Restoration does plan to upgrade its point-of-sale system, according to W.R. Hambrecht analyst Kristine Koerber, but its unclear whether the system will be installed in 2004. The company has sent to suppliers a request for proposals. A comparison between Restoration Hardware and peers such as Williams Sonoma and Pier 1 reveal the retailers inefficiencies. According to Raymond James Financial, a St. Petersburg, Fla.-based brokerage, Restoration Hardware brings up the rear in several key categories. Restoration only turned over inventory 1.9 times in the 12 months ending Nov. 1. Kitchen-goods retailer Williams Sonoma turned its inventory into sales 3.2 times. And Restorations gross profit margin checked in at 30 percent, tying it with the lowest of its peers. Those operating metrics come even as Restoration Hardwares same-store sales growth in each of the last four quarters averaged 7 percent over the previous years quarter.Restoration Hardware executives havent been totally ignoring operational improvements. Catalog and Web sales were up 40 percent for the nine weeks ended Jan. 3, compared to the prior year. In 2002, the retailers Web site was put on Art Technology Groups electronic-commerce software, which increased the possible number of simultaneous customers to 12,000 from 150. Check out eWEEK.coms Enterprise Applications Center at http://enterpriseapps.eweek.com for the latest news, reviews, analysis and opinion about productivity and business solutions. The retailer outsources call centers, customer-order management and fulfillment for its direct sales to NewRoads, a business-process-outsourcing company based in Alpharetta, GA. Analysts say Restoration Hardwares decision to outsource its Web and catalog fulfillment hints that the company realizes its supply chain needs improvement. Michael Napolitana, an analyst at JMP Securities, wrote in a Jan. 9 report that the company needs to fix its infrastructure before it opens more doors. "Restoration will need to address its legacy systems and supply chain processes before any new store growth is launched," wrote Napolitana.
Analysts say its unclear whether Restoration Hardwares current management can make the retailer more efficient. Most of the executives come from merchandising backgrounds and arent known for technology or supply-chain prowess. Gary Friedman, Restoration Hardwares chief executive officer, was a Williams Sonoma veteran who was brought in nearly three years ago as Restoration flirted with bankruptcy. Friedman has revamped the merchandise selection to boost sales, a process that has largely been successful. He also closed stores, remodeled existing ones and increased the number of goods imported directly.