Third quarter 2004 should have been a very successful period for Restoration Hardware. Its retail revenue rose from $79.9 million a year earlier to $89.7 million, partly on the strength of new stores. Direct-to-consumer sales nearly doubled, from just under $16 million to $28.4 million during the quarter that ended on Oct. 30.
But despite overall revenue growth from $95.8 million to $118.2 million, the Corte Madera, CA-based home furnishings marketer recorded a net loss of $3.1 million, a greater loss than the $2.9 million it generated a year ago. And the reason for this is largely increased advertising costs stemming from higher catalog circulation.
The company had boosted catalog circulation levels for its September mailing, but did not generate sales to justify its increase. It scaled back its mailing plans starting with the October catalog, and will maintain advertising costs as a percentage of its total revenue in line with their historical levels for at least the remainder of the year.
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