Gary Friedman: Restoration Hardware's savior has bigger plans

October 26, 2013

There is the RH catalog or "source book," thicker than the September issue of Vogue. There is the hillside home in Belvedere, where everything is beautiful, symmetrical and in pairs - right down to the framed pictures of twin daughters. Then there is the man behind the catalog and home, Restoration Hardware's poster boy and creative force himself, Gary Friedman, 56, in a T-shirt, artfully distressed jeans, belt, boots and leather wristbands.

But go back five decades and there is Gary Friedman, the child: His father died when he was 5. His mother, Angelina, one of the loveliest and happiest people he says he's ever known, battled schizophrenia, leaving Friedman to fend for himself at times. The two lived on welfare and food stamps in San Francisco and Sonoma, and moved 21 times before Friedman was 18. His idea of furniture was their one coffee table that his mom would dress up with Con-Tact paper, one month a green marble look, the next a wood veneer.

"I was the young guy who didn't know what couldn't be done," Friedman said of his career. He has gone from stock boy at Gap to president of Williams-Sonoma to chairman and CEO of the Corte Madera high-end home furnishings company Restoration Hardware, with 70 retail stores throughout the United States and Canada, and adjusted net income of $22 million for the first six months of this year compared with $11 million over the same period last year.

"His success has surprised me," said Millard Drexler, Friedman's onetime mentor who was head of Gap and now runs J. Crew. "He took a substantial risk with a major reinvention of Restoration Hardware. He basically took a moribund business and made it a relevant business."

Expanding the brand

Friedman, who took over Restoration Hardware in 2001 when it was on the verge of bankruptcy, is continuing the risk taking, expanding Resto - as insiders call it - into a lifestyle brand, curating music by emerging artists, launching a clothing line, buying contemporary art pieces (including "Rain Room," which Friedman bought and then loaned to New York's Museum of Modern Art for an exhibition that drew more than 70,000 people over the summer), opening art galleries and repurposing historic buildings.

In San Francisco, Friedman has proposed an adaptive reuse of the former Exploratorium site at the Palace of Fine Arts. In it, he hopes to create an indoor public park and cafe, a retail space, a contemporary art museum, a performing arts theater and, possibly, a small RH "guest house," the company's version of a boutique hotel, complete with a green roof to grow food for on-site use. It would also be the official home of "Rain Room," the immersive art piece where rain falls everywhere except on visitors as they walk through the space. The RH proposal and plan are before the city's Recreation and Park Department.

"The jury is out on the expansion" of Restoration Hardware, said Drexler. "I like businesses that are incredibly focused. Having said that, Gary takes calculated risks. And I wouldn't bet against him."

Setbacks and successes

Friedman's career has not been without its missteps. In August 2012, three months before RH was about to go public, news surfaced that he was having a relationship with a 26-year-old employee. The RH board determined he was having an inappropriate relationship with a subordinate, and Friedman - who had long been divorced from his wife, Kendal Agins Friedman - was asked to step aside as co-CEO and given the titles chairman emeritus, creator and curator. Friedman never actually left the company, but served in different roles. He was reinstated in July as co-chief executive and chairman - and kept the titles of creator and curator.

Friedman said the female employee has since left RH. He explained the situation: "We were getting ready to go public and I had started dating a woman I met at work. She had an ex-boyfriend. They had dated for four to six months. This person decided to make my life miserable. He threatened my life. I had 24-hour armed security for three months. We were going to take the company public and all of a sudden this person was making threats and trying to create bad press. The board and I thought it would be best for me to step aside through the storm to get the company public."

Friedman accepts the setbacks with the successes. "Stuff happens in life," he said. "It's not what happens to you but how you deal with it."

Throughout life's challenges, Friedman has "dealt with it," by working hard and with intense focus.

Stock clerk to manager

Friedman landed his first job as a stock clerk at Gap in 1977. He was attending Santa Rosa Junior College and struggling with a D-minus average when he saw a new Gap store was opening in the mall. He was first in line, completed application in hand, and dressed head-to-toe in Gap clothing. He got the job.

"I liked the camaraderie and being a part of a team, and I was getting better feedback there than I ever had in school," Friedman said, sitting in his home in Belvedere. He dropped out after his first year of college, and increased his hours at Gap, going from stock boy to salesperson to junior assistant manager.

"I was making $4.10 an hour and thought I was rich," he said. "On days off, I'd go to the store at corporate headquarters and fold clothes and clean up. One day I was doing that and someone said that the new guy, Mickey Drexler, is having a town hall in the lunchroom." Friedman joined the large group and found himself impressed by the company's new CEO. When Drexler asked questions, Friedman raised his hand to answer.

"That's exactly what we oughta be f- doing," said Drexler, known for his colorful language. From that day on, Drexler invited Friedman - managing the Market Street store - to sit in on select board meetings and give feedback on what was going on at the store level. By 1988, Friedman had risen to regional manager in Los Angeles, overseeing 63 stores.

Williams-Sonoma calls

"I remember getting a call from a recruiter looking for a senior vice president at Williams-Sonoma," Friedman said. "I was 29, turning 30. I wanted to get back to the Bay Area. I thought I'd go on a practice interview. I really hit it off with the recruiter. He had me meet with (Williams-Sonoma CEO) Howard Lester, and Howard made me an offer I couldn't refuse." He was hired as senior vice president of stores and operations.

"I knew nothing about the kitchen business," said. "We had 40 to 50 (Williams-Sonoma) stores and about 20 Pottery Barn stores."

A few years later, in 1992, when the company was struggling, Lester came to Friedman and said he was making him president of both Williams-Sonoma and Pottery Barn. Within a year, Friedman was named executive vice president of Williams-Sonoma Inc.and president of the Williams-Sonoma and Pottery Barn brands.

"I'd never been a merchant. I'd never bought anything. I'd never even been to Europe!" Friedman said. "But, I always had a point of view about how it should be merchandised and a pretty developed way of thinking about the business. Still, there was a lot I didn't know. I remember falling asleep at 3 in the morning with these big merchandise reports on my lap."

'Total heartbreak'

Friedman spent 13 years at Williams-Sonoma, taking it from $300 million to $2.1 billion in revenue, and Pottery Barn from a $50 million business to a $1.2 billion business. He left after being passed over for CEO by Lester.

"It was a total shock, a total heartbreak," Friedman said, noting that Lester had told him for years that he would be the company's next CEO. "I remember Howard saying, 'Now don't do anything emotional. You've got $50 million in stock options you can't walk away from.' I was hearing him talk but I was almost in a dream."

That night, Friedman drove home along Chestnut Street - where he had opened a Williams-Sonoma store and Pottery Barn - and turned left on Steiner.

"There was the low fog and it was a kind of eerie night," he said. "I looked at this billboard with this typewriter quote that said, 'He who dies with the most toys is still dead.' I had an epiphany: It's not about the money. I knew in that moment that if I stayed, it would be for the money."

Friedman made a call to Stephen Gordon, the head of a company he had studied for a possible acquisition while at Williams-Sonoma. It was Restoration Hardware, whose stock had gone from $37 per share to 50 cents per share and was on the verge of bankruptcy. Gordon said Restoration would love to have Friedman on board, but "the banks have a gun to our head and could push us into bankruptcy at any time. Can you raise money?"

Friedman said he could. Shortly after leaving Williams-Sonoma (he was sued by the company for taking 11 of its executives with him), Friedman raised $15 million, which included $4.5 million of his own money, to give the company a cash infusion and stave off the banks.

More than a turnaround

"I saw an opportunity to build a new brand," Friedman said. "It was not a turnaround, because Restoration Hardware never worked. They went public in 1998, and never made money. It didn't carry enough of anything to stand for anything."

Friedman paused from lunch to reach into his briefcase, pulling out Restoration Hardware's Spring 2001 catalog. "Fifty percent of the business was nostalgic, kitschy, tchotchke items."

He recalled walking through the Restoration Hardware store in Berkeley. It was April 2001 and he had his team with him to go over inventory. About two-thirds of the way through the store, Friedman spotted Santa Claus figurines and thought, "Oh my God, we still have Santa Claus in April and they haven't taken markdowns. This is worse than I thought." He asked, "Why do you still have Santa Claus from Christmas?"

Friedman was told it wasn't Santa Claus. "I said, 'I'm half Jewish, but I do know what Santa Claus looks like.' " The figure was an "Aqua troll," a lawn ornament whose head bobs when connected to a sprinkler. Friedman asked why the store sold Aqua trolls, and he was told, "Because they're funny." Friedman shook his head no. "From now on, funny is no longer a brand attribute."

Friedman returned the catalog to his briefcase and said, "The troll went quickly." He spent the next six years remaking the business, slowly and methodically getting rid of the novelty items and bringing in furniture, linens and lighting.

'We ... enable the magic'

One of the key strategies that set RH apart is its approach to inventory. While most retailers design things in-house, RH created a different model.

"We have one full-time designer," Friedman said. "We are more curators than we are retailers. We find artists we love and 'curate' that person. We source the world. We try to find the magic, and enable the magic."

"This has been a real fight," Friedman said of RH, the company's rebranded name. "At any point during the early years, any missed move and we would have gone bankrupt. People always said, 'You're crazy for trying this' and 'It can't be done.' "

Now his mother, who's in an elder care facility close to Friedman's home, likes to brag about her son to other residents every time he visits.

Looking around his house, with its expansive view of San Francisco Bay, Friedman reflected, "Most of my life I felt like I've been in over my head. I'm a really good underdog. I had to work really hard to prove myself, to prove I was worthy."