Restoration Hardware posts bigger loss
By Furniture Today Staff -- Furniture Today, December 2, 2001
CORTE MADERA, Calif. — Restoration Hardware reported an $8.3 million loss in the quarter ended Nov. 3 compared with a $5.1 million loss a year earlier, as it marked down slow-moving merchandise and saw sales fall after the Sept. 11 attacks.
Sales of $76.6 million were down 5.4% from last year's fiscal third quarter, with same-store sales off 8.8%.
Restoration took a big sales hit in September, when same-store numbers were down 18.4% from a year earlier. In October, sales recovered to a same-store decline of just 0.8%. And direct-to-customer sales, including Internet business, were up 32.4% for the quarter to $6.6 million.
"The results for the quarter were not unexpected," said Gary Friedman, chief executive officer. He said the company "has succeeded in completing a key part of our restructuring strategy by marking down and eliminating approximately 3,000 underperforming products. To date we have sold through approximately 85% of the discontinued items, and merchandise margins have returned to historical levels in November."
Margins for the quarter reflected the discounting, with gross profit at 20.9% of sales compared with 25.2% in the same quarter a year ago. Mainly because of the decline in same-store sales, the company also saw its selling, general and administrative expenses grow to 36.4% of sales from 33.6% a year earlier.
The quarter's $8.3 million loss available to common shareholders was after a $375,000 charge associated with its convertible preferred stock, but also included non-cash income of $330,000 after taxes as it marked some warrants to market value.
Restoration, which sells furniture, accessories and other home goods and gift items at 104 stores, said it had no store openings or closings in the third quarter and anticipates none in the fourth quarter.
| Quarter ended 11/3 | 2001 | 2000 | Change |
|---|---|---|---|
| Sales | $76,614,000 | $80,952,000 | (5.4%) |
| Operating income | (11,892,000) | (6,797,000) | — |
| Net income(a) | (8,302,000) | (5,123,000) | — |
| Earnings per share | (0.35) | (0.30) | — |
| 9 months ended 11/3 | 2001 | 2000 | Change |
| Sales | $219,296,000 | $222,851,000 | (1.6%) |
| Operating income | (30,575,000) | (17,838,000) | — |
| Net income(a) | (24,491,000) | (12,836,000) | — |
| Earnings per share | (1.22) | (0.75) | — |
| (a) Includes income tax benefits of $4.5 million in the 2001 quarter, $3.6 million in the 2000 quarter, $12.4 million in the 2001 nine months and $8.9 million in the 2000 nine months. The 2001 quarter also includes a $375,000 charge for convertible preferred stock and the 2001 nine months includes a $2.4 million charge for convertible preferred stock. | |||
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