RH Beats Q2 Guidance, Sees Momentum from Estates Collection and International Expansion

RH (NYSE: RH) reported second-quarter fiscal 2026 revenue and profitability above the high end of its guidance, as CEO Gary Friedman said momentum is beginning to build from recently launched growth initiatives.

GAAP net revenue totaled $922.2 million, up 2.6% from a year earlier and representing a 4.2-point acceleration from the first quarter, Friedman said on the earnings call. Normalized adjusted EBITDA margin was 13.4%, also above the company’s guidance range. The company 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.

RH shares jumped 8.2% in premarket trading after the earnings release, according to multiple reports.

### Outlook Raised on Estates and Backlog

The company raised its fiscal 2026 outlook to revenue growth of 5.5% to 7% and adjusted EBITDA margin of 15% to 16.2%. RH also 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 associated with international expansion. RH expects that drag to decline to 150 basis points in fiscal 2027, after the company cycles the opening costs for its global flagships in Paris, Milan and London.

For the third quarter, RH forecast revenue growth of 5% to 6%, including contributions of 2.5 percentage points from backlog reduction, 2 points from RH Estates and 1 point from new galleries and other sources. It expects adjusted EBITDA margin of 12.5% to 13.5%. Fourth-quarter revenue growth is projected at 16.1% to 21.2%, with backlog reduction contributing 6.5 points, RH Estates contributing 8 points, and new galleries and other sources adding 4 points. Fourth-quarter adjusted EBITDA margin is projected at 19.7% to 22.9%.

RH recognized a $55.1 million tariff benefit in the second quarter and expects another $13.9 million benefit in the second half. Friedman said the company plans to use tariff proceeds to offset approximately $50 million of unplanned supply-chain costs tied to higher oil prices amid the Middle East conflict. The remaining $19 million is included in the margin outlook.

### RH Estates: A Major Brand Extension

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 the collection 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, when it expects 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 said the collection’s design, quality, finishes and exclusivity support the pricing, and that the products had generated interest from 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 levels to meet demand. Friedman said the company expects demand to increase as shoppers can see the products in person, particularly because luxury furniture customers typically prefer to inspect products before making purchases. He added that Estates is expected to be margin accretive due to higher gross margins and operating leverage from higher average price points. Most of the collection is protected by trade dress or design patents pending, and RH plans 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 London 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. He noted that larger, complex projects will take several months to convert into revenue. London has an advantage over Paris and Milan because the U.K. is English-speaking, has more expatriates, and had already benefited from the RH England location, which he said had reached roughly $38 million in demand over three years.

The company expects its capital-spending cycle to move below its peak. Adjusted capital expenditures are projected to decline 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 decrease to $18 million in 2027 from $48 million this year.

RH is also shifting toward new retail formats. Its RH Compounds, which will feature multiple buildings, connected garden courtyards and a central restaurant, are under development in Naples and Aventura, Florida. The company expects both projects to open in 2027 and deliver payback periods of 12 to 18 months. Friedman said RH is also developing single-story design galleries with integrated restaurants and pursuing “ecosystem” strategies in certain markets.

### Analyst Reaction

While the earnings beat and guidance lifted the stock, analysts tempered expectations. According to one report, analysts mostly cut price targets following the results. UBS lowered its price target on RH stock, citing risk to the fourth-quarter outlook, according to another report. The stock was trading higher by about 1.5% in regular trading after the premarket surge, according to market data.