Restoration Hardware 4Q net revenue up, sales down
Net loss of $19.5M
By Furniture Today Staff -- Furniture Today, March 31, 2006
CORTE MADERA, Calif. (PR) -- Restoration Hardware said net revenue for the fourth quarter increased 2%, to $191 million, compared to $187.9 million last year.
Comparable store sales declined 5.5% for the fourth quarter against a 5.7% increase last year. Direct-to-customer revenue rose 20%, to $48.2 million, compared to a 51% increase last year.
Income from operations was $14.4 million for the fourth quarter compared to $17.2 million for the same period last year.
For the fourth quarter, the company reported a net loss of $19.5 million or $0.52 per share, inclusive of a non-cash charge of $27.9 million or $0.74 per share, for a valuation allowance established against the company's net deferred tax assets, as described below.
Last year in the fourth quarter, the company reported net income of $10.6 million or $0.28 per fully-diluted share.
For the full year ending January 28, 2006, net revenue increased 11% to $581.7 million compared to net revenue of $525.8 million last year.
Comparable store sales declined 0.3% for the full year against a 7.8% increase last year.
Direct-to-customer revenue increased 34% to $160.0 million compared to a 75% increase last year.
Income from operations was $0.9 million for the fiscal year compared to $4.1 million in fiscal 2004.
For the full year, the Company reported a net loss of $29.3 million, or $0.83 per share, inclusive of the non-cash charge of $27.9 million for the valuation allowance established in the fourth quarter, as described below. Last year for the full year, the company reported net income of $1.7 million, $0.04 per fully-diluted share.
Gary Friedman, president, CEO and chairman, said: "Our results of operations for the fourth quarter were in- line with our January 17, 2006 press release. The demand for our core businesses remains strong, and we expect that the reduction in our total order and revenue deferral balance as detailed in our January 17, 2006 press release, will provide a positive benefit to our results in future periods. For the first quarter of fiscal 2006, we expect comparable store sales to increase 6% to 8%, including two to three points of impact from the carry-over of fourth quarter order and revenue deferral, compared to a 5.0% increase last year. We also expect our direct-to-customer revenue to increase 20% to 25% on top of a 50% increase last year. Additionally, product margins will continue to be up several hundred basis points over a year ago."
"Looking forward, we are excited about the many growth opportunities that lie ahead. This month, we launched our first category extension, the Restoration Hardware outdoor catalog. We believe it offers the most comprehensive and well-designed collection of outdoor furniture in the marketplace. In addition, as previously discussed, we will test a new concept targeting a broader-value market with a catalog mailing in September. We believe these initiatives will position the Company for sustained long-term growth."
Reported results for the fourth quarter include a non-cash charge of $27.9 million or $0.74 per share in connection with providing a full valuation allowance against the Company's net deferred tax asset. Based on the guidance provided in Statement of Financial Accounting Standard ("SFAS") No.109, and considering the cumulative U.S. losses of the company, we provided a valuation allowance against net deferred income tax assets. The charge will have no impact on cash flow or future prospects, nor does it alter our ability to utilize the underlying tax net operating loss and carry forwards in the future.
Guidance
The company provides the following guidance for the first quarter and full year fiscal 2006:
First Quarter fiscal 2006:
* Total revenue growth of 15 to 18%.
* Increase in comparable store sales of 6 to 8%. The first
quarter guidance includes the positive impact from fourth quarter
order and revenue deferral of 2 to 3%.
* Direct to customer revenue increase of approximately 20 to 25
%.
* Operating loss of between $3.0 and $4.0 million, which includes the
estimated impact of SFAS No. 123(R), stock option expensing, of
approximately $1.3 million. Loss from operations in the first
quarter of fiscal 2005 was $4.3 million
* The weighted average share count is estimated at approximately 38.0
million shares compared to 33.1 million shares in the prior year,
due to the conversion of our preferred stock in July 2005.
* Quarter-end inventory increase of approximately 20 to 25% in
support of accelerated revenue growth in the second quarter.
* Due to the valuation allowance provided against the company's net
deferred tax assets, income tax benefits or expense will be close to
zero in 2006.
* Loss per share, inclusive of adopting SFAS No. 123(R) will be in the
range of $0.12 to $0.15 per share. The impact of adopting SFAS No.
123(R) is estimated to be $0.03 per share. The impact of no tax
benefit being recorded in the first quarter is estimated to be $0.05
to $0.06 per share. Fiscal 2005 first quarter loss per share was
$0.09 per share.
Full Year fiscal 2006:
* Total revenue growth of approximately 18% to 22%.
* Increase in comparable store sales in the low to mid single digits.
* Direct to customer revenue increase of 35% to 40%.
* Operating margins of 1.5% to 2.0%, which includes the
estimated impact of SFAS No. 123(R) stock option expensing of
approximately $4.0 million, or 0.6%.
* Year-end inventory increase of approximately 5% as our outlet
strategy helps moderate total inventory growth.
* Capital expenditures of no more than $15 million. Investments are
primarily focused against new order and warehouse management
systems.
* The weighted average diluted share count estimated at approximately
40 million.
* Due to the valuation allowance provided against the company's net
deferred tax assets, income tax benefits or expense will be close to
zero in 2006.
-
Restoration Hardware boosts 2Q net revenue
Aug 29, 2006 -
Special charge hurts Restoration
May 11, 2006
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