Restoration Hardware 2012 Annual Report Download - page 74

Competition
The home furnishings industry is highly competitive. We primarily compete against a large number of
independent retailers that provide unique items and custom-designed product offerings at high price points,
including antique dealers and home furnishings retailers who market to the interior design community. We also
compete with national and regional home furnishings retailers and department stores, as well as with mail order
catalogs and online retailers focused on home furnishings.
We believe we compete primarily on the basis of design, quality, value and customer service. We believe
our distinct combination of design, quality and value allows us to compete effectively and we believe we
differentiate ourselves from competitors based on the strength of our brand, products and our fully integrated
multi-channel business model. We compete with the interior design trade and specialty merchants by providing a
broader product assortment at an exceptional value based both upon the price and quality of our products. We
compete against certain other home furnishings retailers primarily by offering what we believe is superior
quality, highly distinctive design styles and a sophisticated lifestyle presentation in our product offering.
We also believe that our success depends in substantial part on our ability to originate and define product
trends, as well as to timely anticipate, gauge and react to changing consumer demands. Certain of our
competitors are larger and have greater financial, marketing and other resources than us. However, many smaller
specialty retailers may lack the financial resources, infrastructure, scale and national brand identity necessary to
compete effectively with us.
Employees
As of February 2, 2013, we had approximately 3,100 employees, of which approximately 1,000 were part-
time employees. As of that date, approximately 1,700 of our employees were based in our stores. None of our
employees is represented by a union, and we have had no labor-related work stoppages. We believe our relations
with our employees are good.
Intellectual Property
The “Restoration Hardware” and “RH” trademarks and certain variations thereon, such as the Restoration
Hardware and RH logos, the Baby & Child logo and many trademarks used for our product lines are registered or
are the subject of pending trademark applications with the U.S. Patent and Trademark Office and with the
trademark registries of many foreign countries. In addition, we own many domain names, including
“restorationhardware.com,” “rh.com,” “rhbabyandchild.com” and others that include our trademarks. We also
have pending patent applications for some of our proprietary product designs and own copyrights in our catalogs
and websites. We believe that our trademarks, product designs and copyrighted works have significant value and
we vigorously protect them against infringement.
Seasonality
Our business is seasonal, and we have historically realized a higher portion of our net sales, net income and
operating cash flows in the fourth fiscal quarter, attributable to the impact of the holiday selling season. In
addition, some of our product offerings such as outdoor furniture and garden products are seasonal in nature and
experience higher sales during our second fiscal quarter. As a result of these factors, our working capital
requirements and demands on our product distribution and delivery network fluctuate during the year in response
to seasonal trends in our business, and are greatest in the first and third fiscal quarters as we ramp up for the
outdoor selling season and the holiday season, respectively.
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