Restoration Hardware, Inc. Reports Fourth Quarter and Full Year Profitability
Comparable store sales for the quarter increase 5.7%
Direct-to-Customer sales for the quarter increase 51%
EPS of 28 cents for the quarter versus 21 cents a year ago, up 33%
EPS of 4 cents for the full fiscal year versus a net loss of 8 cents a year
ago
CORTE MADERA, Calif., March 31 /PRNewswire-FirstCall/ -- Restoration Hardware, Inc. (Nasdaq: RSTO) today announced its financial results for the fourth quarter and fiscal year ended January 29, 2005, including the following:
-- Net revenue increased 14% to $187.9 million for the fourth quarter of
fiscal 2004, versus net revenue of $165.0 million for the same period
last year.
-- Comparable store sales increased 5.7% for the fourth quarter of fiscal
2004, which reflects a holiday comp sales increase of 3.1% and a
January comp sales increase of 20.7 %.
-- Direct-to-customer revenue increased 51% to $40.1 million for the
fourth quarter of 2004, on top of a 51% increase in the same period in
the prior year.
-- Operating earnings were $17.2 million for the fourth quarter of fiscal
2004, up 23% compared to operating earnings of $13.9 million in last
year's fourth quarter.
-- Net income for the fourth quarter of fiscal 2004 was $10.6 million,
$0.28 per share, as compared to net income of $8.0 million, $0.21 per
share, in the fourth quarter of the prior year.
-- Full year net income was $1.7 million, $0.04 per share, as compared to
a net loss of $2.5 million, ($0.08) per share.
As previously announced, the Company will restate its fiscal 2003 and prior years' financial statements to give effect to a correction in the Company's lease accounting practices. All references to financial results in this press release give effect to the anticipated impact of the restatement which the Company expects to complete as part of the filing of its 10-K for the year ended January 29, 2005. The restatement will also include a reduction in equity in the Company's balance sheet as of January 31, 2004 to correct an error of approximately $650 thousand relating to the Company's tax provision calculation for 2001. In addition, during the fourth quarter of fiscal 2004, the Company completed its annual evaluation of previously established tax valuation allowances and identified necessary income tax contingencies. The effect of that review was to reduce its tax provision for the fourth quarter and the year.
Gary Friedman, the Company's President, CEO, and Acting Chairman stated, "We are pleased to report a comparable store sales increase of 5.7% for the fourth quarter and a 7.8% increase for the full fiscal year despite a difficult retail environment for home retailers. In addition, our Direct-to- Customer business increased 51% for the fourth quarter and 75% for the full year, on top of a 52% increase in fiscal 2003."
Mr. Friedman continued, "We are also pleased to report our first full year of profitability since 1998, the year in which the Company went public. While this is a key milestone, it merely represents the first of many important steps to transform Restoration Hardware into a high performance home furnishings brand that will stand the test of time. As we look forward, we are excited about both the continued initiatives to further evolve the brand, and our investments in operational leadership to enhance the customer experience and drive improved bottom line performance."
For the year ended January 29, 2005, net revenue was $525.8 million, a 20% increase versus a year ago. Comparable store sales for the full year increased 7.8% on top of a 5.2% increase for the last fiscal year. Direct-to-customer sales increased 75% to $119.0 million on top of a 52% increase a year ago.
Operating income for fiscal 2004 was $4.1 million versus a loss from operations in fiscal 2003 of $1.9 million. The Company's net income for the year ended January 29, 2005 was $1.7 million, $0.04 per share, as compared to a net loss of $2.5 million, ($0.08) per share, for fiscal year 2003.
At the end of fiscal 2004, inventory was $144 million as compared to fiscal 2003 ending inventory of $103 million. The higher level of inventory is in support of higher sales levels as well as the earlier timing of inventory purchases to support the Company's outdoor furniture program, including shipments in transit. The Company received the outdoor furniture shipments early to ensure solid in stock positions for the spring selling season. By the end of the first quarter, inventory levels are expected to be 15 to 20 % higher than the prior year's first quarter, which is in line with higher sales levels.
The Company provides the following guidance for fiscal 2005 (which excludes the impact of a change in accounting for stock options in accordance with the provisions of SFAS 123R):
-- Increase in comparable store sales in the low to mid single digits for
the full year.
-- Direct-to-customer net revenue increase of 25% to 35%.
-- Operating margins of 2 to 3 percent for the full year.
-- Inventory at year end is projected to be relatively flat compared to
fiscal 2004 levels.
-- First quarter of fiscal 2005 results are expected to be a net loss in
the range of $0.10 to $0.11 per share with an expected basic share
count of 33.2 million shares.
Conference Call:
The Company's fourth quarter and full fiscal year 2004 earnings conference
call is scheduled for Thursday, March 31, 2005 at 5:00 p.m. Eastern Time. The dial-in number is 800-689-5991. A live webcast is available at http://phx.corporate-ir.net/phoenix.zhtml?p=irol- eventDetails&c=79100&eventID=1043120. If you are unable to participate during the live webcast, a playback of the conference call will be available via the Internet at http://phx.corporate-ir.net/phoenix.zhtml?p=irol- eventDetails&c=79100&eventID=1043120 beginning at 7:00 p.m. Eastern Time on Thursday, March 31, 2005. A webcast replay of the call will be available at www.restorationhardware.com under "Company Info-Investor Relations-Event Calendar" or by dial-in (800-938-1602) until April 14, 2005.
About Restoration Hardware, Inc.:
Restoration Hardware, Inc. is a specialty retailer of high quality home furnishings, bath fixtures and bath ware, functional and decorative hardware and related merchandise that reflects the Company's classic and authentic American point of view. Restoration Hardware, Inc. sells its merchandise offering through its retail stores, catalog (800-762-1005) and on-line at www.restorationhardware.com. As of March 31, 2005 the Company operated 102 retail stores and two outlet stores in 30 states, the District of Columbia and Canada.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
This release contains forward-looking statements that involve known and unknown risks. Such forward-looking statements include, without limitation, statements concerning or relating to implications of the Company's financial results for the fourth quarter and fiscal year ended January 29, 2005, statements concerning guidance for the full year of fiscal 2005 and the quarterly periods therein, statements relating to improved performance in future periods, statements regarding expected sales levels, statements regarding anticipated future inventory levels and the matching of inventory levels sales and anticipated sales, statements relating to the long-term status of the Company, statements regarding the expected benefits of investments in management and initiatives to evolve the Company's brand, and other statements containing words such as "plans," "estimates," "expects," and words of similar import or statements of management's opinion. These forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, including financial results, market performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause such differences include, but are not limited to, customer reactions to the Company's current and anticipated merchandising and marketing programs and strategies, customer reactions to the Company's outdoor furniture, timely introduction and customer acceptance of the Company's merchandise, positive customer reaction to the Company's catalog and Internet offerings, revised product mix, prototype stores and core businesses, timely and effective sourcing of the Company's merchandise from its foreign and domestic vendors and delivery of merchandise through its supply chain to its stores and customers, effective inventory and catalog management, actual achievement of cost savings and improvements to operating efficiencies, effective sales performance, in particular during the holiday selling season, the actual impact of key personnel of the Company on the development and execution of the Company's strategies, changes in investor perceptions of the Company, fluctuations in comparable store sales, limitations resulting from restrictive covenants in the Company's credit facility, changes in economic or business conditions in general, changes in political conditions in the United States and abroad in general, changes in product supply, changes in the competitive environment in which the Company operates, changes in the Company's management information needs, changes in customer needs and expectations, governmental actions and other factors detailed in the Company's filings with the Securities and Exchange Commission, including its recent filings on Forms 10-K, 10-Q and 8-K, including, but not limited to, those described in the Company's Form 10-Q for the quarter ended October 30, 2004 in Part I, Item 2 thereof ("Management's Discussion and Analysis of Financial Condition and Results of Operations") under the captions "Expenses," "Liquidity and Capital Resources" and "Factors that May Affect our Future Operating Results." Guidance offered by the Company represents a point- in-time estimate made by management of the Company. The Company undertakes no obligation to update any guidance or any other forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.
RESTORATION HARDWARE, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(in thousands, except per share and store data)
13 weeks ended 13 weeks ended
% of 1/31/2004 % of
1/29/2005 Revenue (as restated) Revenue
Retail net revenue $147,739 78.6% $138,394 83.9%
Direct-to-customer net revenue 40,119 21.4% 26,561 16.1%
Total net revenue 187,858 100.0% 164,955 100.0%
Cost of revenue and occupancy 119,921 63.8% 105,820 64.2%
Gross profit 67,937 36.2% 59,135 35.8%
Selling, general and
administrative expenses 50,740 27.0% 45,196 27.3%
Income from operations 17,197 9.2% 13,939 8.5%
Interest expense, net (799) (0.5%) (480) (0.3%)
Income before income taxes 16,398 8.7% 13,459 8.2%
Income tax expense (5,817) (3.1%) (5,485) (3.4%)
Net income $10,581 5.6% $7,974 4.8%
Earnings per common share, basic $0.32 $0.24
Earnings per common share, diluted $0.28 $0.21
Weighted average shares, basic 33,049 32,753
Weighted average shares, diluted 38,135 37,943
Comparable store sales 5.7% 0.7%
Retail stores open at end of period 102 103
Total selling square footage, end
of period 676,520 679,300
RESTORATION HARDWARE, INC.
STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(in thousands, except per share and store data)
52 weeks ended 52 weeks ended
% of 1/31/2004 % of
1/29/2005 Revenue (as restated) Revenue
Retail net revenue $406,833 77.4% $370,609 84.5%
Direct-to-customer net revenue 118,990 22.6% 67,899 15.5%
Total net revenue 525,823 100.0% 438,508 100.0%
Cost of sales and occupancy 359,808 68.4% 305,265 69.6%
Gross profit 166,015 31.6% 133,243 30.4%
Selling, general and
administrative expenses 161,939 30.8% 135,118 30.8%
Income (loss) from operations 4,076 0.8% (1,875) (0.4%)
Interest expense, net (2,472) (0.5%) (2,154) (0.5%)
Income (loss) before income taxes 1,604 0.3% (4,029) (0.9%)
Income tax benefit 100 0.0% 1,511 0.3%
Net income (loss) $1,704 0.3% $(2,518) (0.6%)
Earnings (loss) per common
share, basic $0.05 $(0.08)
Earnings (loss) per common share,
diluted $0.04 $(0.08)
Weighted average shares, basic 32,940 30,873
Weighted average shares, diluted 38,183 30,873
Comparable store sales 7.8% 5.2%
Retail stores open at end of period 102 103
Total selling square footage, end
of period 676,520 679,300
RESTORATION HARDWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
1/31/2004
1/29/2005 (as restated)
ASSETS
Current assets:
Cash and cash equivalents $1,904 $2,003
Accounts receivable 6,945 5,745
Merchandise inventories 144,185 102,926
Prepaid expense and other current assets 19,574 15,670
Total current assets 172,608 126,344
Property and equipment, net 81,886 83,518
Goodwill 4,560 4,560
Deferred tax asset, long-term portion 18,745 18,051
Other long-term assets 1,464 1,422
Total assets $279,263 $233,895
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $63,920 $45,292
Line of credit, net of debt issuance costs 33,819 10,286
Deferred revenue and customer deposits 8,130 7,231
Other current liabilities 14,948 11,438
Total current liabilities 120,817 74,247
Deferred lease incentives 30,365 33,999
Deferred rent 20,321 20,224
Other long-term liabilities 143 352
Total liabilities 171,646 128,822
Series A redeemable convertible preferred stock 8,331 8,541
Common stock 3 3
Additional paid in capital 159,233 158,174
Unearned compensation -- (234)
Accumulated other comprehensive income 812 1,055
Accumulated deficit (60,762) (62,466)
Total stockholders' equity 99,286 96,532
Total liabilities, redeemable convertible
preferred stock and stockholders' equity $279,263 $233,895
Common stock issued and outstanding at end of
period 33,084 32,768
SOURCE Restoration Hardware, Inc.
-0- 03/31/2005
/CONTACT: Patricia McKay, Executive Vice President, Chief Financial
Officer, of Restoration Hardware, Inc., +1-415-924-1005/
/Web site: http://www.restorationhardware.com /
(RSTO)
CO: Restoration Hardware, Inc.
ST: California
IN: REA HOU
SU: SLS ERN ERP CCA
JO
-- SFTH070 --
0043 03/31/2005 16:04 EST http://www.prnewswire.com