Restoration Hardware 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Monster growth numbers

“Net revenues increased 33% and comparable brand revenues increased 31% on top of the 28% increase last year, representing our fourth consecutive year of comparable brand growth in excess of 25%. This is even more impressive considering the elimination of our fall source book and the consolidation of our store base. In 2013 we expanded operating margins by 200 basis points and grew adjusted net income by 92%”

A disruptive platform

“the disruptive power of our product platform. Our demonstrated ability to innovate, curate and integrate new products, categories and businesses, and then scale them across a fully integrated multichannel platform is, we believe, unique in the industry and a powerful competitive advantage.”

Defy the conventional wisdom that everyone is moving to the web

“we’ve continued to innovate, test and prove that we can build a retail experience that defies the current conventional wisdom that everyone is moving to the web and retail stores are dead. We have proven just the opposite and continue to develop new and more exciting concepts that will create an even more compelling and highly experiential environment for our customers.”

A next generation anchor tenant

“Last year we learned that we could partner with developers and create a win-win by moving from a tenant who occupies high cost interior mall space or street space to adding value by positioning ourselves as a next-generation anchor tenant who can help transform the mall or a neighborhood.”

A $4 B company trapped in secondary real estate

“we believe we are a $4 billion to $5 billion company trapped in billion-dollar of legacy real estate.”

Strong real estate pipeline

“As we look to 2015 and beyond, our real estate pipeline is strong and includes opportunities to serve as an anchor tenant in some of the best centers and streets in the country, with significantly larger stores and lower occupancy rate. We have signed leases for five next-generation full-line design galleries and are in negotiations for an additional 25 locations.”

No one has ever made furniture of this quality in this quantity

“No one has made furniture of this quality in these quantities before. And we believe our proprietary network of artists and partners creates a long-term competitive advantage.”

Destroy today’s reality

“Real value has always been created by those who have the courage to lead rather than follow, who are willing to destroy today’s reality to create tomorrow’s future. We have created a unique and winning brand, one that you should expect will continue to destroy its own reality to create tomorrow’s future. And we look forward to sharing in the value-creation with all of our stakeholders.”

Weather had some effect

“I think if you’re a retail customer and you want to go to the store and interact with the goods before you, like say, like test-drive a car, you may not make that sale. And if someone’s delaying their visit to the store and that was the day that the husband and wife could have gone, and now they’re kind of snowed out, could it delay sales purchases for a month or two, I think so. Because unless you’ve moved into a new home and you don’t have furniture, the urgency is not as great, right? It is a purchase that you can put off.”

Be better stewards of capital

“be better investors and better stewards of our capital, and getting to every level of detail. And that’s just kind of our DNA by the way, and that’s why everything here always evolves and always changes, right? As new data comes in, as new information comes in, new thoughts and new debates happen inside the company, it brings forth a new and better view.”

have debates, improvise

“And one of the things that I think is one of the strengths of the company is we have those debates and we continue to evolve and we are quick to make a decision. You know, we’re not the kind of company that gets better information in the first quarter, second quarter ago, well, that’s the plan in the year, I’m sorry, you know, that’s what we’re doing. We are constantly iterating. We are constantly improvising, adapting and overcoming and trying to get better every single day.”

This is not cookie cutter

“this is a not cookie cutter, 3,000 square-foot retail rollout that has the same assortment in every market, that you slap up a storefront and just go. This is a much more intricate and complex investment strategy.”

Very complex for a home goods retailer to expand internationally

“ost of the other international moves I’d say are much riskier than domestic growth. And what’s very different about a company like ours than, you know, if we were apparel or anything else, is the backend. You could say like, okay, am I going to build a big DC over there, am I going to put all that inventory over there? Am I going over there with all of the assortment, part of the assortment? Why and how and where? And where do we think the business is going to come from by market?

I mean it’s — international, for our business, very, very complex.”

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