the Eiffel Tower (found in a flea market and not for sale) and a vintage lightbulb tester thats been turned into a minibar ($1,995). The cash registers are hidden in cabinets. The store is three times as large as RHs older one in Boston, and if it does as well as the first luxury stores, it could have sales per square foot that are three times as high.

Other stores will be even bigger, with wine bars and restaurants, performance spaces, courtyards, and rooftop gardens. All will have free valet parking. RH says average sales could be $30million a year per store. No one has ever built stores like this, Friedman says. RH has opened five so far and will eventually open 60 to 70 in North America, replacing its 62 existing ones. Friedman calls them design galleries.

Retailers are struggling to find ways to bring more people into their stores. I wish more of them were doing things like this, says Matt Nemer, an analyst at Wells Fargo Securities (WFC).

Friedman opened an RH contemporary art gallery in Manhattan last November and says hell introduce an RH guesthouse in the city by 2016. Hes started a small music label thats signed three groups. Hes announced RH Atelier, a clothing and jewelry line, and RH Antiques and Artifacts, a collection of one-of-a-kind pieces. Much of the money for these projects will come from RHs advertising budget, says Friedman. Even if art never becomes a very big business, but it renders the brand more valuable, thats what you want to do with marketing, right? he says.

The timing of RHs experiment seems fortunate so far: Many companies doing well these days cater to increasingly affluent customers. Friedman has a reputation for getting people to buy what hes selling. Hes the one who put working kitchens in the center of Williams-Sonoma (WSM) stores, changing how Americans shop for pots and pans. He also turned Pottery Barn into the Gap of home furnishings, offering reasonable design at affordable prices. Hes a creative genius. He is that guy, says David Strasser, an analyst at Janney Montgomery. Either you believe the transformation makes sense or you dont. So far the evidence is that its pretty powerful.

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Restoration Hardware CEO Gary Friedman's Luxury Retail Ambitions