Sears Moves on Restoration Hardware
Earnings Falling, Specialty Retailer Gets Offer
By James Mammarella -- Home Textiles Today, 12/17/2007 12:00:00 AM
Hoffman Estates, Ill. —
By proposing an all-cash bid of $6.75 per share in its acquisition move on home furnishings specialty retailer Restoration Hardware, merchandising conglomerate Sears Holdings surpassed the approximately $260 million merger bid made Nov. 8 by investment firm Catterton Partners.
The Catterton offer (proposed through its Home Holdings entity) was set at $6.70 per share. Sears also said its prospective merger deal would include “a lower, more reasonable break-up fee” than that contained in the Catterton offer.
Sears Holdings, which first expressed its acquisition interest to RH executives in June 2007, recently became the largest stockholder in Corte Madera, Calif.-based Restoration Hardware (RH) with 13.6% of voting shares. Under the terms of the standing RH-Catterton agreement, Thursday, Dec. 13 was the last day that RH was to solicit competing proposals for a third-party transaction.
The Sears proposal, delivered in draft form to RH, gives Sears time to further evaluate the company’s finances and some maneuvering room as to how it may ultimately effect an acquisition.
On the eve of reporting disappointing third-quarter earnings results — a net loss of $15.2 million — RH had entered into the confidentiality agreement requested by Sears, granting access to non-public information on the company.
Meanwhile, Restoration reported a fully diluted net loss more than twice that of a year ago, or $0.39 per share vs. $0.15 per share — noting that $0.04 of the most recent loss was “related to costs associated with the merger agreement.”
While sales grew 10.6% to $173.7 million in the quarter, RH president and ceo Gary Friedman noted that “high ticket durable categories” in particular were affected by “weakening consumer spending and traffic levels.”
In its continuing shift of emphasis away from its 111 stores and outlets toward direct sales, RH said that direct-to-consumer revenues made up 56% of total volume for the quarter, up from 36% in the year-ago period.
SG&A costs are higher in its direct division, and partly as a result of that, overall SG&A costs zoomed up 410 basis points to 40.8% of sales. Gross profit margin slipped 90 basis points to 33.4% of sales.
RH said it would not hold a quarterly conference call, due to its pending merger/acquisition developments. For the same reason, the company has withdrawn prior guidance and will not provide guidance for either fourth quarter or full year results.
We would love your feedback!
Most Recent Resources
- Getting the most out of offline leads
- Free Shipping and the Importance of Onsite Promotion
- Should Branded Manufacturers Participate in Flash Sales?
- Rugs 101 - Special Edition
- How Big Is Your Label
- Choosing a Web Site Developer
- Convergence: Tie Your Online & Offline Experience...
- Social Networks to Social Shopping
- Why Brands and Their Retailers are Facebook’s Biggest...
- Web Based Intelligence Gathering
- The Future of Tablets
- Shopatron: Bicycles & eCommerce
- A Guide to Holiday eCommerce Success
- Mattress Buying 101 - Connecting with Consumers
- Designing Your Brand’s Website for eCommerce
- Global Sourcing in 2010: Doing More With Less
- Comparing Four Options for Turning Web Site Traffic into...
- Are You Prepared for the 2009 Holiday Season? A Branded...
- Design, Develop, Deliver: The Three D's to Digitally...