News Releases

Printer Friendly Version View printer-friendly version
<< Back
Restoration Hardware, Inc. Reports Fourth Quarter and Full Year Profitability
             Comparable store sales for the quarter increase 5.7%

            Direct-to-Customer sales for the quarter increase 51%

      EPS of 28 cents for the quarter versus 21 cents a year ago, up 33%
 EPS of 4 cents for the full fiscal year versus a net loss of 8 cents a year
                                     ago

CORTE MADERA, Calif., March 31 /PRNewswire-FirstCall/ -- Restoration Hardware, Inc. (Nasdaq: RSTO) today announced its financial results for the fourth quarter and fiscal year ended January 29, 2005, including the following:

    -- Net revenue increased 14% to $187.9 million for the fourth quarter of
       fiscal 2004, versus net revenue of $165.0 million for the same period
       last year.
    -- Comparable store sales increased 5.7% for the fourth quarter of fiscal
       2004, which reflects a holiday comp sales increase of 3.1% and a
       January comp sales increase of 20.7 %.
    -- Direct-to-customer revenue increased 51% to $40.1 million for the
       fourth quarter of 2004, on top of a 51% increase in the same period in
       the prior year.
    -- Operating earnings were $17.2 million for the fourth quarter of fiscal
       2004, up 23% compared to operating earnings of $13.9 million in last
       year's fourth quarter.
    -- Net income for the fourth quarter of fiscal 2004 was $10.6 million,
       $0.28 per share, as compared to net income of $8.0 million, $0.21 per
       share, in the fourth quarter of the prior year.
    -- Full year net income was $1.7 million, $0.04 per share, as compared to
       a net loss of $2.5 million, ($0.08) per share.

As previously announced, the Company will restate its fiscal 2003 and prior years' financial statements to give effect to a correction in the Company's lease accounting practices. All references to financial results in this press release give effect to the anticipated impact of the restatement which the Company expects to complete as part of the filing of its 10-K for the year ended January 29, 2005. The restatement will also include a reduction in equity in the Company's balance sheet as of January 31, 2004 to correct an error of approximately $650 thousand relating to the Company's tax provision calculation for 2001. In addition, during the fourth quarter of fiscal 2004, the Company completed its annual evaluation of previously established tax valuation allowances and identified necessary income tax contingencies. The effect of that review was to reduce its tax provision for the fourth quarter and the year.

Gary Friedman, the Company's President, CEO, and Acting Chairman stated, "We are pleased to report a comparable store sales increase of 5.7% for the fourth quarter and a 7.8% increase for the full fiscal year despite a difficult retail environment for home retailers. In addition, our Direct-to- Customer business increased 51% for the fourth quarter and 75% for the full year, on top of a 52% increase in fiscal 2003."

Mr. Friedman continued, "We are also pleased to report our first full year of profitability since 1998, the year in which the Company went public. While this is a key milestone, it merely represents the first of many important steps to transform Restoration Hardware into a high performance home furnishings brand that will stand the test of time. As we look forward, we are excited about both the continued initiatives to further evolve the brand, and our investments in operational leadership to enhance the customer experience and drive improved bottom line performance."

For the year ended January 29, 2005, net revenue was $525.8 million, a 20% increase versus a year ago. Comparable store sales for the full year increased 7.8% on top of a 5.2% increase for the last fiscal year. Direct-to-customer sales increased 75% to $119.0 million on top of a 52% increase a year ago.

Operating income for fiscal 2004 was $4.1 million versus a loss from operations in fiscal 2003 of $1.9 million. The Company's net income for the year ended January 29, 2005 was $1.7 million, $0.04 per share, as compared to a net loss of $2.5 million, ($0.08) per share, for fiscal year 2003.

At the end of fiscal 2004, inventory was $144 million as compared to fiscal 2003 ending inventory of $103 million. The higher level of inventory is in support of higher sales levels as well as the earlier timing of inventory purchases to support the Company's outdoor furniture program, including shipments in transit. The Company received the outdoor furniture shipments early to ensure solid in stock positions for the spring selling season. By the end of the first quarter, inventory levels are expected to be 15 to 20 % higher than the prior year's first quarter, which is in line with higher sales levels.

The Company provides the following guidance for fiscal 2005 (which excludes the impact of a change in accounting for stock options in accordance with the provisions of SFAS 123R):

    -- Increase in comparable store sales in the low to mid single digits for
       the full year.
    -- Direct-to-customer net revenue increase of 25% to 35%.
    -- Operating margins of 2 to 3 percent for the full year.
    -- Inventory at year end is projected to be relatively flat compared to
       fiscal 2004 levels.
    -- First quarter of fiscal 2005 results are expected to be a net loss in
       the range of $0.10 to $0.11 per share with an expected basic share
       count of 33.2 million shares.

    Conference Call:
    The Company's fourth quarter and full fiscal year 2004 earnings conference
call is scheduled for Thursday, March 31, 2005 at 5:00 p.m. Eastern Time. The
dial-in number is 800-689-5991.  A live webcast is available at
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=79100&eventID=1043120. If you are unable to participate during
the live webcast, a playback of the conference call will be available via the
Internet at
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=79100&eventID=1043120 beginning at 7:00 p.m. Eastern Time on
Thursday, March 31, 2005.  A webcast replay of the call will be available at
www.restorationhardware.com under "Company Info-Investor Relations-Event
Calendar" or by dial-in (800-938-1602) until April 14, 2005.

About Restoration Hardware, Inc.:

Restoration Hardware, Inc. is a specialty retailer of high quality home furnishings, bath fixtures and bath ware, 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. As of March 31, 2005 the Company operated 102 retail stores and two outlet stores in 30 states, the District of Columbia and Canada.

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 fourth quarter and fiscal year ended January 29, 2005, statements concerning guidance for the full year of fiscal 2005 and the quarterly periods therein, statements relating to improved performance in future periods, statements regarding expected sales levels, statements regarding anticipated future inventory levels and the matching of inventory levels sales and anticipated sales, statements relating to the long-term status of the Company, statements regarding the expected benefits of investments in management and initiatives to evolve the Company's brand, and other statements containing words such as "plans," "estimates," "expects," 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, customer reactions to the Company's current and anticipated merchandising and marketing programs and strategies, customer reactions to the Company's outdoor furniture, timely introduction and customer acceptance of the Company's merchandise, positive customer reaction to the Company's catalog and Internet offerings, revised product mix, prototype stores and core businesses, 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, actual achievement of cost savings and improvements to operating efficiencies, effective sales performance, in particular during the holiday selling season, the actual impact of key personnel of the Company on the development and execution of the Company's strategies, 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 political conditions in the United States and abroad 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-Q for the quarter ended October 30, 2004 in Part I, Item 2 thereof ("Management's Discussion and Analysis of Financial Condition and Results of Operations") under the captions "Expenses," "Liquidity and Capital Resources" and "Factors that May Affect our Future Operating Results." 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
                                                % of      1/31/2004     % of
                                    1/29/2005  Revenue  (as restated)  Revenue

    Retail net revenue               $147,739   78.6%     $138,394     83.9%
    Direct-to-customer net revenue     40,119   21.4%       26,561     16.1%
      Total net revenue               187,858  100.0%      164,955    100.0%

    Cost of revenue and occupancy     119,921   63.8%      105,820     64.2%
      Gross profit                     67,937   36.2%       59,135     35.8%

    Selling, general and
     administrative expenses           50,740   27.0%       45,196     27.3%
      Income from operations           17,197    9.2%       13,939      8.5%

    Interest expense, net                (799)  (0.5%)        (480)    (0.3%)

      Income before income taxes       16,398    8.7%       13,459      8.2%

    Income tax expense                 (5,817)  (3.1%)      (5,485)    (3.4%)

    Net income                        $10,581    5.6%       $7,974      4.8%

    Earnings per common share, basic    $0.32                $0.24
    Earnings per common share, diluted  $0.28                $0.21
    Weighted average shares, basic     33,049               32,753
    Weighted average shares, diluted   38,135               37,943

    Comparable store sales               5.7%                 0.7%
    Retail stores open at end of period   102                  103
    Total selling square footage, end
     of period                        676,520              679,300


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


                                       52 weeks ended       52 weeks ended
                                                  % of    1/31/2004     % of
                                     1/29/2005  Revenue (as restated)  Revenue

    Retail net revenue                $406,833   77.4%     $370,609     84.5%
    Direct-to-customer net revenue     118,990   22.6%       67,899     15.5%
      Total net revenue                525,823  100.0%      438,508    100.0%

    Cost of sales and occupancy        359,808   68.4%      305,265     69.6%
      Gross profit                     166,015   31.6%      133,243     30.4%

    Selling, general and
     administrative expenses           161,939   30.8%      135,118     30.8%
      Income (loss) from operations      4,076    0.8%       (1,875)    (0.4%)

    Interest expense, net               (2,472)  (0.5%)      (2,154)    (0.5%)

      Income (loss) before income taxes  1,604    0.3%       (4,029)    (0.9%)

    Income tax benefit                     100    0.0%        1,511      0.3%

    Net income (loss)                   $1,704    0.3%      $(2,518)    (0.6%)

    Earnings (loss) per common
     share, basic                        $0.05               $(0.08)
    Earnings (loss) per common share,
     diluted                             $0.04               $(0.08)
    Weighted average shares, basic      32,940               30,873
    Weighted average shares, diluted    38,183               30,873

    Comparable store sales                7.8%                 5.2%
    Retail stores open at end of period    102                  103
    Total selling square footage, end
     of period                         676,520              679,300


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

                                                                   1/31/2004
                                                      1/29/2005  (as restated)

    ASSETS
    Current assets:
      Cash and cash equivalents                         $1,904       $2,003
      Accounts receivable                                6,945        5,745
      Merchandise inventories                          144,185      102,926
      Prepaid expense and other current assets          19,574       15,670
        Total current assets                           172,608      126,344

      Property and equipment, net                       81,886       83,518
      Goodwill                                           4,560        4,560
      Deferred tax asset, long-term portion             18,745       18,051
      Other long-term assets                             1,464        1,422
        Total assets                                  $279,263     $233,895

    LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
     STOCK AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued expenses            $63,920      $45,292
      Line of credit, net of debt issuance costs        33,819       10,286
      Deferred revenue and customer deposits             8,130        7,231
      Other current liabilities                         14,948       11,438
        Total current liabilities                      120,817       74,247

      Deferred lease incentives                         30,365       33,999
      Deferred rent                                     20,321       20,224
      Other long-term liabilities                          143          352
        Total liabilities                              171,646      128,822

    Series A redeemable convertible preferred stock      8,331        8,541

    Common stock                                             3            3
    Additional paid in capital                         159,233      158,174
    Unearned compensation                                   --         (234)
    Accumulated other comprehensive income                 812        1,055
    Accumulated deficit                                (60,762)     (62,466)
        Total stockholders' equity                      99,286       96,532

        Total liabilities, redeemable convertible
         preferred stock and stockholders' equity     $279,263     $233,895

    Common stock issued and outstanding at end of
     period                                             33,084       32,768
SOURCE  Restoration Hardware, Inc.
    -0-                             03/31/2005
    /CONTACT:  Patricia McKay, Executive Vice President, Chief Financial
Officer, of Restoration Hardware, Inc., +1-415-924-1005/
    /Web site:  http://www.restorationhardware.com /
    (RSTO)

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

JO
-- SFTH070 --
0043 03/31/2005 16:04 EST http://www.prnewswire.com