Restoration Hardware 2012 Annual Report Download - page 108

by approximately 90% and 60%, respectively, and direct demand increased by approximately 30% and
45%, respectively in the first full year of operations of those Full Line Design Galleries. In the Scottsdale
market, we experienced an approximate 80% increase in store demand and an approximate 75% increase
in direct demand during the months from the store’s opening in November 2012 through the end of fiscal
2012. In April 2013 we opened our fourth Full Line Design Gallery in Boston.
•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 and introducing new products and categories, including
current initiatives in furniture, rugs, lighting, tableware, children’s furnishings and decorative
accessories;
• Expanding our service offerings, including interior design, product customization and gift registry
services; and
• Exploring and testing new business opportunities complementary to our core business that
leverage our defining strengths of taste, style and innovation, such as the planned launch of our
Contemporary Art business.
•Increase Brand Awareness. We will continue to increase our brand awareness and customer loyalty
through our real estate transformation, our circulation strategy, our digital marketing initiatives, and
our increased advertising and public relations efforts.
•Pursue International Expansion. We plan to strategically expand our business into select countries
outside of the United States and Canada over the next several years. We believe that our luxury brand
positioning and unique aesthetic will have strong international appeal.
•Increase Operating Margins. We have the opportunity to continue to improve our operating margins by
leveraging our fixed occupancy costs and scalable infrastructure.
Our fiscal 2012 results reflect the ongoing strength of our business. We have continued to take market share,
and at the same time invested in our infrastructure and supply chain to support future growth. Key financial
achievements of fiscal 2012 include:
• Net revenues increased 25% to $1.2 billion, on top of a 24% increase in fiscal 2011 and a 24% increase
in fiscal 2010.
• Comparable store sales increased 28% on top of a 25% increase in fiscal 2011 and a 19% increase in
fiscal 2010.
• Direct net revenues increased 30% on top of a 27% increase in fiscal 2011 and a 37% increase in fiscal
2010.
• The fourth quarter of fiscal 2012 marked our 12th consecutive quarter of double digit revenue growth.
• Our GAAP net loss was $12.8 million. Our adjusted net income increased 43% to $37.7 million.
See “Basis of Presentation and Results of Operations” for a discussion of adjusted net income and a
reconciliation of the differences between adjusted net income and net income (loss).
Factors Affecting Our Operating Results
Various factors affected our results for the periods presented in this “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” including the following:
Overall Economic Trends. The industry in which we operate is cyclical, and consequently our revenues are
affected by general economic conditions. For example, reduced consumer confidence and lower availability and
higher cost of consumer credit reduces demand for our products and limits our ability to increase prices or sustain
price increases. We expect that some of the economic factors that have been in place for the last several years,
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