Quirky home store chain Restoration Hardware, which during the last two years has gone from market darling to Wall Street dud, is looking to remodel its business by putting former Williams-Sonoma Inc. President Gary Friedman in the top job.
The question Thursday was whether Friedman, long known as the brilliant merchandiser behind Williams-Sonoma and Pottery Barn stores, is the best choice to lead a company that many say has great products but a disappointing financial performance.
"I don't think there's any question that his talent lay in merchandising, he was a visionary," said Shelly Hale, an analyst with Banc of America Securities in San Francisco. "But at Williams-Sonoma, some didn't think he demonstrated the ability to take the company to the next level, financially and operationally."
At the same time the company announced Friedman's role, Restoration reported better-than-expected earnings for its fourth quarter and a $15-million cash infusion from private investors--particularly positive news for a chain that has had numerous operational and sales difficulties over the last two years.
On a conference call with analysts Thursday, Friedman talked about paring down the mix of goods at Restoration--eliminating some of founder Stephen Gordon's sentimental items that many think give the store its charm.
In their place, Friedman said, belong higher-margin "lifestyle" products that the upscale Restoration customer wants, such as window treatments, linens and floor coverings. But Friedman is careful to say that he will not be building a new Pottery Barn.
"From a quality perspective, Restoration has always been above Pottery Barn," Friedman said. "I think there's a void in the marketplace between Pottery Barn and the interior designers of the world."
Friedman succeeds Restoration Hardware founder Gordon, who opened his first store in Eureka in 1980. He will remain chairman.
Known for its re-creations of classic American goods--an offbeat mix of high-priced fixtures, lux leather and wood furniture and updated 1950s toys--Restoration already had earned the adoration of consumers and strong valuation from investors when it went public in 1998.
Eager to increase its success, the company expanded quickly and ran up against the classic problems of fast growth: distribution snafus, merchandise misses and under-performing stores.
After an initial public offering of $25 a share in the summer of 1998, Restoration watched its stock climb in a month to almost $37.75.
