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Restoration eyes return to profitability

Restoration Hardware's new strategy is working, and the early reads on holiday are positive, said Gary Friedman, ceo, during the company's third quarter conference call. In addition, its expanded and new core businesses, such as textiles, are "gaining momentum each month … We have great confidence that we will return to profitability this year."

However, rugs are "the worst of the textiles strategy out of the box," he said, and handknotted offerings are in only 20 to 30 stores. "We've cancelled a lot of [handknotted rug] orders until we can get our arms around what is the right rug strategy."

But "it's not a significant risk to the overall business model."

Otherwise, the linens, bedding and bath businesses for Restoration Hardware as a percentage to total revenue were in line with expectations, he said, with some categories performing above expectations and one or two below par.

For the compressed holiday season, the company said it will be able to replenish 80 percent of its stores within three days, and 100 percent within five days because of its bi-coastal DCs and "between-the-weekend distribution strategy," he added.

Its direct channel sales, which includes the web site and catalogs, increased 66 percent over last year's levels, he said, and the retailer will be aggressive in growing this channel over the next few years. Catalogs are now its key advertising vehicle, he said, and it has significantly increased its circulation from a year ago.

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