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Why the mall isn't dead for Restoration Hardware

If you're writing up your shopping list of the top stocks to own for 2015, Restoration Hardware is near the top of Jim Cramer's list.

The "Mad Money" host was blown away when he listened to the stunning video conference call that this company had recently. Not only do they have gorgeous stores but they had astounding growth as well, announcing a 22 percent gain in same-store sales. They also talked about upping company revenues to $4 billion or $5 billion from $2 billion. Wow!

This company has become one of the best luxury home furnishings retailers, and it has gained the competitive edge by creating store displays that draw customers into the store to want to shop. Something Amazon can't even compete with.

With the stock up over 40 percent this year, Cramer spoke with Restoration Hardware CEO Gary Friedman to find out how he has created such incredible growth this year, and how the company will continue its run into 2015.





Restoration Hardware
Tony Avelar | Bloomberg | Getty Images

"So many people want to try to fit businesses into a simple model," Friedman said. "When you think about retail companies that are public, most of them start out very innovative and then they become a public company and they go from innovation to duplication because that's what Wall Street wants…If you're an innovator and you keep evolving your business, you've got to keep evolving your model."

With the tremendous sales growth that Restoration Hardware has had this year, its business model of creativity and innovation has led it to triumph in the retail world. While many stores are blaming low sales on slow mall traffic, Restoration Hardware has blown that notion out of the water.

The CEO explained the necessary humanization of retail that has brought them to the top of the food chain when he stated, "If you think about the retail stores that have been built over the last 30 to 50 years, most retail stores are archaic windowless boxes that don't have any sense of humanity. There are no windows, there's no fresh air, there's no natural light. Plants die in a typical retail store."

As for holiday shopping season, Friedman noted that the retail world is a battle every day. Every day and every minute counts, and they get their report cards at the end of the day and learn from there.

"Everyone is worried about the threat of online shopping—92 percent of retail sales are done in retail stores. 8 percent is done online—yet what nobody is talking about, is that all of the innovation and creativity is going online. There is a lack of imagination in retail, from my point of view."

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Cramer reminded investors that this innovation is the way a great stock works. Go to the store, watch the video and own the stock. It's the only way to play the game.

"It's not about Wall Street's spreadsheets, or Wall Street's numbers. It's about our performance. We are always unsatisfied, always on the move. We are completely allergic to doing the same thing over and over again," Friedman said.

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