Restoration Hardware 2012 Annual Report Download - page 115

We operate a fully integrated distribution model through our stores, catalogs and websites. The following
table shows a summary of our Stores revenues, which include all sales for orders placed in retail stores as well as
sales through outlet stores, and our Direct revenues which include sales through our catalogs and websites.
Year Ended
February 2,
2013
January 28,
2012
January 29,
2011
(in thousands)
Stores $ 643,306 $534,411 $438,463
Direct 549,740 423,673 334,289
Net revenues $1,193,046 $958,084 $772,752
Fiscal 2012 Compared to Fiscal 2011
Net revenues
Net revenues increased $234.9 million, or 24.5%, to $1,193.0 million in fiscal 2012 compared to $958.1
million in fiscal 2011. We had 71 and 74 retail stores open at February 2, 2013 and January 28, 2012,
respectively. Stores sales increased $108.9 million, or 20.4%, to $643.3 million in fiscal 2012 compared to
$534.4 million in fiscal 2011 due in large part to our comparable store sales increase of 28% in fiscal 2012
compared to fiscal 2011, partially offset by having fewer stores open during fiscal 2012 compared to fiscal 2011.
Direct sales increased $126.0 million, or 29.8%, to $549.7 million in fiscal 2012 compared to $423.7 million in
fiscal 2011. We believe that the increase in both comparable store and direct sales was due primarily to our
customers’ favorable reaction to our merchandise assortment, including the expansion of existing product
categories, new product categories, and an increase in catalog pages circulated.
Gross profit
Gross profit increased $80.1 million, or 22.5%, to $436.4 million in fiscal 2012 from $356.3 million in
fiscal 2011. As a percentage of net revenues, gross margin decreased 0.6% to 36.6% of net revenues in fiscal
2012 from 37.2% of net revenues in fiscal 2011.
In fiscal 2012, we incurred a $3.3 million charge related to increased tariff obligations of one of our foreign
suppliers following the U.S. Department of Commerce’s review of the anti-dumping duty order on wooden
bedroom furniture from China for the period from January 1, 2011 through December 31, 2011. Excluding the
impact associated with this obligation, gross margin decreased 0.3% to 36.9% of net revenues in fiscal 2012 from
37.2% in fiscal 2011. This decrease was primarily driven by changes in product mix, strategic pricing on new
product introductions and increased promotional activity. In addition, gross margin decreased due to increased
freight costs resulting from a higher percentage of furniture sales during the period, as furniture deliveries require
greater shipping costs than our other products. These decreases in gross margins as a percentage of net revenues
were partially offset by improvement in occupancy costs from improved leverage on the fixed portion of our
store and distribution center occupancy costs.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $176.0 million, or 53.4%, to $505.5 million in fiscal
2012 compared to $329.5 million in fiscal 2011. Selling, general and administrative expenses for fiscal 2012
included (i) a $92.0 million non-cash compensation charge related to equity grants at the time of the
Reorganization and initial public offering, (ii) a $23.1 million non-cash compensation charge related to the
performance-based vesting of certain shares granted to Mr. Alberini and Mr. Friedman in connection with the
Reorganization and initial public offering, (iii) $10.8 million of costs incurred in connection with our initial
public offering, including a fee of $7.0 million to Catterton, Tower Three and Glenhill in accordance with our
management services agreement, payments of $2.2 million to certain former executives and bonus payments to
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Form 10-K