Restoration Hardware has cleaned up its house, and Wall Street wants inside.
Shares of the home-decor retailer climbed $7.10, or 30 percent, to close at $31.10 on their first day of trading yesterday under the ticker symbol “RH.”
The scramble for shares came despite the abrupt departure in August of Gary Friedman as co-CEO following a board inquiry about his relationship with a 26-year-old female employee.
Friedman — a well-regarded merchant who has guided the chain during the past decade — said yesterday he will spend the “vast majority” of his time with Restoration Hardware, although technically he will do so as an outside consultant.
Known for chic leather sofas, ceiling fans and pricey tables made from salvaged wood, Restoration Hardware — which counts Williams-Sonoma and Ethan Allen as rivals — went public following a four-year turnaround effort under private-equity firm Catterton Partners.
During that time, red ink and slipping sales were replaced with profits and rising revenue.
Analysts took yesterday’s stock surge as a signal that investors have grown newly optimistic about the housing market, and that wealthy homeowners are poised to splurge on the company’s upscale wares.
Restoration Hardware late Thursday was valued at $887 million as it sold 5.2 million shares priced at $24, the high end of an expected range valuing the retailer at more than 25 times the past year’s earnings.
Proceeds of $124 million will be used to pay down debt taken on in the company’s leveraged buyout.
Catterton won Restoration Hardware in 2008 for $179 million — a slightly lower price than had been offered at the time by Sears.
The Corte Madera, Calif., company at the time cited “significant uncertainties” associated with the Sears bid.