Has Restoration Hardware Gone Too Far With Its Catalogs This Time?

Big catalogs have paid off for this upscale home furnishings retailer before, so in 2014 Restoration Hardware has sent out even more catalogs.

Jun 2, 2014 at 5:30PM

While catalogs may seem like a relic to some shoppers at a time when online shopping continues to gain traction, their retro appeal benefits some companies. Restoration Hardware (NYSE:RH) sells a variety of classic home decoration products, appliances, and furniture through catalogs and huge stores that, when entered, are reminiscent of museums. In fact, this retailer actually bought an old museum in Boston and made it into one of its stores. This upscale home furnishings retailer has also gained notoriety for sending out huge catalogs to its customers. As the catalog shipments from Restoration Hardware have grown larger over the years, the retailer's revenue has risen dramatically as well. This year's shipment might be too much for some customers, although this catalog oriented strategy has been very successful in past years. 

An effective but controversial catalog strategy
Restoration Hardware received criticism back in 2011 for sending out a huge catalog. While the retailer tried to promote its huge catalog as environmentally friendly even back then, noting that it contained recycled paper, some critics weren't convinced. The next year, Restoration Hardware sent out another catalog with a page count more than 50% higher. While the catalog was costly and many viewed it as wasteful, it did succeed in getting the retailer the attention and the customers it wanted.

For its first year as a public company again, Restoration Hardware posted some incredible comps numbers. The upscale home furnishings retailer posted same-store sales growth of 28% (without including the extra calendar week) against a figure of 25% for the previous year. These figures actually surpassed its overall revenue growth, so new stores didn't drive its revenue growth; total revenue grew by 24% in 2011 and 22% in 2012, again without including the extra week for 2012.

After the success of this strategy in 2013, once again Restoration Hardware shipped out a huge catalog and put up some huge same-store sales numbers. While the catalog the retailer shipped out in 2011 weighed more than three pounds, it sent out a six-pound package of catalogs in 2013.Once again, the catalogs did their job. At the end of the year, the retailer posted revenue growth of 33% and same-store sales growth of 27% (on a 52-week basis).

Customers got a lot more catalogs in 2014
In May 2014, the catalog delivery from Restoration Hardware nearly tripled in weight to tip the scales at 17 pounds. Actually, the retailer shipped out 13 separate catalogs altogether, which it calls source books. Once again, the retailer promoted its source books as environmentally friendly. It said that it used carbon-neutral shipping, and explained that its customers would now only receive the source books once per year. However, this time Restoration Hardware may have gone too far with its catalogs.

Unusually, Restoration Hardware doesn't have its own Facebook page aside from the default Wikipedia entry, although this might help the brand appear more exclusive. The retailer also hasn't used Twitter to make any tweets since March 2011. However, the 17-pound catalog package has received some attention on other sites, where people complained about receiving the catalogs, complained about their impact on the environment, and mentioned throwing them out. In addition, the Boston Globe shared an article about the 17-pound catalog delivery on Facebook, and its post received similar comments. Even with the complaints, market conditions seem favorable for Restoration Hardware right now.

The high-end home furnishings market
While Williams-Sonoma (NYSE:WSM) has not been growing as rapidly as Restoration Hardware has recently, it still posted encouraging results for the first quarter of 2014. Overall same-store sales jumped up 10%, led by West Elm with a blazing 18.8% rise and Pbteen with a strong 12% rise. While the main Williams-Sonoma brand reported a slightly weaker performance at 6%, this still shows that the market for high-end home furnishings is growing right now.

Foolish takeaway
Restoration Hardware seems like it's hitting on all cylinders, and the results from Williams-Sonoma show the strength of the sector. While Restoration Hardware doesn't look very good on earnings-based metrics at the moment, it appears that the retailer is investing in growth (and lots of catalogs) and shareholders are OK with that considering the numbers it's been putting up. The main risk for this retailer is that it may have angered its customers by sending 17 pounds of catalogs to their homes. Aside from that, its strategy seems to be working.

Your cable company is scared, but you can get rich
Restoration Hardware and Williams-Sonoma aren't the only companies fighting it out for places in your living room. You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Eric Novinson has no position in any stocks mentioned. The Motley Fool recommends Facebook, Twitter, and Williams-Sonoma. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers