Restoration Hardware's Recession Strategy

A Chain That Has Been Hard to Define Takes Aim at the High-End Market

When the first Restoration Hardware on the East Coast opened in Alexandria in 1996, its mix of crackled leather club chairs, retro ceiling fans and wind-up zeppelins immediately identified it as a place men and women would like to shop together. Back then, 1,200 customers would show up daily, Starbucks coffee in hand, to check out the new yuppie hardware store from California.

Today, the 30-year-old chain still sells upscale furnishings and bed and bath fittings rooted in nostalgia at 99 stores, including the King Street location and three others in the Washington area. But over the years, the company has struggled with its merchandise assortment, which has included upscale nickel faucets, slipcovered sofas, dark Mission-style chests and even the Slinky. Some years, it was hard to figure out what the store was about.

The latest look, for example, channels romance, with chandeliers crafted from French oak wine barrels and coffee tables made of steamer trunks. Artisans from London, Florence and Amsterdam are pictured in the current catalogue with products they created.

"There's no escaping we're in a tough economy," says chief executive Gary Friedman, 51, a Gap and Williams-Sonoma veteran who has been running Restoration Hardware since 2001. "But we're excited that we've launched a new campaign that's innovative and is going to separate us from the competition." (That would be Pottery Barn, Williams-Sonoma Home and Crate and Barrel.)

Resto, as retail insiders call it, has always marched to its own tune.

It was born when entrepreneur Stephen Gordon could not find period hardware for the Victorian house he was renovating into a bed-and-breakfast. Dumping the innkeeper idea, he opened a shop for classic hardware, furniture and lighting. Over the years, the store built a following for offbeat merchandise, including record players, penguin cocktail shakers and iron boot scrapers shaped like beavers. Its core customer has been someone in their 40s or 50s with a taste for craftsmanship.

This is not the store for consumers reacting to the recession by scaling back and trading down. It specializes in generously sized furnishings for large homes with ample budgets: denim sofas 4 feet deep and 8 feet wide ($2,545), 86-inch lamps reproduced from British surveyors' tripods ($1,250) and 12-inch rain shower heads ($779). In 2008, the company launched Baby & Child, a division selling monogrammed stroller blankets and pint-size armchairs.

Friedman spoke to us on the phone last week from Restoration Hardware's corporate offices in Corte Madera, Calif.

When you took over Restoration Hardware in 2001, what was your vision and what changes did you make?

The original concept of the store had fallen off-track. Those cornball, retro knickknacks had grown to 50 percent of the store and polluted the brand. I shrank them to 10 percent. My sense was that as people graduated from Pottery Barn and Crate and Barrel as they got older and were into their second or third home, they were looking for a more classic style and a higher level of quality. I wanted to position ourselves above the lifestyle retailers but below the interior design trade.

We are now the biggest importers of Italian bedding into the United States. With our Belgian linen and Thai silk draperies, we have taken fabrics only available to the trade and made them accessible.