Restoration Hardware Nails 1st Trading Day
Restoration Hardware Inc., an upscale home-furnishing retailer, made a splash in its first day of trading Friday.
The Corte Madera, Calif.-based company sold 3.33 million shares, a 21% stake, in its initial public offering priced at $19, the high end of the expected range of $18 to $19.
The shares climbed $7.25 to end the day at $26.25 in Nasdaq trading.
Restoration Hardware’s substantial trading gain sets it apart from many recent initial public offerings, which have suffered in a rough market. New issues have often faltered in their first day of trading or had their initial sales postponed.
“Whenever there’s a hiccup in the IPO market, investors look more toward companies that are tangible, the ones that are generating earnings,” said Steven Tuen, an analyst at IPO Value Monitor in New York, which analyzes new stocks for investors.
Restoration Hardware had net income of $1.7 million last year, up from $796,000 the year earlier. Sales also more than doubled, to $97.9 million.
“This is a very hot retailer,” said Linda Killian, a portfolio manager with Renaissance Capital Corp.’s IPO Plus Aftermarket Fund in Greenwich, Conn. “It’s a company that has developed a really superb way of presenting home furnishings and gifts.”
Restoration Hardware has 47 stores in 22 states. The money raised in the offering will let the company’s founder and chief executive, Stephen Gordon, continue to expand the chain, which he started 18 years ago. Gordon plans to open 25 new stores this year and 30 more in 1999. The company also plans to introduce a merchandise catalog later this year.
Restoration Hardware seeks to appeal “not only to the nesting instincts of people 25 and up,” Killian said, and has its “products reflect lifestyle in America as it used to be in the 50s, when things were safe and nice.” She said the company creates stories around its products that let it sell them for more than it might otherwise.
Restoration Hardware trades under the symbol RSTO. Goldman, Sachs & Co., BancAmerica Robertson Stephens, NationsBanc Montgomery Securities and Piper Jaffray Inc. served as underwriters.
