Oh, this has to be the worst earnings call I've ever gone through in my career and look. I'm a licensed financial advisor I Read earnings calls almost every single day and this one's bad. I Don't know if this is a sign of what's to come in the economy, but that is not a Nike Swoosh style earnings call. It's bad.

Let's talk about it. This video is going to be brought to you by the paid promotion of short form, but we'll talk more on them later. For now, let's get into it. Promotion by the way, will be 20 off with short form by going to shortform.com meet Kevin linked down below Steven Forbes An analyst Ask the CEO Can you talk about an inflection point within the business And here is are some of his responses: Sure.

I Think based on the times we're in and uncertainty we're facing, whether it's the continued rise of interest rates or the next bank or two that get hit, it's hard to be anything but conservative right now. I Think it would be foolish to be not just from the perspective of disappointing investors, but disappointing ourselves and possibly making decisions and investments before we could see around the next corner you hear this reign in. Don't spend more on Capex Reign in: Get small, Get scared is what he's saying because we haven't seen around the corner yet because instead he talks about it's a very unsettling feeling. It's like the days of Bear Sterns and Lehman Brothers and we're just waiting for the next shoe to drop.

It's very unknown right now, so we believe that there will be an inflection point in the second half. Notice he doesn't say good, We don't know what it is. What will what will the economic environment be in the second half? What would be the condition of the banking industry In the second half, Where will interest rates? What would be what if inflation is persisted? All one has to do is Google the history of the Fed's funds rate and zoom into the 70s and 80 80s and look how many times the Federal resolve Reserve brought inflation under control? Yes, yes, Mr CEO Let's completely ignore that. In the 70s, we left the Gold Standard and we let inflation expectations on anchor and the FED had a start stop mentality that led to a lack of confidence for the Federal.

Reserve. Let's completely ignore those things. and let's just talk about the fear of the 70s and 80s. How basically we have to not spend money anymore because we don't know what's around the corner.

This is literally a CEO that wakes up. It probably loses sleep at night and then wakes up in the morning trembling that this company is going to poopsie doopsy. This is Restoration Hardware by the way, and I mean if you just look at their earnings, uh, right here you can see their margins are starting to get hit. You know, over here on the right side you've got uh, their past margins and their income from operations at 14.5 percent, Way down from the over 20 percent we used to.

Uh, see, their net income is down about an average of about three percentage points over here compared to the Past reporting quarters. So you could tell there's probably there's a numbers reason why as well. But let's keep going with what he's saying because he starts getting a little angrier. There's not.

There's not. Oh my. God Hello grammar. Uh, there are not many people Do you know they should really have a word thereer right? Like it should be there Like that.

That should be a word. It should be pronounced there. There are not many people on the planet see that would be good grammar. A shortening of there are, but that's how it should be written, but that doesn't exist.

Instead, people get lazy and then they just say theirs because there's no contraction for there are. That's kind of weird, isn't it? Uh, anyway. uh, in in this context. Okay, so continuing.

uh I don't know why we go on these grammar tangents. There's there are not many people on the planet in levels of authority and responsibility that we're old enough to experience those times. And I Think having a conservative you and being prepared, having a strong balance sheet and trying to see the whole board and all the moves is basically prudent. Okay, that's fine.

So he's making the argument that we're so scared at. Restoration Hardware We're gonna basically compare this to the 70s and 80s and and try to buckle up as much as possible, which is not a bad idea. It is not a bad idea to say uh, hey, let's let's pause. uh and let's make sure we can reign in to make sure we're not running away and spending all of our money and not being conservative to where.

Then we have to get emergency that debt right? That would be very bad. I'm sorry if you're sending me promotional emails every day, uh, if not every day, multiple times a day calling them different things, you want to call your promotion something different. That's interesting. He's starting his little lash out right now.

We're not pushing the Panic buttons on promotion I wouldn't call it Panic kind of promotions. It's really trying to hang on to the illusion of where the business was in the pandemic, right? Okay, now this one's pretty emotional. But before we keep going I Want to bring up a short form our sponsor for the video thank you to a short form Meet Kevin is the code you want to use to get 20 off. crash that it's actually 25 off I Negotiated a higher discount for you 25 off.

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Go to Shortform.com Meet Kevin and you'll get a special discount. You not like it's on promotion I wouldn't call it Panic kind of promotions. It's really trying to hang on to the illusion of where the business was in the pandemic, right? So in other words, he's starting to elude to how they are different from other businesses. They're saying we're not going to do promotions because we're Restoration Hardware and we're fancy and better than promotions.

And then he's starting to compare to other businesses that are sending promotional emails every day, sometimes multiple times a day. He could smell the fear that other companies because they're freaking out and they got to get more sales. Well take a look at this. I Have never ever seen a CEO pull this one.

So listen to this. So and that's even in this environment and the product that's on its way is by far the best work we've done talking up their business. Okay, great how they're not how they have a value proposition. and they don't have to send all these disruptive promotions to people that are below us.

Uh, it is. Wait, what? And I think that will be disruptive not only to the high end. it's going to be disruptive to the people that are below us in the market just because we have the scale to buy in stock inventory and many people don't. In other words, you really have a CEO who's literally like we don't spam people with promotions.

We aren't going to be suffered like the people who are below us because we are the high-end Corporation and then listen to this literally goes on to name a company by name and bag on them. You ready for this? Here we go: the platforms that are out there today. whether it's a Wayfair or others again I Understand they don't take the position we have on inventory so they can't really Buy in volume because they're the poppers. they're the poor normies.

So continuing with the quote here. So they because they can't buy in volume, they can't drive efficiency. So a lot of people say well, aren't you worried about platform So I think platforms ought to be worried about us. You know, like those website platforms they should be worried about Restoration Hardware There's not a lot.

There's not a platform that made a dollar yet or anything. I mean Wayfair made money during the peak of the pandemic for God's sake? No and look May Wayfair Be able to hike their prices and make it I don't know. All I know is we've got a really great model we've got I think the most compelling Vision in the industry. The guy is literally dumping on Wayfair saying they only made money during the pandemic.

and basically Restoration Hardware is so much better because they have scale and and they have a reputation and they have a brand and uh, but at the same time we're worried about the 1970s recession and we're worried that. Listen to this. I Think it's more uncertain today than 2008 and 2009. if you didn't have the inflation problem that we had today and you didn't have the political unrest, maybe it would be interesting.

but but you do. And so, uh, if there isn't a complete crash, uh, which a complete crash would look like the 70s or 80s, which would ultimately mean it would take over a decade to recover from the recession. Uh, then then maybe we could pray for not a complete crash. But this is what we want to prepare for.

So I kid you not, Restorations Hardware CEO is losing his sh9t. He is literally losing it. lashing out at the competition, lashing out at promotional emails and lashing out that basically we're walking into the 70s and 80s and as a result, they're going to pull back on spending. That's crazy.

So look at this in a typical environment in a slowing. Market There's usually one thing to hit us at once, but multiple things are hitting us at once. Now look at this. Listen to this.

Yeah. I Think you've got. you've got about a 20 margin floor. Not in the worst housing market though.

Right now, we're in the worst luxury housing market I've ever seen The one of the worst housing markets anybody has ever seen. I think in the third quarter luxury housing Fourth Quarter luxury. If you think about where luxury housing has been, it was down eighteen percent of the first quarter, down 28 in the second quarter, down 38 in the third quarter, and now reportedly down 45 percent in the fourth quarter. Which means because you're talking about months, they're kind of going down.

It probably means the last month of the fourth quarter was down close to 50 percent. Damn, you've got the refinance Market which nobody's refinancing so nobody's able to buy new furniture. And that means the Market's really down like 80 or 90 or 70 or 80 percent. Oh man, this is by far the most comical, but also kind of scary earnings call I've ever seen.

This is the CEO of Restoration Hardware But then, But then listen to this. We're cutting through the noise. That's what we're doing. We're not panicked, we're not nervous, joke ever.

And that then he even. he even goes on to say this, do I wish yelling, we'll just tell everybody we're gonna backstop everybody's savings and dance. In other words, do I Wish we could just go back to the stimulus days of course. but I think instead, we might be facing more of the 1970s.

This is by far. uh uh, the uh I I Don't know whether to be to be scared, uh or or to think the guy has just lost it Now after I went through the earnings call I took the entire script, the transcript and I put it into chat. GPT and I asked Chachi P some questions about it I asked Champion chatgpt specifically hey, does the housing market affect Restoration Hardware and it replied, of course it does well. Essentially, it said yes.

the CEO suggests the housing market is affecting Restoration Hardware He mentions that the luxury housing market has experienced a record falloff which has impacted their business. He also mentions that when the housing market is down, it takes about three months for it to completely hit them and for that damage to settle in. I Thought that three-month delay was actually pretty insightful. I personally missed that in the transcript.

He also talks about how building a luxury brand takes time. now. a chat GPT refused to imply that this CEO was bashing Wayfair He says that a Wayfarer is not implied illicitly discounting I Kind of think that's pretty much exactly what the CEO here was saying just saying in a different area. So maybe that's where artificial intelligence just not yet is in the context awareness space.

Like if you go from talking about how bad discounting is, making fun of people who are discounting and then all of a sudden you talk about Wayfair who did great during the pandemic. the AI is not realizing. Okay, he. come on, it's a direct slam.

Okay, it's basically a direct slam. so it's kind of interesting to test the chat. GPT and what I did with this is I read it first obviously I made my commentary first and then after all of that I put this all into chat Jpt Uh, I even tried asking chat GPT to see if I could trip it up. Hey, did the CEO make fun of anyone? No, they just talked up their own strengths.

Okay, all right, Chachi PT So there were some things that chat GPD found specifically that three month lag time that I missed. but when it came to that actual human element, that implication element tragic didn't quite get there yet. So if you found this video helpful, make sure you check out the link down below shortform.com Meet Kevin It's a phenomenal product. Yes, it is a paid a partnership and of course that link is right next to the programs on building your wealth link down below.

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