Financial Reports: Direct Business Soars at Restoration Hardware

The catalog and Internet businesses of Corte Madera, CA-based cataloger/retailer Restoration Hardware (Nasdaq: RSTO) showed strong fourth quarter and annual growth and outpaced the overall growth at the gifts and home goods marketer.

Revenue for the direct-to-customer division, which includes catalog and Internet sales, increased 51% to $26.6 million for the fourth quarter of fiscal 2003, compared with $17.6 million last year.

Overall net revenue in the fourth quarter ended Jan. 31 increased 6%, to $165.0 million, compared with $155.2 million in net revenue last year. Net income for the fourth quarter fell 19%, to $7.9 million as compared to $9.7 million last year. The company says that earnings were below last year’s fourth quarter as a result of lower than expected holiday sales, and higher markdowns to clear holiday merchandise.

The company’s direct division also enjoyed substantial annual gains as well. Revenue for the direct-to-customer division increased 52% to $67.9 million for the year ended Jan. 31, compared with $44.7 million last year. Restoration Hardware reported a 10% increase in net revenue to $438.5 million, compared with $400.3 million last year. Comparable store sales for fiscal 2003 increased 5%.

Restoration Hardware lessened its loss from the previous year to $2.9 million, compared with a loss of $4.0 million last year. In addition, prior year’s results included an income tax benefit of $4.0 million realized by the company due to the economic stimulus bill enacted in 2002, which did not repeat in fiscal 2003. Excluding the effect of the income tax benefit, the loss available to common stockholders for fiscal 2002 was $8.0 million.

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