Restoration Hardware 2012 Annual Report Download - page 59

often. This approach is designed to enhance our customer experience, generate greater sales, increase
our market share and deliver higher returns on invested capital.
•Fully Integrated Infrastructure. Our infrastructure is integrated across our multiple channels, providing
three key advantages. First, we have strong direct sourcing capabilities and direct vendor relationships
that contribute to shortened product lead times and reduced merchandise costs. Second, our inventory
is centrally managed across our channels to drive working capital efficiency and optimize product
availability. Third, our reconfigured distribution network and new order management, warehouse
management and point-of-sale systems contribute to improved customer service levels, including
shorter delivery times. Our systems platform has business intelligence reporting capabilities that
provide multi-channel information which enable us to make timely and informed decisions across all
aspects of our business. We believe our infrastructure provides us with a sophisticated operating
platform and significant capabilities to support our future growth.
Our High-Performance Culture and Team. We have built a high-performance organization driven by a
company-wide commitment to our core values of People, Quality, Service and Innovation. The leadership team
led by our Chief Executive Officer, Carlos Alberini, has significant expertise across all of our core functions,
including brand management, product development, sourcing, supply chain, merchandising, finance and
operations. Mr. Alberini is a highly respected financial and operational leader in the retail sector, having most
recently served as President and Chief Operating Officer of Guess? from 2000 to 2010. Mr. Alberini is widely
recognized in the industry for his role in helping to build Guess? into a leading global brand and business. We
also benefit from the vision and advice of Gary Friedman, who serves as our Chairman Emeritus, Creator and
Curator. With over 24 years of experience in executive roles in the specialty home industry, Mr. Friedman is
recognized as a creative force and design leader. We believe our high-performance culture and team are key
drivers of our success and position us well to execute our long-term growth strategy.
Our Growth Strategy
Key elements of our growth 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 retail footprint to a portfolio focused on Full Line
Design Galleries. Our Full Line Design Galleries are sized based on the market potential and the size of our
assortment. As of February 2, 2013, we had three Full Line Design Galleries that averaged approximately 21,800
selling square feet, more than three times the size of our average Gallery. Our Full Line Design Galleries allow
consumers to experience a broader merchandise assortment in a highly differentiated retail setting. We have
found that we experience higher sales across all of our channels when we showcase more of our assortment. We
have identified approximately 50 key metropolitan markets where we can open new Full Line Design Galleries in
iconic or high profile locations that are representative of our luxury brand positioning. We believe, based on our
analysis of the market, that we have the opportunity to more than double our current selling square footage in the
United States and Canada over the next 5 to 10 years as we transform our real estate platform by opening Full
Line Design Galleries in these 50 identified markets.
We opened our first three Full Line Design Galleries in Los Angeles in June 2011, Houston in November
2011 and Scottsdale in November 2012. In the Los Angeles and Houston markets, store demand increased 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. We plan to open new Full Line Design Galleries in
Indianapolis, Greenwich and Atlanta. In addition, we have identified locations, and are in active lease
discussions, in approximately 20 markets including New York City, Chicago, Miami, Denver, Dallas and San
Diego.
3
Form 10-K