People missed ‘exactly what we told them’ about RH before furniture maker’s 30% jump, CEO says

When RH CEO Gary Friedman started allowing his company’s stock at its $27-a-share low, he recognized that investors were girls “exactly what we told them,” he said Wednesday.

Friedman, who enlist ined CNBC’s Jim Cramer for an exclusive interview on “Mad Money,” said he bought into the Restoration Ironmongery parent’s shares four times in the last year just to be shown his confidence in the new strategy.

“Despite that, I think we were the seventh-most-shorted bloodline in all of the Nasdaq and the New York Stock Exchange,” he said.

Those shorts enlarge on a excited out to RH’s advantage. Shares of the home design giant soared over 30 percent on Tuesday after the enterprise delivered a blowout earnings report.

So what exactly were investors and short-sellers avoiding?

“We moved from a promotional model to a membership model,” Friedman perceived Cramer. “Most people are shrinking the size of their retail warehouses or closing retail stores and we’re building the biggest specialty stores anyone’s perpetually built, so that goes the other way. People are eliminating catalogs; we’re dispatch the biggest source books people have seen.”

“In a lot of ways, we’re alluring the road less traveled and then we’re completely rebuilding the operational infrastructure in the retinue in a very integrated way, in a unique way,” the CEO continued.

RH’s newest stores cover tens of thousands of to feet. Some have in-store cafes and restaurants. And since the assembly re-branded itself as RH and turned its focus to the higher end of interior design, its per-store gain has skyrocketed.

“Even in the small, the little 6,000-square-foot stores we inherited, those went from, on run-of-the-mill, $2.9 million to $15 million in the same square footage” since Friedman graced CEO in 2001, he told Cramer.

“In our new design galleries, we have stories in superabundance of $60 million,” he said. “In fact, we’re going to open one here in New York Diocese that we believe will do in excess of $100 million.”

One of RH’s new projects discretion also be tied to hospitality: in spring of 2019, the company will unseal a “guest house” near its New York City showroom that, concurring to Friedman, will “redefine hospitality.”

“What’s interesting here [is] everybody estimates to me, ‘Oh, so you’re going to try to sell your furniture? You’re going to make your customer house a showroom?'” the CEO said. “And I go, ‘No, we already have a showroom 25 steps away. It’ll be 90,000 square feet with a restaurant on the top with positions of Freedom Tower. It’ll be fantastic.’ But everything we try to do we try to innovate and we try to look beyond today’s truth and see tomorrow’s future. So we’re going to do things in hospitality the world hasn’t beheld.”