RH Beats Q2 Earnings, Launches RH Estates as Growth Engine; Shares Jump 8%

RH (NYSE: RH) reported second-quarter fiscal 2026 results that topped its own profitability guidance and beat analyst earnings per share estimates, but revenue fell short of Wall Street expectations. The luxury home furnishings retailer said momentum is building from recently launched growth initiatives, notably the RH Estates collection.

Shares jumped as much as 8.2% in premarket trading following the report, according to Benzinga. The stock later gave back some gains but remained higher.

Earnings and Revenue

For the quarter ended August 2, 2026, RH reported GAAP net revenue of $922.2 million, up 2.6% from a year earlier. Chairman and CEO Gary Friedman said on the earnings call that this represented a 4.2-point acceleration from the first quarter and came in above the high end of the company’s guidance.

Normalized adjusted EBITDA margin was 13.4%, also above the company’s forecast. However, according to Benzinga, the revenue figure missed analysts’ estimates even as earnings per share exceeded expectations.

RH generated $72.3 million of cash during the quarter, including free cash flow and a $42 million distribution from its Aspen joint ventures, excluding tariff refunds of $69.2 million, Friedman said.

The company recognized a $55.1 million tariff benefit in the second quarter and expects an additional $13.9 million in the second half. Friedman said the proceeds will offset approximately $50 million of unplanned supply-chain costs tied to higher oil prices from the Middle East conflict, with the remaining $19 million included in the margin outlook.

RH Estates: A Potential Market Doubler

Much of the earnings call focused on RH Estates, a traditional and classic furniture collection introduced through a 268-page source book mailed from late June through mid-July. Friedman said the company believes Estates could double RH’s total addressable market, noting that more than 60% of luxury homes in North America have traditional or classic architecture.

RH has made acquisitions over the past six years—including Michael Taylor Designs, Formations, Dennis & Leen, Joseph Jeup and Dmitriy & Co.—to support the Estates opportunity, Friedman said. The company plans to rapidly expand the collection’s assortment over the next five years, expecting Estates to represent 50% of its offering.

The initial Estates assortment carries an average price point about 45% higher than RH’s existing assortment. Friedman cited the collection’s design, quality, finishes and exclusivity as justifying the pricing, and said it has already attracted customers who were not previously RH buyers.

RH plans to expand Estates circulation in November, place the collection on the main floor of galleries representing roughly 80% of its business, and build inventory to meet demand. The company expects Estates to be margin accretive due to higher gross margins and operating leverage. Most of the collection is protected by trade dress or design patents pending, and RH intends to pursue intellectual-property protections against unauthorized copies.

International Expansion and Gallery Strategy

RH opened RH London, The Gallery, Mayfair, on June 27. Friedman said the location built a design pipeline of nearly $7 million in its first eight weeks, comparable with the design pipelines of RH Newport and RH New York, though larger complex projects will take months to convert to revenue.

The London gallery benefits from the U.K. being English-speaking and from the existing RH England location, which has generated roughly $38 million in demand over three years, Friedman said. The company is still learning how consumer and trade behavior differs across European markets ahead of its planned flagship openings in Paris and Milan.

RH expects its capital-spending cycle to decline. Adjusted capital expenditures are projected to drop to $175 million to $200 million in fiscal 2027 from $240 million to $260 million in fiscal 2026. New-gallery opening costs are expected to fall to $18 million in 2027 from $48 million this year.

The company is also developing new retail formats. RH Compounds, featuring multiple buildings, garden courtyards and a central restaurant, are under development in Naples and Aventura, Florida, with both expected to open in 2027 and deliver payback periods of 12 to 18 months, according to the company.

Updated Outlook and Analysts

RH raised its fiscal 2026 revenue growth outlook to 5.5% to 7% and adjusted EBITDA margin to 15% to 16.2%. The company expects free cash flow, asset sales and distributions from equity-method investments of $300 million to $400 million.

The outlook includes an estimated 340-basis-point drag on adjusted EBITDA margin from pre-opening and startup costs for international expansion, expected to decline to 150 basis points in fiscal 2027 after the London, Paris and Milan flagships cycle their opening costs.

For the third quarter, RH forecasts revenue growth of 5% to 6%, with contributions of 2.5 percentage points from backlog reduction, 2 points from RH Estates and 1 point from new galleries. Fourth-quarter revenue growth is projected at 16.1% to 21.2%, with Estates contributing 8 points, backlog reduction 6.5 points and new galleries 4 points. Fourth-quarter adjusted EBITDA margin is expected to be 19.7% to 22.9%.

Despite the strong guidance, at least one analyst expressed caution. According to Investing.com, UBS lowered its price target on RH, citing risk to the fourth-quarter outlook.