Restoration Hardware Holdings chairman and CEO Gary Friedman lauded the company’s performance in the fourth quarter and fiscal 2013, saying that RH continued to outperform the home furnishings industry by a wide margin.
Net revenues for the quarter increased 18% to $471.7 million from $398.1 million in the prior-year quarter, which had an additional week. Excluding that additional week, net revenues increased 26% on top of a 23% increase in net revenues for the prior-year quarter. Comparable brand revenue growth, which includes direct, increased 24% in the quarter on top of a 29% increase last year.
“Throughout fiscal 2013, we continued to take market share and outperform our expectations — delivering results that far exceeded the annual financial targets we introduced at the beginning of the year,” said Friedman. “We increased revenue by 32% in the back half of the year on a comparable week basis, roughly in-line with the 34% growth in the first half, despite the elimination of our Fall Source Book. During the fourth quarter of fiscal 2013, we increased comparable brand revenue by 24%, on top of 29% last year, in spite of a tougher than anticipated holiday selling season and the impact of weather on our retail business. Additionally, we increased adjusted net income 52% on a comparable week basis demonstrating the disruptive nature of the RH brand and the power of our multichannel business model.”
Friedman said that looking ahead the company remains focused on its two largest value-driving strategies: the expansion of its offer and the transformation of its retail stores.
“The expansion of our offer will be highlighted across 3,200 pages in our Spring 2014 Source Books, positioning us for what we believe will be another year of industry leading results In regards to the transformation of our retail stores, we believe we have a $4 to $5 billion company trapped in billion dollar legacy real estate. Post the drop of our Spring 2014 Source Books, approximately 10% of our assortment will be displayed at retail. We believe the key to unlocking the value of the company is to transform our real estate portfolio into our next generation Full Line Design Galleries,” he added.
This year the company will open new Galleries in Greenwich, Los Angeles, and its first next generation Full Line Design Gallery in Atlanta. Additionally, the company is significantly expanding the size its New York Gallery, adding two additional floors.
“We now have signed leases for five next generation Full Line Design Galleries and are in negotiations for an additional 25 locations. Once our real estate transformation is complete in North America, we believe we will deliver $4 billion to $5 billion in annual sales, achieve mid-teens operating margins, and generate significant free cash flow,” Friedman added.
As of Feb. 1, the company operated a total of 70 retail stores, consisting of 62 Galleries, 5 Full Line Design Galleries and 3 Baby & Child Galleries, as well as 17 outlet stores throughout the United States and Canada. This compares to a total of 71 retail stores, consisting of 65 Galleries, 3 Full Line Design Galleries and 3 Baby & Child Galleries, as well as 13 outlet stores at the end of fiscal 2012.
Looking ahead, the company expects net revenues in the first quarter to fall in the range of $345 million to $350 million.
In other news, the company appointed Doug Diemoz as chief development officer. He will report to Friedman and serve as a member of the company's executive leadership team. Diemoz has nearly 20 years of operational, financial and international expertise in the retail industry at global brands including Mexx, Williams-Sonoma and Gap.
“On behalf of the entire RH team, I am thrilled that Doug will be joining RH. I've known and admired Doug for years and believe his high energy, drive, and collaborative nature is an excellent fit for our culture. His finance, operations, and international experience will be invaluable as we execute our long term growth strategy,” said Friedman.
Diemoz served as CEO of Mexx, an Amsterdam-based, international fashion brand in more than 46 countries and sold through 5,000 retail and wholesale stores worldwide. During his tenure at there, from 2011 to 2013, Diemoz also served as president, chief transformation officer and CFO.
“I am honored to join RH in this new role. Gary and the team have built a brand with enormous international potential, plus the current and new brand extensions position the company for robust long term growth. I look forward to being a part of one of the most innovative companies in retail today,” said Diemoz.
Diemoz also spent more than nine years at Williams-Sonoma in various senior finance roles, including divisional CFO and SVP, financial operations of the Pottery Barn Brands. He spent more than five years at Gap’s Old Navy brand in various finance roles and started his career as a financial analyst in Bank of America’s Corporate Real Estate group.