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Restoration Hardware, Inc. Reports First Quarter 2003 Results

CORTE MADERA, Calif., May 21 /PRNewswire-FirstCall/ -- Restoration Hardware, Inc. (Nasdaq: RSTO) today reported net sales for the first quarter of $81.8 million, an 18% increase versus net sales of $69.4 million for the same period a year ago. Comparable store sales for the first quarter increased 11.9%. Direct-to-customer sales, which include catalog and Internet, increased 72% to $11.3 million in the first quarter.

(Logo: http://www.newscom.com/cgi-bin/prnh/19990902/RSTOLOGO )

The Company's operating loss for the quarter was $8.1 million, versus an operating loss of $16.6 million in the first quarter last year. The Company reported a net loss available to common stockholders of $5.2 million, or $0.17 per share for the first quarter, versus a net loss available to common stockholders of $7.5 million, or $0.25 per share in the first quarter a year ago. The Company's prior year first quarter results included $4.0 million of one-time additional income tax benefits, as a consequence of the economic stimulus bill enacted March 9, 2002.

Gary Friedman, the Company's President and CEO stated, "We are pleased with our results in this past quarter. We significantly reduced our losses versus a year ago, and exceeded our previous earnings guidance of a loss of $0.20 to $0.22 per share, despite a difficult retail environment."

Mr. Friedman continued, "Our comparable store sales increase of 17.6% in April, on top of a double-digit increase in the April period a year ago, demonstrates that our new strategy is being embraced by our customers. Despite the recent positive sales trends, we believe it remains prudent to plan conservatively within the current economic climate. Looking forward, we are planning second quarter comparable store sales to increase in the mid single digits, and forecasting a loss of $0.09 to $0.11 per share for the quarter, versus a loss of $0.13 per share in the second quarter a year ago. For the year, we are maintaining our previous guidance for operating margins in the range of 1% to 2% of sales."

As of May 3, 2003 the Company operated 105 retail stores in 31 states, the District of Columbia and Canada.

Conference Call:

The Company's first quarter earnings conference call is scheduled for Wednesday, May 21, 2003 at 2:00 p.m. (Pacific Daylight Time). The dial-in number is 1-800-362-0571. A live webcast of the call is available at http://www.firstcallevents.com/service/ajwz38215668gf12.html. A webcast replay of the call will be available at www.restorationhardware.com under "Company Info - Investor Relations" until May 21, 2004.

About Restoration Hardware, Inc.

Restoration Hardware, Inc. is a specialty retailer of home furnishings, functional and decorative hardware and related merchandise that reflects the Company's classic and authentic American point of view. Restoration Hardware, Inc. sells its merchandise offering through its retail stores, catalog (800-762-1005) and on-line at www.restorationhardware.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act

of 1995:

This release contains forward-looking statements that involve known and unknown risks. Such forward-looking statements include, without limitation, statements concerning or relating to implications of the Company's financial results for the first quarter ended May 3, 2003, statements regarding implications of the Company's new strategy, statements reflective of financial guidance for the Company for the second quarter of fiscal 2003 and for the entire fiscal year of 2003, and other statements containing words such as "believes," "anticipates," "estimates," "plans," "forecasts," "expects," "may," "intends" and words of similar import or statements of management's opinion. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, including financial results, market performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause such differences include, but are not limited to, finalization of financial results for the first quarter ended May 3, 2003, customer reactions to the Company's current programs and strategies, timely introduction and customer acceptance of the Company's merchandise, further customer acceptance of the Company's private label credit card, timely and effective sourcing of the Company's merchandise from its foreign and domestic vendors and delivery of merchandise through its supply chain to its stores and customers, effective inventory and catalog management, changes in investor perceptions of the Company, fluctuations in comparable store sales, limitations resulting from restrictive covenants in the Company's credit facility, changes in economic or business conditions in general, changes in product supply, changes in the competitive environment in which the Company operates, changes in the Company's management information needs, changes in customer needs and expectations, governmental actions and other factors detailed in the Company's filings with the Securities and Exchange Commission, including its recent filings on Forms 10- K, 10-Q and 8-K, including, but not limited to, those described in the Company's Form 10-K for the fiscal year ended February 1, 2003 in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the captions "Liquidity and Capital Resources" and "Critical Accounting Policies," in "Business" under the caption "Factors that May Affect our Future Operating Results" and in "Controls and Procedures." Guidance offered by the Company represents a point-in-time estimate made by management of the Company. The Company undertakes no obligation to update any guidance or any other forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

                        RESTORATION HARDWARE, INC.
             STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
               (in thousands except per share and store data)

                               13 weeks ended              13 weeks ended
                            5/3/03    % of sales       5/4/02    % of sales

    Net sales              $81,766        100.0%      $69,377        100.0%
    Cost of sales
     and occupancy          61,825         75.6%       58,489         84.3%
     Gross profit           19,941         24.4%       10,888         15.7%

    Selling, general
     and administrative     28,029         34.3%       27,458         39.6%
     Loss from operations  (8,088)         -9.9%     (16,570)        -23.9%

    Interest expense, net    (562)         -0.7%        (493)         -0.7%
    Change in fair value
     of warrants                --          0.0%        (278)         -0.4%
     Loss before
      income taxes         (8,650)        -10.6%     (17,341)        -25.0%

    Income tax benefit       3,460          4.2%       10,248         14.8%

    Net loss               (5,190)         -6.3%      (7,093)        -10.2%

    Preferred
     shareholder return:
     Dividends                  --          0.0%        (358)         -0.5%
     Beneficial conversion
      charges                   --          0.0%           --          0.0%

    Loss available to
     common stockholders  $(5,190)         -6.3%     $(7,451)        -10.7%
    Stores open at
     end of period             105                        105

    Total selling
     square footage        688,634                    688,634

    Loss per share,
     basic and diluted     $(0.17)                    $(0.25)

    Weighted average shares 30,052                     29,246



                         RESTORATION HARDWARE, INC.
             CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                               (in thousands)

                                                 May 3, 2003    May 4, 2002

    Current assets
     Cash                                             $1,814         $2,225
     Accounts receivable                               3,989          5,007
     Merchandise inventories                          99,702         77,982
     Prepaid expense and other current assets         11,123         16,393
      Total current assets                           116,628        101,607

    Property and equipment, net                       86,023         96,760
    Goodwill                                           4,560          4,560
    Other long term assets                            22,953         20,096

     Total assets                                   $230,164       $223,023

    Current liabilities
     Accounts payable and accrued expenses           $33,061        $46,494
     Deferred revenue                                  5,073          3,623
     Revolving line of credit, net of
      debt issuance costs                                  0          8,475
     Other current liabilities                         8,659          8,966
      Total current liabilities                       46,793         67,558

    Long term line of credit, net of
     debt issuance costs                              27,250              0
    Deferred lease incentives                         37,290         41,903
    Deferred rent                                     14,324         13,100
    Other long term obligations                          109            142
     Total liabilities                               125,766        122,703

    Series A redeemable preferred stock               13,328         13,529

    Common stock                                     151,938        148,686
    Stockholder loan                                      --        (2,050)
    Unearned compensation                              (534)        (1,000)
    Accumulated other comprehensive income               211            146
    Accumulated deficit                             (60,545)       (58,991)
     Total stockholders' equity                       91,070         86,791

     Total liabilities, redeemable preferred
      stock and stockholders' equity                $230,164       $223,023 
SOURCE  Restoration Hardware, Inc.
    -0-                             05/21/2003
    /CONTACT:  Kevin W. Shahan, Vice President and Chief Financial Officer of
Restoration Hardware, Inc., +1-415-924-1005, or fax, +1-415-945-4679/
    /Photo:  NewsCom:  http://www.newscom.com/cgi-bin/prnh/19990902/RSTOLOGO
              AP Archive:  http://photoarchive.ap.org
             PRN Photo Desk, 1-888-776-6555 or +1-212-782-2840//
    /Web site:  http://www.restorationhardware.com /
    (RSTO)

CO:  Restoration Hardware, Inc.
ST:  California
IN:  REA
SU:  ERN ERP CCA



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1753 05/21/2003 16:01 EDT http://www.prnewswire.com