Restoration Hardware 2012 Annual Report Download - page 4

We believe there is an opportunity to open Full Line Design Galleries in more than 50 key markets in North America over time.
We plan to open new Full Line Design Galleries in Greenwich, Connecticut, and Atlanta in 2014; and we have identified
locations and are in active lease negotiations in over 20 markets including New York, Chicago, Miami, Denver and San Diego,
to name a few. The next-generation Full Line Design Galleries will be larger to accommodate our expanded furniture and Small
Spaces assortments, Baby & Child, Objects of Curiosity and Tableware products, in addition to any future new businesses.
Landlords have embraced our new Full Line Design Galleries with great enthusiasm and are currently offering anchor tenant
leases in some of the most prestigious retail shopping centers in North America. We expect these new opportunities to result in
more predictable timing for executing our real estate transformation, higher developer contributions to our build-outs, and lower
rent per square foot, all of which should drive higher sales, increased earnings, lower capital investment and higher ROIC than
our previously targeted store economics. Our real estate transformation is still in the very early stages and we believe there is a
long runway ahead that will allow us to drive sustainable and profitable growth for many years to come.
We continue to expand our product offering as reflected in the breadth and depth of our assortment. We recently introduced
our Spring 2013 collection across six Source Book titles totaling over 1,600 pages. Our Interiors and Small Spaces Source
Books include the addition of new furniture collections and finishes, the expansion and presentation of color across our
upholstered furniture and textiles collections, and dramatic new lighting collections highlighted throughout the books. In
addition, we introduced two new businesses, RH Objects of Curiosity and RH Tableware, which we believe represent
significant long-term growth opportunities for RH. Further, our newest business, RH Contemporary Art, acquired the first
edition of Rain Room by rAndom International, arguably one of the most admired pieces of modern art in recent history,
with exclusive showing rights in North America. This piece made its U.S. debut in May 2013 and is on display at The
Museum of Modern Art in New York through July 2013. We plan to launch our first freestanding art gallery in the Chelsea
Arts District of New York City and our online platform in Fall 2013.
We have never been more confident in the strategic direction we have chosen for our Company. We have a disruptive and
powerful business model that we believe will drive significant market share gains and support our financial goals for many
years to come. We believe we have dominant product assortments and exclusive products across all categories, and are
offering tremendous value and superior service. We have significant real estate opportunities with very attractive lease
economics. We have made investments in our infrastructure that will continue to leverage as we grow. Each of these attributes
positions us for strong top-line growth, operating margin expansion and improved returns on invested capital for the long term.
All of our accomplishments in 2012 would not have been possible without the strong commitment, relentless effort and
tremendous hard work of every member of TeamResto as well as the outstanding support of our Board of Directors, all of
our artisan partners, service partners, landlords and customers – we thank each and every one of you. We also would like to
welcome all of our new shareholders – we are excited about the future of RH and look forward to updating you all on our
progress.
Sincerely,
Carlos Alberini Gary Friedman
Chief Executive Officer Chairman Emeritus, Creator & Curator
This Annual Report contains “forward-looking statements” within the meaning of the federal securities laws and includes financial measures not prepared in
accordance with generally accepted accounting principles (GAAP). See the discussion under “Special Note Regarding Forward-Looking Statements and
Market Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K included in this Annual
Report for matters to be considered in this regard including reconciliations of non-GAAP financial measures to their closest GAAP equivalent.