RH Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

GAAP Net Revenues:: $922.2 million, up 2.6% year-over-year, exceeding guidance.

Adjusted EBITDA Margin:: 13.4%, also above guidance.

Cash Generation:: $72.3 million in cash flow, including a $42 million distribution from Aspen joint ventures.

Tariff Benefits:: Recognized a $55.1 million tariff benefit in Q2, with an additional $13.9 million expected in H2 2026.

Free Cash Flow Outlook:: Projected at $300 million to $400 million for the fiscal year.

2Strategic Updates and Business Highlights

Launch of RH Estates:: Aimed at doubling the total addressable market (TAM) by targeting traditional and classic architecture, which comprises over 60% of luxury homes in North America.

International Expansion:: Opened RH London, with strong early demand and a design pipeline of nearly $7 million. The company expects to reduce the drag from international operations significantly in the coming years.

New Retail Formats:: Introduction of RH Compounds and single-story galleries to enhance customer experience and improve return on invested capital.

Trade Program Revamp:: Positive early feedback from the trade community, with increased engagement and volume offsetting discounts.

3Forward Guidance and Outlook

Fiscal Year 2026 Revenue Growth:: Expected between 5.5% to 7%, with an adjusted EBITDA margin of 15% to 16.2%.

Q3 2026 Outlook:: Revenue growth projected at 5% to 6%, with an adjusted EBITDA margin of 12.5% to 13.5%.

Q4 2026 Outlook:: Anticipated revenue growth of 16.1% to 21.2%, driven by RH Estates and new galleries, with an adjusted EBITDA margin of 19.7% to 22.9%.

4Bad News, Challenges, or Points of Concern

Supply Chain Costs:: Significant unplanned cost increases due to rising oil prices, expected to impact margins.

International Operations Drag:: Continued challenges in international markets, with a projected drag of 340 basis points in 2026, although expected to decrease in 2027.

Promotional Environment:: The home furnishings market remains promotional, which could pressure margins despite RH's strong brand positioning.

5Notable Q&A Insights

Demand for RH Estates:: Early indications show strong demand, primarily from new customers, with a premium price point justified by exclusivity and quality.

International Market Dynamics:: The UK is expected to outperform other European markets due to cultural familiarity and prior brand establishment.

Inventory Management:: RH Estates will not require markdowns of existing inventory, as it is seen as an incremental addition to the product line.

Legal Protections:: The company has invested significantly in intellectual property protections for RH Estates, enhancing its ability to defend against potential knock-offs. Overall, RH is positioning itself for growth through strategic expansions and product innovations while navigating challenges in supply chain costs and international market dynamics.