Record Second Quarter at Restoration Hardware

August 28, 2006  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on August 2006 Restoration Hardware reported second-quarter 2006 sales of $179.3 million, a 24 percent increase over the prior-year period; and net income of $200,000, compared to a $2.5 million loss the same period last year.

Same-store sales increased 4.3 percent during the second quarter, which ended July 29, but were a little off from the prior year, when those sales were up 5.6 percent.

“We are proud to announce that for the first time in the company’s history, we were profitable outside of the fourth quarter,” said Gary Friedman, chairman, president and chief executive officer of Corte Madera, Calif.-based Restoration Hardware,” Company’s President, Chief Executive Officer and Chairman. “This milestone, and the strong customer response to our product offerings, validates our work to position Restoration Hardware as the premium home furnishings brand in the marketplace.”

While Friedman was pleased with performance, he anticipates more opportunities through initiatives that will launch in the second half of this year.

“Brocade Home, our new brand with decidedly feminine appeal, will launch with an innovative home catalog this September,” he said. “While our initial launch this fall is small in scope, we expect to develop a multi-channel retailing platform over the next several years. Customers can preview the brand and request a catalog through the Web site www.brocadehome.com .”

“In addition, we will introduce our second category extension this holiday, the Restoration Hardware Gift Catalog. Supported by a unique assortment and fresh merchandising approach, the Gift Catalog, as well as a supporting web experience, will be an important addition to our holiday business.”

Restoration Hardware is raising its fiscal 2006 guidance to reflect the strong second quarter and the effect of new intitiatives. The company now expects operating margins of 1.7 percent to 2.2 percent; and, in the third quarter, revenue growth between 17 percent and 20 percent, mid-single digit increases in same-store sales, and direct-to-customer sales increases between 30 percent and 35 percent.

For the full year, Restoration Hardware anticipates revenue to grow between 19 percent and 23 percent; mid-single-digit increases in same-store sales; and direct-to-customer revenue growth between 40 percent and 45 perecent.

The company also announced that it has completed a voluntary review of stock option practices that was overseen by the Audit Committee of the company’s Board of Directors with the assistance of outside legal counsel. Restoration Hardware has determined that it used incorrect measurement dates with respect to the accounting for certain previously granted stock options, primarily during the years 2002 through 2004 as a result of lapses in documentation and deficiencies in option plan administration controls. The cumulative impact of the errors resulted in additional non-cash compensation of $0.6 million. The cumulative charge was reported in the current period since the amount of the stock option compensation expense attributable to each of the previous periods was not material to any previously reported historical period and is not expected to be material to the current fiscal year.