Restoration Hardware

About Restoration Hardware

Restoration Hardware puts vintage American fixtures and fittings into homes old and new. The company sells upscale home and outdoor furnishings, garden products, hardware, bathware, lighting, textiles, baby and child products, and more through about 85 retail and outlet stores in 30 states, the District of Columbia, and Canada. It also markets products – more... through its catalogs and e-commerce sites (more than 40% of overall sales). Founded in 1980, Restoration Hardware was taken private in 2008 by Catterton Partners and Tower Three Partners in a deal valued at about $175 million. In 2012 the high-end home accessories retailer went public.

IPO

Restoration Hardware's November 2012 IPO raised about $124 million. The proceeds are earmarked to repay debt and for general corporate purposes. The IPO sought to capitalize on the company's recent strong financial performance, resulting from a uptick in consumer spending by high-income households, the retailer's target customer group.

Geographic Reach

While Restoration Hardware operates five stores in Alberta, British Columbia, and Ontario, Canada, revenues from its Canadian operations are not material to the company. The chain is seeking to expand beyond North America to select international markets in the next several years. (The company has not specified which markets.)

Operations

In addition to its retail stores, the company distributes more than 26 million catalogs, and its websites log more than 14.3 million unique visits annually. Unlike many retailers, who are deemphasizing their catalog operations while growing their online presence, Restoration Hardware is growing both in tandem. Indeed, it is expanding its catalog page count and circulation, while growing its e-commerce business.

Financial Performance

Restoration Hardware's fiscal 2012 (ends January) sales jumped 24% vs. the prior year, despite the fact that the retailer operated 17 fewer stores in 2012 than 2011. Sales were buoyed by a 25% gain in same-store sales, accompanied by a double-digit gain in Direct sales. Shoppers responded to the retailer's expanded product lines and categories, increased catalog pages, and its new Design Gallery stores by opening their wallets. The strong sales performance in fiscal 2012 helped the company return to profitability after posting a loss in fiscal 2011. The firm's 2012 sales were essentially evenly divided between furniture and non-furniture sales.

Strategy

In fiscal 2012 the company made progress on its real estate strategy to consolidate stores in existing markets. To that end, it reduced its store count in California, Florida, Illinois, New York, and other states where it operated multiple locations. As it trims its traditional mall-based store count, the company is opening larger full-line Design Galleries, which measure about 21,500 square feet (about three times the average size of its existing Gallery stores) and contain expanded merchandise selections, such as baby and child furniture and products.

In late 2011 the retailer opened its first two Design Galleries in Houston and Los Angeles. Buoyed by the strong gains in both retail store and direct sales in those markets, Restoration Hardware has selected 50 key metropolitan markets in which to open new full-line Design Galleries. They include: Scottsdale, Arizona; Boston; Greenwich, Connecticut; and Atlanta. The company believes it can double its store footage in the US and Canada over the next seven to 10 years by opening more Design Galleries. The company also plans to open additional Galleries in small and mid-sized markets and Baby & Child Galleries in key markets. – less

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