Restoration Hardware 2014 Annual Report Download - page 50

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In order to drive growth across our business, we are focused on the following key strategies:
•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.
•Expand Our Offering and Increase Our Market Share. We believe we have a significant opportunity to
increase our market share by:
• Growing our merchandise assortment;
• Introducing new products and categories;
• Expanding our service offerings;
• Exploring and testing new business opportunities complementary to our core business; and
• Increasing brand awareness and customer loyalty through our circulation strategy, our digital
marketing initiatives and our advertising and public relations activities and events.
•Increase Operating Margins. We have the opportunity to continue to improve our operating margins by
leveraging our fixed occupancy, advertising and corporate general and administrative costs, as well as
leveraging our scalable infrastructure. Key areas in which we believe we will increase operating
margins include:
• Occupancy leverage;
• Advertising cost leverage;
• Improved product margin and shipping efficiencies; and
• Other selling, general and administrative expenses.
•Pursue International Expansion. We plan to strategically expand our business into select countries
outside of the United States and Canada over the next several years. We believe that our luxury brand
positioning and unique aesthetic will have strong international appeal.
Our fiscal 2014 results reflect the ongoing strength of our business. We have continued to increase market
share, and at the same time invested in our infrastructure and supply chain to support future growth. Key
financial achievements of fiscal 2014 include:
• 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.
• Net income increased to $91.0 million in fiscal 2014 from $18.2 million in fiscal 2013.
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