Restoration's textiles business grows

SAN FRANCISCO — Restoration Hardware boasted strong gains during the first quarter in its textiles business, which jumped to 20 percent of the total business from just 4 percent last year, the company reported during its recent earnings call.

This feat was one of many Restoration Hardware said it achieved during the past three months since implementing its restructuring strategy last year to better merchandise stores, increase traffic and improve profitability.

Other reported first quarter gains for Restoration Hardware include: the more than doubling of its bathware business; an improvement of its average-store sales volume from $3.1 million per store in 2001 to a trending $3.7 million per store this year; increased direct product sourcing to over 60 percent of the company's business this year from 15 percent; and strong growth in its direct businesses, catalog and Internet, which rang in at $12.4 million and $9.4 million, respectively, in revenues.

"(The latter) is one of our most important strategic developments, as we are now building a highly profitable direct channel that creates strategic alternatives for the company," said Gary Friedman, president and CEO, "whether it be continuing to aggressively increase catalog circulation and growing this profitable channel while simultaneously driving increased store traffic and improving store-level profitability, to the possibility of growing our direct business through category expansion."

By August, at the onset of the fall selling season, Restoration Hardware said it will have completed the remerchandising transformation of its brand. The last phase comprises furniture and accessories.

In furniture, about 65 percent of the assortment will be new versus a year ago, and in accessories (frames, candles, vases, etc.) about 70 percent of the assortment will be new.

Under the strategy, the company has already implemented and continues to refine its assortments in its core businesses — hardware, bathware, lighting and textiles.

Also for this fall, the company will launch a "completely redesigned catalog," Friedman said.

He explained that the objectives of this effort include: the ability to more clearly communicate to the customer Restoration Hardware's "quality authority and differentiation inherent in our new strategy"; project dominance in its core category offerings; and create a style guide for its customers.

"We believe this is a tremendous opportunity to present our product in a more aspirational manner," Friedman continued, "with styling that inspires our customers to buy a complete Restoration Hardware look for their homes."

In conjunction, the company is in the process of updating the design presentation and functionality of its Web site.

Other key initiatives for this year include the delivery of improved holiday results, which suffered last year, Friedman noted, "as a direct result of our efforts being focused on building our core businesses that will reposition Restoration Hardware as a brand to stand the test of time."

Already, it has built a "compelling" assortment skewed for holiday, he added.

To back up this and other in-store enhancement efforts, Restoration Hardware has also invested in its distribution and supply-chain operations "to deliver our desired performance this year," Friedman added. To that end, the company is in the final stages of plans to appoint a new senior vice president of supply chain operations.

In store for 2005 is the addition of tabletop goods as a permanent category, not just a seasonal offering as it has traditionally been.