Restoration Hardware’s Direct Sales Surge, Profits Fall

Second-quarter sales for home decor, furniture, and gifts cataloger/retailer Restoration Hardware increased 2.5%, to $183.8 million, but the company incurred a net loss of $7.9 million. In the same quarter last year, the company posted a profit of $236,000. Direct sales for the second quarter rose 38% to $93.8 million, up from $67.9 million in the second quarter last year.

The Corte Madera, CA-based merchant announced changes in segment reporting beginning in the second quarter. All small package direct-to customer shipments have been funneled into one direct channel. Historically, the shipments originated from three facilities: a direct-to-customer direct channel and two retail replenishment direct channels. Revenue associated with these shipments is now being reflected in its direct segment.

President/CEO Gary Friedman said in a release that second-quarter results reflect “the challenging home furnishings environment and weakness in the home building sector.” He noted that the company would continue to focus on strategic growth initiatives, “which are expected to contribute to a revenue increase of 7% to 9% in the second half of 2007. Additionally, the cumulative effect of reduced catalog production costs, other cost-cutting actions, and the elimination of headquarters positions we announced in mid-August, will drive profit improvement in the second half. We expect operating income to be in the range of $15 million to $19 million, which compares to $12 million in the second half of last year.”

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