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Restoration Hardware, Inc. Reports Third Quarter Results
                     Comparable Store Sales Increase 8.7%

                    Direct-to-Customer Sales Increase 78%

CORTE MADERA, Calif., Nov. 18 /PRNewswire-FirstCall/ -- Restoration Hardware, Inc. (Nasdaq: RSTO) today announced its financial results for the third quarter ended October 30, 2004, including the following:

     -- Net revenue increased 23% to $118.2 million for the third quarter of
        fiscal 2004 versus net revenue of $95.8 million for the same period
        last year.
     -- Comparable store sales for the third quarter of fiscal 2004 increased
        8.7%, on top of a 2.9% increase in the third quarter of fiscal 2003
        and 14.9% in the third quarter of fiscal 2002.
     -- Direct-to-Customer net revenue increased 78% in the third quarter, on
        top of a 46% increase in the same period a year ago.
     -- Operating results reflected a loss from operations of $4.5 million for
        the third quarter of fiscal 2004 versus a loss from operations of $4.2
        million for last year's third quarter.
     -- Net results for the third quarter of fiscal 2004 reflected a net loss
        of $3.1 million ($0.09 per share) as compared to a net loss of $2.9
        million ($0.09 per share) in the third quarter of the prior year.

Gary Friedman, the Company's President and CEO, stated, "Our efforts to reposition the Restoration Hardware brand continue to resonate with our customers as we generated another quarter of strong comparable store performance and Direct-to-Customer growth. Our comparable store sales increase in this year's third quarter of 8.7%, on top of an increase of 2.9% in 2003 and a 14.9% increase in 2002 represents compounded comparable store sales growth of 29% since the launch of our new merchandising strategy in 2002. These results combined with the Direct-to-Customer sales increase of 78%, on top of a 46% increase last year, clearly demonstrates the Company's ability to gain market share even during a difficult economic environment."

Mr. Friedman continued, "Although pleased with our overall sales performance and product margin expansion in the third quarter, we experienced higher than anticipated advertising, distribution, and Sarbanes-Oxley Section 404 compliance costs, which resulted in flat earnings per share for the quarter compared to last year. While making progress in improving execution in our distribution centers, identifying optimum catalog circulation strategies and improving internal controls, these items negatively impacted earnings in the quarter by approximately five to six cents per share.

     -- Advertising costs as a percent of net revenue were higher than
        expected in the quarter due to lower than anticipated Direct-to-
        Customer sales from prospecting and circulation expansion of our
        September catalog mailing.  We experienced a more significant fall off
        in sales demand from not repeating last year's Fall Furniture Sale.
        We have adjusted our mailing plans for the remainder of the year
        beginning with our October Catalog, and advertising costs as a
        percentage of net revenue are back in line with historical levels.
     -- During the quarter, the Company continued to make investments in its
        supply chain and distribution center operations. As previously
        communicated, the Company has hired a new Chief Operating Officer and
        has recently completed the search for its Senior Vice President of
        Supply Chain Operations. The Company has employed the services of
        outside consultants to manage its East and West coast distribution
        centers and related transportation network since the first quarter of
        2004. While significant improvement has been made to ensure the
        Company executes well in the important fiscal fourth quarter, we
        believe there is opportunity to significantly reduce costs throughout
        the supply chain and improve service to our customers."

Mr. Friedman added, "We are excited to have both of these executives on board. They fill the key open leadership roles that will enable us to both execute at a high level during the important fiscal fourth quarter and develop the long-term strategy to build a highly efficient supply chain infrastructure. In the short term, we believe there is opportunity to reduce expenses by improving labor productivity and eliminating outside consulting oversight of our distribution facilities."

For the nine months ended October 30, 2004, net revenue was $338.0 million, a 24% increase versus the same period a year ago. Comparable store sales for the nine months increased 9.0%, on top of an 8.0% increase in the first nine months last year. Direct-to-Customer net revenue increased 91% to $78.9 million for the nine month period, on top of a 53% increase in the same period a year ago.

The Company's net loss for the nine months ended October 30, 2004 was $9.1 million ($0.28 per share) and showed improvement over the nine month period a year ago when the net loss was $10.8 million ($0.36 per share).

The Company provides the following guidance for the fourth quarter of fiscal 2004:

     -- Increase in comparable store sales in the range of 5% to 7%.
     -- Direct-to-customer net revenue increase of 40% to 50%.
     -- Diluted earnings per share of $0.26 to $0.30 versus $0.21 a year ago.
     -- Inventory at year-end is projected to increase by approximately 20 to
        22% over the prior year-end level to support projected sales growth in
        the first quarter of fiscal 2005.

    Conference Call:

The Company's third quarter fiscal 2004 earnings conference call is scheduled for Thursday, November 18, 2004 at 5:00 p.m. Eastern Time. The dial- in number is 800-362-0571. A live webcast is available at http://phx.corporate-ir.net/playerlink.zhtml?c=79100&s=wm&e=967179 . 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/playerlink.zhtml?c=79100&s=wm&e=967179 beginning at 7:00 p.m. Eastern Time on Thursday, November 18, 2004. A webcast replay of the call will be available at www.restorationhardware.com under "Company Info-Investor Relations-Event Calendar" or by dial-in (888-566-0193) until December 3, 2004.

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 November 18, 2004 the Company operated 102 retail 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 revenues and financial results for the third quarter ended October 30, 2004, statements concerning guidance for the fourth quarter of fiscal 2004, statements relating to the achievement of cost savings and improvements to operating efficiencies, including with regard to labor productivity and distribution operations, statements relating to the impact on the Company of its retention of new operating leadership, statements relating to the timing and effect of the issuance of the Company's catalog, statements relating to the Company's anticipated sales and merchandising performance and efforts, statements relating to anticipated long term strategy of the Company, and other 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, 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 July 31, 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             % of
                                         10/30/04  Revenue 11/1/03  Revenue

    Retail net revenue                    $89,747   76.0%  $79,858   83.3%
    Direct-to-customer net revenue         28,418   24.0%   15,956   16.7%
        Total net revenue                 118,165  100.0%   95,814  100.0%

    Cost of revenue and occupancy          80,196   67.9%   67,027   70.0%
        Gross profit                       37,969   32.1%   28,787   30.0%

    Selling, general and administrative
     expense                               42,511   35.9%   33,031   34.5%
        Loss from operations               (4,542)  (3.8%)  (4,244)  (4.5%)

    Interest expense, net                    (737)  (0.6%)    (519)  (0.5%)

        Loss before income taxes           (5,279)  (4.4%)  (4,763)  (5.0%)

    Income tax benefit                      2,161    1.8%    1,905    2.0%

    Net loss                              $(3,118)  (2.6%) $(2,858)  (3.0%)

    Loss per common share, basic and
     diluted                               $(0.09)          $(0.09)
    Weighted average shares outstanding,
        basic and diluted                  33,017           30,602

    Comparable store sales growth            8.7%             2.9%
    Stores open at end of period              102              103
    Total selling square footage at end
     of period                            673,910          675,585


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

                                           39 weeks ended    39 weeks ended

                                                      % of              % of
                                          10/30/04  Revenue 11/1/03   Revenue

    Retail net revenue                    $259,094   76.7%  $232,215   84.9%
    Direct-to-customer net revenue          78,871   23.3%    41,338   15.1%
        Total net revenue                  337,965  100.0%   273,553  100.0%

    Cost of revenue and occupancy          240,269   71.1%   200,012   73.1%
        Gross profit                        97,696   28.9%    73,541   26.9%

    Selling, general and administrative
     expense                               111,199   32.9%    89,922   32.9%
        Loss from operations               (13,503)  (4.0%)  (16,381)  (6.0%)

    Interest expense, net                   (1,673)  (0.5%)   (1,674)  (0.6%)

        Loss before income taxes           (15,176)  (4.5%)  (18,055)  (6.6%)

    Income tax benefit                       6,070    1.8%     7,222    2.6%

    Net loss                               $(9,106)  (2.7%) $(10,833)  (4.0%)

    Loss per common share, basic and
     diluted                                $(0.28)           $(0.36)
    Weighted average shares outstanding,
        basic and diluted                   32,904            30,246

    Comparable store sales growth             9.0%              8.0%
    Stores open at end of period               102               103
    Total selling square footage at end
     of period                             673,910           675,585


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

                                              10/30/04    1/31/04     11/1/03
    ASSETS
    Current assets:
        Cash and cash equivalents              $1,692      $2,003      $3,237
        Accounts receivable                     6,305       5,745       5,911
        Merchandise inventories               157,457     102,926     122,810
        Prepaid expense and other current
         assets                                21,016      16,968      16,330
            Total current assets              186,470     127,642     148,288

        Property and equipment, net            82,701      83,518      84,170
        Goodwill                                4,560       4,560       4,560
        Other long-term assets                 23,141      16,560      24,351
            Total assets                     $296,872    $232,280    $261,369

    LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
         STOCK AND STOCKHOLDERS' EQUITY
    Current liabilities:
        Accounts payable and accrued
         expenses                             $65,949     $45,292     $46,909
        Line of credit, net of debt
         issuance costs                        64,206      10,286      45,891
        Deferred revenue and customer
         deposits                               7,446       7,231       7,864
        Other current liabilities              12,247      11,438       9,744
            Total current liabilities         149,848      74,247     110,408

        Deferred lease incentives              30,513      33,999      35,677
        Deferred rent                          15,053      14,455      14,554
        Other long-term liabilities               196         352         155
            Total liabilities                 195,610     123,053     160,794

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

    Common stock and additional paid-in
     capital                                  158,915     158,177     157,666
    Unearned compensation                         (22)       (234)       (284)
    Accumulated other comprehensive income      1,441       1,040         841
    Accumulated deficit                       (67,403)    (58,297)    (66,189)
            Total stockholders' equity         92,931     100,686      92,034

            Total liabilities, redeemable
             convertible preferred
             stock and stockholders' equity  $296,872    $232,280    $261,369

    Common stock issued and outstanding at
     end of period                             33,026      32,768      32,719
SOURCE  Restoration Hardware, Inc.
    -0-                             11/18/2004
    /CONTACT:  Patricia McKay, Executive Vice President & Chief Financial
Officer of Restoration Hardware, Inc., +1-415-924-1005, or fax,
+1-415-927-7264/
    /Web site:  http://www.restorationhardware.com /
    (RSTO)

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

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2898 11/18/2004 16:41 EST http://www.prnewswire.com