Restoration Hardware Softens Its Merchandise Mix

It’s curtains for Restoration Hardware. And it’s rugs, sheets, and towels too. The Corte Madera, CA-based housewares and furniture cataloger/retailer plans to expand its line of textiles beginning next spring.

According to catalog director Marta Benson, the merchandise change has been inspired by Gary Friedman, the former president/chief operating officer of Williams-Sonoma, who joined $369.5 million Restoration Hardware as CEO in March. “The feeling is that we have an opportunity in home textiles that we haven’t fully executed,” Benson says.

Catalogs selling an expanded line of towels, bed linens, and draperies will drop around April of next year — the same time that the products become available in the company’s stores. The company has not yet determined price points for the line.

Although Restoration Hardware currently sells some draperies, towels, and bed linens, its selection of textile products is “underwhelming,” Benson says. “If we’re going to be a destination for home furnishings, then we need to have a complete offer for our customers. For example, if we sell them a sofa and a bookcase, why should we make them go elsewhere for a rug or drapery panels?”

Smart thinking, agrees Chris Carrington, president of King of Prussia, PA-based catalog consultancy Catalogs by Lorel. “If the company is able to source curtains and linens that reflect its unique positioning of nostalgia laced with wit, that would complement its merchandise mix and potentially increase average order sizes,” she says.

Soft goods, firm margins

That textiles have a higher margin than most hard goods is another good reason for Restoration Hardware to expand within that market. According to Shawnee Mission, KS-based catalog consultancy J. Schmid & Associates, the margin for textiles is roughly 55%-60%. By contrast, the margin of furniture is around 45%-55%.

A shift in the product line toward textiles could mean changes for the catalog’s creative. “We see an opportunity to evolve the look and feel of the catalog to support the new merchandise,” Benson says. The company also sees an opportunity to trim its creative and production costs when it introduces the new textiles.

For instance, the company might change the trim size of the catalog to the more standard 8″ × 11″. “When we started out in the mail, we differentiated ourselves by producing a square catalog,” which measures roughly 8-3/4″ × 9-1/4″, Benson says. “But that size and our use of the fifth color [to create the company’s signature silver-sage border] are not as efficient for us now. I think that people know who we are now — with our catalog and 104 stores, we’re a national brand.”

Even as a national brand, however, Restoration Hardware needs to improve its performance, particularly in the slowing economy. The company suffered a net loss of $7.0 million for the quarter ended May 5 — 63% greater than the $4.3 million net loss for last year’s first fiscal quarter. Net sales decreased nearly 3%, to $67.9 million from $69.7 million. But its direct sales — namely catalog and Internet sales — climbed 50%, to $6.3 million from $4.2 million. In a statement, Friedman said Restoration Hardware plans to accelerate markdowns and significantly reduce its SKU count during the next two quarters.

Benson says that the company plans to shelve some of its lower-priced items, such as Moon Pie snack foods and kazoos, which she refers to as “discovery” items that shoppers come across in the catalog or a store. “We haven’t been as disciplined as we could have been in retiring many of those items, and bringing in a few new ones,” she says. “They’re great products, but they need a shorter life span.”

For previous coverage of Restoration Hardware — along with other articles from past issues and the Catalog Age e-mail newsletter — visit the Catalog Age Website at www.CatalogAgemag.com

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