Restoration profits slump 18 percent
By Staff -- Home Textiles Today, 3/26/2004
CORTE MADERA, CALIF. — With margins thinning out and costs rising, fourth-quarter profits at Restoration Hardware Inc. fell by 18.7 percent, to $7.9 million from $9.7 million last year.
Acting as a drag were lower-than-expected holiday sales and higher markdowns to clear the shelves of holiday merchandise, the retailer said.
Helped by a surging catalog and Internet business, overall sales increased by 6.3 percent, to $165 million from $155.2 million.
In a big lift to the top line, direct-to-consumer sales shot up by 50.8 percent, to $26.6 million from $17.6 million last year. The company's store sales were relatively flat, however, edging up just 0.6 percent, to $138.4 million from $137.6 million. Same-store sales decreased by 0.7 percent.
Gary Friedman, president and CEO, commented, "While holiday sales in seasonal items were disappointing, our January 2004 comparable-store sales increase of 23 percent and direct-to-customer division growth of 51 percent in the fourth quarter demonstrate the underlying strength of our core businesses."
| Qtr. 1/31 (x000) | 2003 | 2002 | % chg |
| Sales | $164,955 | $155,167 | 6.3 |
| Oper. income (EBIT) | 13,791 | 15,665 | -12.0 |
| Net income | 7,892 | 9,710 | -18.7 |
| Per share (diluted) | 0.21 | 0.26 | -19.2 |
| Average gross margin | 35.8% | 36.7% | — |
| SG&A expenses | 27.4% | 26.6% | — |
| 52 weeks | 2003 | 2002 | % chg |
| Sales | 438,508 | 400,337 | 9.5 |
| Oper. income (EBIT) | (2,590) | (9,025) | — |
| Net income | (2,941)a | (3,603)a | — |
| Per share (diluted) | (0.10) | (0.13) | — |
| Average gross margin | 30.2% | 29.3 | — |
| SG&A expenses | 30.8% | 31.5% | — |
| (...) - denotes decline a-12-month results include an income-tax benefit of $1.8 million, compared with $8.5 million a year ago. Prior-year results include a charge of $289,000 stemming from a change in the fair value of warrants; and a preferred shareholder dividend of $358,000. |
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