During an investor call Thursday, Gary Friedman, the company's chairman, president and CEO, said the remodeling program will require an investment of $15 million and will result in the removal of some existing store fixtures, which is estimated at $1.2 million to $1.6 million. Costs of the renovations will be fully expensed in the second quarter, resulting in a non-cash charge of 2 to 3 cents per share.
Net revenue increased 19% to $117.5 million for the first quarter of 2005 versus net revenue of $98.9 million for the same period last year. Comparable store sales for the first quarter of fiscal 2005 increased 5% on top of a 9% increase in the first quarter of fiscal 2004.
"Strong sales were led by outdoor furniture, textiles, hardware, bathware and lightings," Friedman told investors, "while we strategically contracted non-core discovery items in the furniture accessories category."
Direct sales revenue increased 50% in the first quarter of 2005 on top of a 94% increase in the same period a year ago. Operating results improved 27% to a loss from operations of $4.3 million for the first quarter of fiscal 2005 compared to a loss of $6 million in last year's first quarter.
Net results for the first quarter of fiscal 2005 reflected a net loss of $3.1 million or 9 cents per share as compared to a net loss of $3.9 million or 12 cents per share in the first quarter of the prior year. Inventory for Q1 posted at $144.2 million up 22% from the prior year's first quarter, and consistent with increases in sales levels.
The company plans to initiate a new strategy in its lighting offerings this fall "making Restoration Hardware a leader in this category," Friedman said. Because of this initiative, several items in this category were marked down in the first quarter. Friedman also said the company will be enhancing the design of its catalogue, and improving supply chain management for its custom upholstery category.
"Our focus on building dominant core businesses is creating consistency and predictability with our customers and has reduced seasonal markdown risk," Friedman said. "Additionally, cost improvements in our distribution and supply chain due to new leadership, gives us confidence in achieving our profitability goals for the year."
In Q1, Restoration Hardware operated 102 retail stores and 2 outlet stores in 30 states, the District of Columbia and Canada.
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