Restoration Hardware 2012 Annual Report Download - page 82

• source sufficient levels of inventory to meet the needs of changes in our store footprint on a timely
basis;
• successfully integrate changes in our store base into our existing operations and information
technology systems;
• obtain or maintain adequate capital resources on acceptable terms;
• avoid construction or local permit delays and cost overruns in connection with the opening of new
stores or the expansion or further remodeling of existing stores;
• maintain adequate distribution facilities, information systems and other operational systems to serve
our new stores and remodeled stores; and
• address competitive, merchandising, marketing, distribution and other challenges encountered in
connection with expansion into new geographic areas and markets.
We have experienced delays in opening some new stores within the time frames we initially targeted, and
may continue to experience such delays in the future. Any of these challenges could delay or prevent us from
completing store openings or the additional remodeling of existing stores or hinder the operations of stores we
open or remodel. If any of these challenges delays the opening of a store, our results of operations will be
negatively affected as we will incur leasing and other costs during the delay without associated store revenue at
such location. New or remodeled stores may not be profitable or achieve our target return on investment.
Unfavorable economic and business conditions and other events could also interfere with our plans to expand or
modify store footprints. Our failure to effectively address challenges such as those listed above could adversely
affect our ability to successfully open new stores or change our store footprint in a timely and cost-effective
manner and could have a material adverse effect on our business, results of operations and financial condition.
Our operating results are subject to quarterly and seasonal fluctuations, and results for any quarter may not
necessarily be indicative of the results that may be achieved for the full fiscal year.
Our quarterly results have fluctuated in the past and may fluctuate significantly in the future, depending upon a
variety of factors, including, among other things, our product offerings, the timing and level of markdowns, promotional
events, store openings, store closings, the weather, remodeling or relocations, shifts in the timing of holidays, timing of
catalog releases or sales, timing of delivery of orders, competitive factors and general economic conditions.
In addition, we historically have realized, and expect to continue to realize, higher net revenue and
profitability in the fourth quarter of our fiscal year due to the holiday selling season and to a lesser extent in the
second quarter due to the outdoor selling season. In fiscal 2012, we recorded net revenues of $292.9 million and
$398.1 million in the second and fourth fiscal quarters or 24.6% and 33.4%, respectively, of our fiscal 2012 net
revenue. In fiscal 2012, our gross profit for the second and fourth quarters was $114.1 million and $145.2 million
or 26.1% and 33.3% of our fiscal 2012 gross profit, respectively. In anticipation of increased sales activity for the
outdoor selling season during our second fiscal quarter and the holiday selling season during our fourth fiscal
quarter, our working capital requirements are typically higher in the first and third fiscal quarters due to
inventory-related working capital requirements for the outdoor selling season and the holiday selling season.
Accordingly, our results of operation may fluctuate on a seasonal basis and relative to corresponding periods
in prior years. We may take certain pricing, merchandising or marketing actions that could have a
disproportionate effect on our business, financial condition and results of operations in a particular quarter or
selling season. For example, we periodically engage in sales promotional activities that are designed to increase
our sales but can have the effect of reducing our gross margins. These initiatives and promotional activities may
disproportionately impact results in a particular quarter and we believe that period to period comparisons of our
operating results are not necessarily meaningful and cannot be relied upon as indicators of future performance.
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