Restoration records profit; furniture's share of mix dips
By Larry Thomas -- Furniture Today, March 24, 2003
Corte Madera, Calif. — Restoration Hardware's strategic repositioning began to show benefits in its fourth quarter, as the specialty lifestyle retailer wound up with a profit of $9.7 million on a 7.4% increase in sales.
The company, with 105 stores in the United States and Canada, posted a net loss of $12 million in last year's fourth quarter.
The fourth-quarter improvements, however, weren't enough to avert a net loss for the full fiscal year. The company said it lost $3.5 million for the fiscal year ended Feb. 1, but that was a far cry from the net loss of $35.8 million in fiscal 2001.
Comparable-store sales rose 3% in the fourth quarter and 6% for the year. Net sales totaled $400.3 million for the year, an increase of 9.2% from 2001.
"Despite the difficult retailing environment, our turnaround is on track to return the company to profitability in 2003," said Gary Friedman, president and chief executive officer. "We are focused on refining our new merchandising and marketing strategy unveiled in the spring of last year."
In a conference call with securities analysts, Friedman said the retailer will continue to focus on its four core businesses — hardware, bathware, furniture and lighting — but is changing the product mix to include slightly less furniture and more bathroom fixtures and textiles.
He said furniture accounted for 25% of sales in 2002, down from 32% the previous year, while textiles increased from 4% of sales to 24% during the same period.
"Furniture is a low-margin, high-distribution cost business for us," Friedman said. "We're trying to shift more of our mix to businesses that have higher margins and lower distribution costs."
He said he believes furniture will remain about 25% of the company's sales this year.
Friedman said the company missed the mark in its attempt to increase its rug business, but said he believes that business can be turned around by the end of this year.
"We tried to have higher quality ... but it wasn't visible to the consumer. Therefore, it just looked too expensive," Friedman said. "Plus, we didn't market it very well."
| Restoration Hardware | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are loses or declines. | |||
| 13 weeks ended 2/1 | 2003 | 2002 | Change |
| (a) After preferred dividends of $375,000. (b) Based on average shares outstanding of 37.2 million in the 2003 13 weeks, 28.4 million in the 2002 13 weeks, 29.8 million in the 2003 52 weeks and 23.4 million in the 2002 52 weeks. (c) After preferred dividends and beneficial conversion charges of $358,000 in the 2003 52 weeks and $2.8 million in the 2002 52 weeks; includes income tax benefits of $8.3 million in the 2003 52 weeks and $9.2 million in the 2002 52 weeks. | |||
| Sales | $155,107,000 | $144,398,000 | 7.4% |
| Operating income | 15,554,000 | (5,542,000) | — |
| Net income | 9,689,000 | (a)(11,996,000) | — |
| Earnings per share (b) | 0.26 | (0.42) | — |
| 52 weeks ended 2/1 | 2003 | 2002 | Change |
| Sales | $400,277,000 | $366,473,000 | 9.2% |
| Operating income | (8,415,000) | (35,088,000) | — |
| Net income (c) | (3,530,000) | (35,842,000) | — |
| Earnings per share (b) | (0.12) | (1.53) | — |
