UPDATE 1-Restoration Hardware holiday sales fall 1 percent

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NEW YORK, Jan 11 (Reuters) - Upscale home furnishings chain Restoration Hardware Inc RSTO.O said on Friday that sales for the holiday period fell 1 percent due to continuing softness in the home goods sector.

The company, which has been eyed for a takeover by Sears Holdings Corp (SHLD.O: Quote, Profile, Research, Stock Buzz), said net revenue for the 9 weeks ended Jan. 5 fell 1 percent to $171.5 million. That compares to a 22 percent increase in 2006 holiday sales.

"The environment for home furnishings retailers remained challenging during the holiday period," said Gary Friedman, the company's chief executive.

Seasonal gift items did not sell as well as expected, helping to concentrate the sales weakness in the company's decorative accessories business, Restoration said.

(Reporting by Aarthi Sivaraman and Martinne Geller, editing by Dave Zimmerman)

(aarthi.sivaraman@reuters.com; +1 646 223 6191; Reuters Messaging: aarthi.sivaraman.reuters.com@reuters.net))

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