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Soft side soothes Restoration Hardware    

Corte Madera, Calif. – Encouraged by success in its bath textiles, bath accessories and decorative accessories that somewhat offset the poorer performing hardline categories during its second quarter, Restoration Hardwareis looking forward to this coming holiday season when the softer and decorative goods will ring.

“Where we’ve seen the business perform relatively well is in the accessories area, bath towels, bath accessories, things less tied to a housing event,” explained Gary Friedman, chairman, president and ceo. “That gives us confidence as we think about holiday.

The holiday selling season is when, Friedman added, “our product mix will shift dramatically to accessories, gifts and holiday décor, which are less likely to be impacted by the current macro environment.”

Shortfalls during the quarter were not minor. Troubles occurred in the furniture category, which came in “substantially below plan, particularly with outdoor,” Friedman said, and “increased softness” in hardline and hardware goods “more directly related to the slowdown in the housing sector.” Examples of categories that suffered include hardware, bath hardware, lighting, and window treatments.

Restoration reported a second quarter net loss of $7.9 million, compared to income of $0.2 million one year ago. Sales of $183.8 million were up 2.5% from $179.3 million last year.

Despite some inventory mishaps, the 100-plus unit store, online and catalog retailer is “quite happy” with the initial success of its Bed & Bath catalog, which rolled out this spring.

The company continues to develop the Restoration Hardware Baby and Child catalog, expected to launch in spring 2008. “We believe it will go positive the first full quarter that it is mailed,” Friedman said. “It should have the quickest ramp-up of any of our concepts.”

 For the fledgling Brocade Home brand, which is approaching its first anniversary this fall, Restoration will increase the catalog page-count, assortment, and circulation.

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