Special charge hurts Restoration
By Janice Chamberlain -- Furniture Today, April 28, 2006
Corte Madera, Calif. — Specialty retailer Restoration Hardware plunged into the red in its fourth quarter and year ended Jan. 28, largely because of a special charge related to deferred taxes.
The $27.9 million after-tax, non-cash charge resulted in a net loss of $19.5 million in the latest quarter, compared with net profits of $10.6 million in the year-earlier comparable period.
The net loss for the full year, also including the charge, was $29.3 million, measured against net earnings of $1.7 million in the prior year.
Revenues in the latest quarter were up 1.7% to $191 million from $187.9 million a year ago, and full-year revenues jumped 10.6% to $581.7 million from $525.8 million.
Same-store sales slipped 5.5% in the most recent quarter, and were off 0.3% for the full year.
Restoration posted strong numbers last year, making comparisons difficult. Same-store sales increased 5.7% in the year-earlier quarter and jumped 7.8% for all of the prior year.
The purpose of the special charge is to provide a valuation allowance against the company's net deferred tax asset. Restoration Hardware said the charge would have no impact on cash flow or future prospects.
Gross profit margins inched up, reaching 38.8% in the latest quarter versus 36.2% in the comparable year-ago period and gaining more than two percentage points for the year, rising from 31.6% to 33.9%.
"The demand for our core business remains strong, " said President, CEO and Chairman Gary Friedman. "For the first quarter of (the current year), 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% increase last year. We also expect our direct-to-customer revenue to increase 20% to 25%."
He said the company launched its first category extension, an outdoor catalog, in March and believes it is the most comprehensive and well-designed collection of outdoor furniture in the marketplace.
For all of 2006, Restoration expects total revenue growth of about 18% to 22%, with same-store sales increasing in the low to mid single-digit range.
| Restoration Hardware | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| 13 weeks ended 1/28 | 2006 | 2005 | Change |
| (a) Based on average shares outstanding of 37.7 million in the 2006 13 weeks, 35.4 million in the 2006 52 weeks and 38.2 million in the 2005 periods. (b) Includes a $100,000 income tax benefit. |
|||
| Revenues | $191,009,000 | $187,858,000 | 1.7% |
| Operating income | 14,384,000 | 17,197,000 | (16.4%) |
| Net income | (19,522,000) | 10,581,000 | — |
| Earnings per share (a) | (0.52) | 0.28 | — |
| 52 weeks ended 1/28 | 2006 | 2005 | Change |
| Revenues | $581,657,000 | $525,823,000 | 10.6% |
| Operating income | 944,000 | 4,076,000 | (76.8%) |
| Net income | (29,307,000) | (b)1,704,000 | — |
| Earnings per share (a) | (0.83) | 0.04 | — |
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Special charge hurts Restoration
May 3, 2006
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