Restoration Hardware 2015 Annual Report Download - page 4

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1
PART I
Item 1. Business
Overview
Restoration Hardware Holdings, Inc. (“RH” or the “Company”) is a leading luxury retailer in the home furnishings marketplace.
Our curated and fully-integrated assortments are presented consistently across our sales channels in sophisticated and unique lifestyle
settings that we believe are on par with world-class interior designers. We offer dominant merchandise assortments across a growing
number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware, and child and teen
furnishings. Our ability to innovate, curate and integrate products, categories, services and businesses with a completely authentic and
distinctive point of view, then rapidly scale them across our fully integrated multi-channel infrastructure is a powerful platform for
continued long-term growth. Our unique product development, go-to-market and supply chain capabilities, together with our
significant scale, enable us to offer a compelling combination of design, quality and value that we believe is unparalleled in the
marketplace.
Restoration Hardware Holdings, Inc. was formed as a Delaware corporation on August 18, 2011. On November 7, 2012,
Restoration Hardware Holdings, Inc. completed an initial public offering. Our business is fully integrated across our multiple channels
of distribution, consisting of our stores, catalogs, including our Source Books, and websites. As of January 30, 2016, we operated a
total of 69 retail galleries, consisting of 53 legacy Galleries, 6 larger format Design Galleries, 4 next generation Design Galleries, 1
RH Modern Gallery and 5 RH Baby & Child Galleries, as well as 17 outlet stores, throughout the United States and Canada.
We have achieved strong growth in sales and profitability, as illustrated by the following:
• Net revenues increased 13% to $2,109.0 million in fiscal 2015, on top of a 20% increase in fiscal 2014 and a 30% increase
in fiscal 2013.
• The fourth quarter of fiscal 2015 marked our 24th consecutive quarter of double-digit net revenue growth.
• Our adjusted net income increased 17.6% to $114.8 million in fiscal 2015 from $97.6 million in fiscal 2014.
Key Value Driving Strategies
Key elements of our strategy are to:
Transform Our Real Estate Platform. We believe we have an opportunity to significantly increase our sales by transforming our
real estate platform from our existing legacy retail footprint to a portfolio of next generation Design Galleries that are sized to the
potential of each market and the size of our assortment. On average, our legacy retail stores display less than 10% of our current
product assortment. Our next generation Design Galleries allow us to optimize our selling space by displaying a greater percentage of
our merchandise assortment, as well as future product expansions and new businesses, in a highly differentiated retail setting. Based
on our historical performance, when a product is presented on the selling floor, we experience an increase in sales for that product
across all of our channels.
Based on recent trends and our plans for product assortment expansion and new businesses, we are generally targeting a range
of approximately 25,000 to 60,000 leased selling square feet for new locations. Landlords are currently offering us leases that
accommodate these space requirements and that have favorable terms, which are typically available only to anchor tenants. Based on
our analysis, we believe we have the opportunity to operate next generation Design Galleries in 60 to 70 locations in the United States
and Canada.
Expand Our Offering and Increase Our Market Share. We believe we have a significant opportunity to increase our market
share by growing our merchandise assortment, introducing new products and categories, expanding our service offerings and
exploring and testing new business opportunities complementary to our core business. We will continue to increase our brand
awareness and customer loyalty through our circulation strategy, our digital marketing initiatives, and our advertising and public
relations activities and events.
Elevate the Customer Experience. We are focused on improving the end-to-end customer experience. As we have elevated our
brand, especially at retail, other customer touch points also need to leapfrog forward to create a cohesive experience. This initiative
will focus on everything from product quality to in-home delivery across all channels, and includes new people, processes, and
systems.