Restoration Hardware 2012 Annual Report Download - page 57

PART I
Item 1. Business
Overview
We believe RH is one of the most innovative and fastest growing luxury brands in the home furnishings
marketplace. We believe our brand stands alone and is redefining this highly fragmented and growing market,
contributing to our superior sales growth and market share gains over the past several years as compared to
industry growth rates. 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. We evolved our brand to
become RH, positioning our Company to curate a lifestyle beyond the four walls of the home. 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.
Our business is fully integrated across our multiple channels of distribution, consisting of our stores,
catalogs and websites. As of February 2, 2013, we operated 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 throughout the United States
and Canada. In fiscal 2012, we distributed approximately 32.7 million Source Books, and our websites logged
over 18.9 million unique visits.
Over the last several years, we have achieved strong growth in sales and profitability, as illustrated by the
following:
• From fiscal 2010 to fiscal 2012, we increased our net revenues 54% to $1,193 million, our adjusted
EBITDA 135% to $96.6 million and our adjusted EBITDA margin by 280 basis points to 8.1%.
• From fiscal 2010 to fiscal 2012, we increased our adjusted net income by $34.7 million from
$3.0 million to $37.7 million. Over the same time period, our GAAP net loss increased from
$7.1 million to $12.8 million.
• We have achieved 12 consecutive quarters of double-digit net revenue growth through our fiscal
quarter ended February 2, 2013. We achieved this growth as we reduced our store base from 95 retail
locations as of January 30, 2010 to 71 locations as of February 2, 2013.
See “Selected Historical Consolidated Financial and Operating Data” for a discussion of adjusted EBITDA, and a
reconciliation of adjusted EBITDA to net income (loss). See “Basis of Presentation and Results of Operations”
within Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations for a
discussion of adjusted net income and a reconciliation of adjusted net income to net income (loss).
Our Competitive Strengths
We attribute our success to the following competitive strengths:
Our Market-Redefining Luxury Brand. We believe RH stands alone as a leading luxury brand of inspired
design, and is redefining the highly fragmented home furnishings market. We provide dominant merchandise
assortments across a growing number of categories and feature a highly differentiated style, presentation and
customer experience. We believe that offering a compelling combination of design, quality and value enables us
to remain relevant with our target customer and expand our reach. We believe we are changing the home
furnishings landscape by attracting affluent consumers from designer showrooms and high-end boutiques with
our compelling value proposition, as well as aspirational consumers trading up to our more sophisticated
aesthetic relative to what can be found in department stores and other home furnishings retailers. We believe this
has led to our superior sales growth and market share gains over the past several years as compared to industry
growth rates. In a market characterized by smaller, independent competitors, we believe our luxury positioning,
superior quality and significant scale enable us to grow our market share.
1
Form 10-K