Restoration Hardware 2012 Annual Report Download - page 80

If we lose key personnel or are unable to hire additional qualified personnel, our business may be harmed.
The success of our business depends upon the continued service of our key personnel, including our Chief
Executive Officer, Carlos Alberini. In addition, the leadership and creative talents of Gary Friedman, our
Chairman Emeritus, who currently serves as our Creator and Curator on an advisory basis, have been and are
expected to continue to be important contributors to our performance. The loss of the services of our key
personnel or advisor could make it more difficult to successfully operate our business and achieve our business
goals. In addition, we do not maintain key man life insurance policies on any of our key personnel. As a result,
we may not be able to cover the financial loss we may incur in losing the services of any of our key personnel.
Mr. Alberini’s and Mr. Friedman’s equity ownership in our Company may give them a substantial amount
of personal wealth. As a result, it may be difficult for us to continue to retain and motivate them, and this wealth
could affect their decisions about whether or not they continue to perform services for us. If we do not succeed in
retaining and motivating Mr. Alberini and Mr. Friedman, we may be unable to achieve our historical growth
rates.
Competition for qualified employees and personnel in the retail industry is intense. We may be unable to
retain other existing personnel that are important to our business or hire additional qualified personnel. The
process of locating personnel with the combination of skills and attributes required to carry out our goals is often
lengthy. Our success depends to a significant degree upon our ability to attract, retain and motivate qualified
management, marketing and sales personnel, in particular store managers, and upon the continued contributions
of these people. We cannot assure you that we will be successful in attracting and retaining qualified executives
and personnel.
In addition, our success depends in part upon our ability to attract, motivate and retain a sufficient number
of store employees who understand and appreciate our corporate culture and customers. Turnover in the retail
industry is generally high. Excessive store employee turnover will result in higher employee costs associated
with finding, hiring and training new store employees. If we are unable to hire and retain store personnel capable
of consistently providing a high level of customer service, our ability to open new stores may be impaired, the
performance of our existing and new stores could be materially adversely affected and our brand image may be
negatively impacted.
Our operations have significant liquidity and capital requirements and depend on the availability of adequate
financing on reasonable terms, and if we are unable to borrow sufficient capital, it could have a significant
negative effect on our business.
Our operations have significant liquidity and capital requirements. Among other things, the seasonality of
our businesses requires us to purchase merchandise well in advance of the outdoor selling season in our second
fiscal quarter and the holiday selling season in our fourth fiscal quarter. In addition, we have invested significant
capital expenditures in remodeling and opening new stores and these capital expenditures have increased and will
continue to increase in fiscal 2013 and succeeding fiscal periods as we open additional Full Line Design
Galleries, which may require us to undertake upgrades to historical buildings or construction of new buildings.
During fiscal 2012, we spent $27.8 million for capital expenditures related to new stores and remodeling, and we
incurred $21.3 million of additional capital expenditures related to supply chain investments and systems
infrastructure. We anticipate our capital expenditure requirements to be approximately $95 million to
$100 million for fiscal 2013. We plan to continue our growth and expansion, including opening Full Line Design
Galleries in select major metropolitan markets, pursuing category extensions of our brand, and exploring new
business areas. We purchased the building and land for our store in San Francisco but we have relied upon leases
with landlords for our other locations to date. As we develop new stores in the future, we may explore other
models for our real estate which could include joint ventures or other forms of equity ownership in the real estate
interests associated with new sites and buildings. These approaches might require greater capital investment than
a traditional store lease with a landlord.
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