Restoration Hardware 2014 Annual Report Download - page 5

Download and view the complete annual report

Please find page 5 of the 2014 Restoration Hardware annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

PART I
Item 1. Business
Overview
Restoration Hardware Holdings, Inc. (“RH” or the “Company”) is a leading luxury retailer in the home
furnishings marketplace. Our collections of timeless, updated classics and reproductions are presented
consistently across our sales channels in sophisticated and unique lifestyle settings that we believe are on par
with world-class interior designers. We offer dominant merchandise assortments across a growing number of
categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware and children’s
furnishings. Our ability to innovate, curate and integrate products, categories, services and businesses with a
completely authentic and distinctive point of view, then rapidly scale them across our fully integrated multi-
channel infrastructure is a powerful platform for continued long-term growth. We evolved our brand to become
RH, positioning our Company to curate a lifestyle beyond the four walls of the home. Our unique product
development, go-to-market and supply chain capabilities, together with our significant scale, enable us to offer a
compelling combination of design, quality and value that we believe is unparalleled in the marketplace.
Our business is fully integrated across our multiple channels of distribution, consisting of our stores,
catalogs and websites. As of January 31, 2015, we operated a total of 67 retail stores throughout the United States
and Canada, consisting of 57 Legacy Galleries, 7 larger format Galleries and 3 Baby & Child Galleries, as well
as 17 outlet stores.
We have achieved strong growth in sales and profitability, as illustrated by the following:
• Net revenues increased 20% to $1.9 billion in fiscal 2014, on top of a 30% increase in fiscal 2013 and a
25% increase in fiscal 2012. This marks our fifth consecutive year of net revenue growth in excess of
20%.
• The fourth quarter of fiscal 2014 marked our 20th consecutive quarter of double-digit net revenue
growth.
• Our net income increased to $91.0 million in fiscal 2014 from $18.2 million in fiscal 2013.
• Our adjusted net income increased 41% to $97.6 million in fiscal 2014 from $69.1 million in fiscal
2013.
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 legacy retail footprint to a portfolio of larger format,
next generation Galleries that are sized to the potential of each market and the size of our assortment. On
average, our legacy retail stores display less than 10% of our current product assortment. Our next generation
Galleries allow us to optimize our selling space by displaying a greater percentage of our merchandise
assortment, as well as future product expansions and new businesses, in a highly differentiated retail setting.
Based on our historical performance, when a product is presented on the selling floor, we experience an increase
in sales for that product across all of our channels.
Based on recent trends and our plans for product assortment expansion and new businesses, we are generally
targeting a range of 25,000 to 60,000 leased selling square feet for new locations. Landlords are currently
offering us leases that accommodate these space requirements and that have favorable terms, which are typically
available only to anchor tenants. Based on our analysis, we believe we have the opportunity to operate next
generation Galleries in 60 to 70 locations in the United States and Canada.
1