Restoration Hardware 2014 Annual Report Download - page 15

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Item 1A. Risk Factors
Certain factors may have a material adverse effect on our business, financial condition, and results of
operations. You should consider carefully the risks and uncertainties described below, in addition to other
information contained in this Annual Report on Form 10-K, including our consolidated financial statements and
related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and
uncertainties that we are unaware of, or that we currently believe are not material, may also become important
factors that adversely affect our business. If any of the following risks actually occurs, our business, financial
condition, results of operations, and future prospects could be materially and adversely affected. In that event,
the trading price of our common stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business
Growth in our business may not be sustained and may not generate a corresponding improvement in our
results of operations.
We may not be able to maintain or improve the levels of growth that we have experienced in the recent past.
In addition, although we have recently experienced strong comparable brand revenue growth, if our future
comparable brand revenue growth fails to meet market expectations or decline, the price of our common stock
could decline. Various factors affect this measure, including the number, size and location of stores we open,
close, remodel or expand in any period, the overall economic and general retail sales environment, consumer
preferences and demand, our ability to efficiently source and distribute products, changes in our product
offerings, competition, current local and global economic conditions, changes in Source Book circulation and the
success of marketing programs. These factors may cause our comparable brand revenue growth to be materially
lower than recent periods and our expectations, which could harm our results of operations and result in a decline
in the price of our common stock.
Although we experienced sustained sales growth over the last several years, this sales growth may not
continue or may not continue at the same rate and the level of our sales growth may slow or even decrease in
future periods and may vary from year to year, including if the favorable customer response to our product
offerings is not sustained. Many factors can influence customer response to our product offerings and store
formats including responses from our competitors, who may introduce similar products or merchandise formats.
In addition, sales levels for particular merchandise or product categories may not continue over time if customer
demand levels are not sustained. The level of customer response to our next generation Galleries may vary in
different markets and store locations. Similarly, the level of customer response to our Source Book format, in
which we display a greater percentage of our product assortment, may vary in different markets. In addition,
there can be no assurance that we will be able to migrate customer demand successfully when we choose to close
a store in a particular location in favor of a next generation Gallery in the same or an adjacent market location.
While our objective is to retain a high percentage of customer demand from store locations that we close, there
can be no assurance that we will retain a high percentage of sales from stores closed in the future or that we will
continue to retain a high percentage of sales from stores previously closed.
In addition, these developments in our business could result in material changes in our operating costs,
including increased merchandise inventory costs and costs for paper and postage associated with the mailing and
shipping of Source Books and products. We cannot assure you that we will succeed in offsetting these expenses
with increased efficiency or that cost increases associated with our business will not have an adverse effect on
our financial results.
If we fail to successfully anticipate consumer preferences and demand, or to manage our inventory
commensurate with demand, our results of operations may be adversely affected.
Our success depends in large part on our ability to originate and define home product trends, as well as to
anticipate, gauge and react to changing consumer demands in a timely manner. Our products must appeal to a
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