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Restoration Hardware ups gallery outlook as sales soar

Corte Madera, Calif. - Restoration Hardware now sees the opportunity to expand its RH full-line design galleries beyond the 50-plus markets it had already identified for growth, executives said during the company's quarterly conference call late yesterday afternoon.
"We are in negotiations for sites in over 30 markets in North America, including New York, Chicago, Miami, Denver, Nashville, New Orleans, and San Diego, among many others," ceo Carlos Alberini told analysts. "We plan to open our next full line design galleries in Greenwich, Conn., and Atlanta in 2014 - and we expect increased opening activity beginning in 2015 and forward."
The design gallery concept has replaced the previous Restoration Hardware format with a mixture of one-of-a-kind pieces as well as curated and commissioned collections.
"What's important to note is that we are in the very beginning stages of our growth story," Restoration Hardware founder Gary Friedman - who serves as chairman emeritus, creator and curator. "Our results to-date have been restricted by the fact that our assortment has been trapped in legacy real estate that was designed for an entirely different company."
RH is also taking a leaf from the Williams-Sonoma playbook and expanding its brands. This fall it will debut two new catalogs, RH Leather and RH Rugs. Future launches include RH Kitchen and Tableware and RH Antiquities, the latter of which was described by executives as a $25 billion market largely scattered among small, independent operators.
"While many of our initiatives such as bigger catalogs and larger stores may not be intuitive and seem to move in the opposite direction of the rest of the industry fascinated by digital trend, we drive ourselves - until it hurts - so we can see what others can't see, so we can do what others can't do," said Friedman.
RH's first quarter earnings beat analysts' projections. For the quarter ended May 4, adjusted net income increased to $2.3 million from a net loss of $1.3 million for the same period last year.
Despite operating four fewer stores during the comparative period, revenues jumped 38% on top of an 18% increase in the year-ago quarter, marking the 13th consecutive quarter of double-digit sales growth.
Direct-to-consumer sales (catalog and online) climbed 38% on top of a 20% increase in the year-ago period.
Same-store sales soared 41% on top of 26% growth for the same period last year.

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