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Restoration Hardware Q4 profit tops Street; develops smaller format

RH (Restoration Hardware) reported better-than-expected quarter earnings for its fourth quarter and said it will return to an expansion strategy in 2019.

The luxury home furnishings retailer reported net income of $261,000, or 1 cent a share, for the quarter, compared with $9.4 million, or 23 cents a share, in the year-ago period. The most recent quarter included a $33.7 million impairment charge related to the company’s Waterworks acquisition. Adjusted for one-time items, RH earned $43.3 million, or $1.69 a share, above the $1.56 per share analysts had expected.

Sales rose 14% to $670.3 million. Analysts had expected sales of $672 million. Same-store sales increased 2%.

RH plans to open four new locations (“Galleries”) in 2018, Portland, Ore.; Nashville; Yountville, Calif.; and New York City. The latter three will feature cafés, wine vaults and coffee bars. The New York location, in Manhattan’s Meatpacking District, will feature six levels connected by a grand staircase, a dramatic central atrium with stacked cast iron columns, and a glass elevator that goes up to a rooftop café encased in a glass box.

RH said it has developed a new smaller format, ranging from 29,000 sq. ft. to 33,000 sq. ft. Its reduced square footage and efficient design has enabled more capital efficiency, with less time and cost risk, according to the company.

“We anticipate these new Galleries will represent approximately two thirds of our target markets and enable us to ramp from three to five new Galleries per year to a pace of five to seven,” company chairman and CEO Gary Friedman stated.

Looking to 2019, Friedman said the company plans to return to a product and business expansion strategy, which has been on hold as it focused on its move to a membership model and the architecture of a new operating platform.

“We have several new business and brand extension plans in our pipeline, and look forward to unveiling them beginning next year,” Friedman said.
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