Restoration Hardware, Inc. Reports Third Quarter Results

Restoration Hardware, Inc. reported a 10.6% increase in net revenue for the third quarter ending November 3, 2007, while reporting losses of $12.9 million, an increase from $3.7 million based on last year's numbers.

Of the company's total net losses this quarter, $1.4 million was due to various affiliate-related merging agreement efforts and another $0.4 million was related to administrative downsizing.

Though a smaller portion of the losses was the result of various administrative and structural changes, the remainder of the losses has been due to a general decline in consumer activity this holiday shopping season.

The report indicated that the company's $16.6 million revenue increase was the direct result of strategic and operational changes made earlier in the year which led to the substantial growth of the company's "Direct to Consumer" segment, moves that resulted in the segment's taking in of more than half of the company's total third quarter revenue.

With increased activity within the "Direct to Consumer" segment came an increase in supply chain costs that, when combined with the company's increased levels of promotional selling, resulted in a near 1% decline in gross margin, an increase in selling, general and administrative expenses, along with a $0.24 increase in the company's net loss per fully diluted share.

The company also stated that it believes it will have enough liquidity to maintain business practices throughout the 2008 operating year, indicating an availability of $49 million worth of credit after its decision to leverage $20 million for the purpose of increasing its overall inventory value by 6% to $231 million.

Such financial issues, in combination with the high levels of uncertainty caused by the pending merger agreement, have led the company to announce a decision to withhold the release of both its fourth quarter and full-year guidance reports for the time being.