RH Q2 Earnings Call Highlights

RH exceeded Q2 expectations, reporting revenue of $922.2 million, up 2.6% year over year, and a normalized adjusted EBITDA margin of 13.4%. The company generated $72.3 million in quarterly cash, excluding $69.2 million in tariff refunds. RH raised its fiscal 2026 outlook to 5.5%–7% revenue growth and a 15%–16.2% adjusted EBITDA margin, despite international pre-opening costs and supply-chain pressures. Tariff benefits are expected to provide $13.9 million more in the second half. RH Estates is a major growth initiative that management believes could double the company’s addressable market and eventually represent half of its assortment. The collection carries prices about 45% above RH’s existing products and is expected to be margin accretive as circulation, gallery displays and inventory expand.

RH reported second-quarter fiscal 2026 revenue and profitability above the high end of its guidance, as the luxury home furnishings retailer said momentum is beginning to build from recently launched growth initiatives. Chairman and Chief Executive Officer Gary Friedman said 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. Normalized adjusted EBITDA margin was 13.4%, also above the company’s guidance range.

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 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 international 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%. The company expects backlog reduction to contribute 6.5 points of growth, RH Estates to contribute 8 points and new galleries and other sources to add 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 of tariff proceeds is included in the company’s updated margin outlook.

Much of the call focused on RH Estates, a traditional and classic furniture collection introduced through a 268-page source book that was 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 architect...