Restoration Hardware Inc. has reported that a significant share of its revenues have shifted from retail to direct marketing sales.
The company reported direct marketing sales for the third quarter that ended Nov. 3 were $97.2 million, an increase of $16.6 million compared to the same quarter last year.
Restoration Hardware generated 56% of total revenues from its catalog in the third quarter this year, compared to 36% during third quarter of 2006.
The Corte Madera, CA-based firm attributed the shift to greater direct sales to increased catalog circulation and adding more pages to catalogs.
It reported $76.5 million in revenues for its stores in the third quarter.
Wow! They must really be doing great, huh?
Let's see what was omitted from this report from Direct Magazine. Compare with a statement written by PR Newswire, via Excite:
- EBIDTA was a loss of $15 million in Q3-2007, vs. a loss of $5 million in Q3-2006. In other words, Restoration Hardware lost 3x as much money in a quarter where "catalog" sales increased dramatically.
- Direct-to-Consumer (Catalog + Internet) sales were 56% of total ... Direct Magazine quoted that 56% of the sales were Catalog. Ugh.
- SG&A rose 4.1%, as the direct-to-consumer channel has a higher expense rate than the retail channel. In other words, sales shifted to the direct-to-consumer channel, where less sales flow-through to profit than in the retail channel. Also, pages circulated increased, adding to marketing expense.
If you're reading Direct Magazine, you learn that catalog results were great!
If you're reading the actual comments from management, you learn that direct-to-consumer (catalog + online) sales increased, but more marketing dollars were spent to cause this shift, and it required more operational expense to process the sales, in-part leading to a dramatic decrease in profit of $10,000,000 in the quarter.
Also, if all those multichannel pundits are "right", why didn't all this catalog marketing, all of this paper in the mail, cause retail sales to increase dramatically? I thought paper drove sales in retail stores? Isn't that what we're told, over and over and over?
Retail sales were down 24% vs. last year's third quarter.
What do you do to filter the content you read via trade journals and vendors, or do you filter the content?
You know, Kevin, it's very hard to filter out news stories, especially B2B news. Your example was perfect--Direct Magazine was looking for a catalog success story and that's exactly what they found.ReplyDelete
I think blogs and blog comments become more and more important to help 'get' to the real truth. It's getting so much easier to see the whole story, thanks to bloggers.
Your blog today was a perfect example of my theory :)
I think it would be fine to highlight the increased catalog sales they observed.ReplyDelete
And then it would be fine to tell the entire story, that this busisness added expense, and observed a huge drop in profitability. Just state the facts.
Weel, since Resto increased its trade discount (for interior designers) to 20%, we've been recommending their products religiously. An average ticket can save our clients over a grand. This discount is absolutely critical to trade sale recommendations.ReplyDelete
I live in San Francisco but I don't have a car so I haven't made it to the RH store. However, I'm about to order a couple of their crystal lamps because of their 20% Friends & Family sale. I'd love to see the items in person first but it seems that more of the big stores, i.e. Ikea, aren't located in the city. If they were, I'd be much more likely to purchase some larger items. I'm looking for a sofa and I see one I like but I won't purchase something like that without sitting in it first. Between their cataslogs, emails & sales, I'm definitely drawn to this store.ReplyDelete