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RH
Earnings call · Jul 2026 (Q2 FY27)

RH Q2 FY27 earnings call RH

Sep 10, 2026 Source

Executive summary

RH Q2 FY27 — RH Estates Launch and International Expansion Drive Momentum

RH's second quarter saw accelerated revenue growth driven by the successful launch of RH Estates and strong initial performance from new international galleries. The company is strategically expanding its market reach and product offerings while navigating a challenging housing market and managing supply chain cost pressures. New capital-efficient gallery formats are expected to improve returns on invested capital.

Highlights

5

  • GAAP net revenues of $922.2 million exceeded the high end of guidance, increasing 2.6% year-over-year.

  • Normalized adjusted EBITDA margin of 13.4% also exceeded the high end of guidance.

  • Generated $72.3 million of cash in the quarter, including free cash flow and a $42 million distribution from Aspen joint ventures.

  • RH Estates, a new brand extension, has the potential to double the total addressable market (TAM) with an average price point 45% higher than existing assortments.

  • RH London design pipeline reached almost $7 million in the first 8 weeks, rivaling top US galleries.

Concerns

3

  • Unplanned supply chain cost increases of $50 million due to a significant spike in oil prices, partially offset by tariff refunds.

  • International expansion is expected to result in a negative 340 basis points adjusted EBITDA margin impact for fiscal year 2026.

  • The housing market is experiencing its worst downturn in four decades, now entering its fifth year.

Guidance & targets

CategoryTargetConfidence
Revenue growth
5.5% to 7%
high materiality
High
Adjusted EBITDA margin
15% to 16.2%
high materiality
High
Free cash flow, asset sales, and distribution of equity method investments
$300 million to $400 million
high materiality
High
Revenue growth
5% to 6%
medium materiality
High
Adjusted EBITDA margin
12.5% to 13.5%
medium materiality
High
Revenue growth
16.1% to 21.2%
medium materiality
High
Adjusted EBITDA margin
19.7% to 22.9%
medium materiality
High
International drag on Adjusted EBITDA margin
150 basis points
medium materiality
High
Adjusted capital expenditures
$175 million to $200 million
medium materiality
High
New gallery opening costs
$18 million
medium materiality
High

Product announcements

ProductTypeDetails
RH Estateslaunch

Deals & partnerships

Michael Taylor Designs Acquisition of design firm to enhance RH Estates offering

One of several acquisitions made over the past 6 years to build the RH Estates collection.

Formations Acquisition of design firm to enhance RH Estates offering

One of several acquisitions made over the past 6 years to build the RH Estates collection. Also acquired Formations real estate for an RH Estates Gallery in West Hollywood.

Dennis & Leen Acquisition of design firm specializing in authentic classical European furniture and antiques

Acquired by Formations, giving them authority in authentic classical European furniture and antiques. Part of the acquisitions to build the RH Estates collection.

Joseph Jeup Acquisition of design firm to enhance RH Estates offering

One of several acquisitions made over the past 6 years to build the RH Estates collection.

Dmitriy Acquisition of design firm to enhance RH Estates offering

One of several acquisitions made over the past 6 years to build the RH Estates collection.

Risks & headwinds

Prolonged housing market downturn Ongoing, expected to continue

Worst housing market in 4 decades, now in its 5th year

Mitigation:Innovating and investing during uncertain times, launching RH Estates to expand TAM, developing new capital-efficient gallery formats.

Unplanned supply chain cost increases Next 6 to 12 months

$50 million due to significant spike in oil prices (oil at $109/barrel, up from $63/barrel at war start)

Mitigation:Offsetting costs with tariff refunds ($55.1M in Q2, $13.9M expected in H2 FY26); adapting to a higher cost world.

Promotional environment in the home furnishings industry Ongoing

Very promotional, requiring competitive pricing to avoid market share loss

Mitigation:Maintaining margins through operational efficiency and the unique value proposition of RH products, particularly RH Estates.

International expansion pre-opening and startup costs FY26 and FY27

Negative 340 bps adjusted EBITDA margin impact for FY26 (450 bps in H1, 250 bps in H2); expected to decrease to 150 bps in FY27

Mitigation:Cycling through significant investments of opening 3 global flagships; building revenue and awareness in new markets; no new European openings planned for 2027.

What to watch in Q3 FY27

RH Estates revenue contribution

Q4 FY26
Current 2 points to Q3 revenue growth
Target 8 points to Q4 revenue growth

Why it matters

RH Estates is expected to be a major growth driver and TAM expander; its Q4 performance will indicate the success of the expanded assortment and gallery presence.

Fourth quarter 2026 outlook. Revenue growth of 16.1% to 21.2%, inclusive of backlog reductions of 6.5 points, RH Estates growth of 8 points, new galleries and other of 4 points.

Q&A highlights

Can you discuss early demand trends for RH Estates, whether new customers are being attracted, and why the 45% price premium is justified given past pricing miscues?

Gary Friedman explained that RH Estates attracts new customers due to its unique design and quality, which is distinct from past contemporary offerings. He emphasized that the product's exclusivity and craftsmanship justify the premium pricing, offering 'incredible value' compared to similar high-end items. He noted that the company focuses on design, quality, and then value, believing the Estates collection is unmatched in the market.

“When you're the only one with the level of design and quality in a marketplace, you can command a premium. Like, are the prices too high? I think they're incredible value. You can't find this kind of product at these kind of prices.”

asked by Steven Zaccone · answered by Gary Friedman

2 min read 5 chapters

Detailed narrative

RH Estates Launch and Market Opportunity

RH launched its new brand extension, RH Estates, with a 268-page sourcebook, aiming to double its total addressable market. This collection targets traditional and classic architectural styles, which comprise over 60% of luxury homes in North America. Management believes this aesthetic will anchor the next major style trend for the next 20+ years, offering a significant incremental growth opportunity, potentially becoming half of the business within five years. The collection features a 45% higher average price point, expected to be margin accretive.

International Expansion and Performance

The company is cycling through a significant international investment cycle, with three global flagships opened in Paris, Milan, and London between September 2025 and July 2026. The drag from international operations is expected to decrease from 340 basis points in FY26 to 150 basis points in FY27. RH London, opened in Mayfair, has shown spectacular early results, with its design pipeline reaching almost $7 million in the first 8 weeks, comparable to top US galleries. Management is actively engaged in learning and adapting to unique cultural and market dynamics in Europe.

New Gallery Formats and Capital Efficiency

RH is evolving its real estate strategy with new formats like RH Compounds and single-story RH Design Galleries. RH Compounds, such as those under construction in Naples and Aventura, Florida, disaggregate large galleries into multiple smaller buildings connected by courtyards, reducing construction costs by half compared to multi-level flagships. These new formats are projected to have a payback period of 12 to 18 months, similar to pre-pandemic levels, and are expected to significantly increase return on invested capital and decrease construction timelines.

Trade Program Revitalization

The revamped trade program has been met with positive reception from the design community, leading to a meaningful acceleration in business that has already offset the associated discounts. The company is increasing engagement with designers through events and offering bespoke services like COM (Customer's Own Material) and custom sizes, which are highly valued by the trade. This enhanced support aims to further differentiate RH in the design world.

Supply Chain and Cost Management

RH is facing unplanned supply chain cost increases of $50 million, primarily due to a significant spike in oil prices. These costs are partially offset by $69.2 million in tariff refunds, with $55.1 million recognized in Q2 and $13.9 million expected in H2 FY26. The remaining $19 million of tariff proceeds will benefit earnings. Management anticipates a higher cost environment for the next 6 to 12 months due to ongoing global conflicts and inflation.

AI-generated summary of the company's earnings call. Not investment advice.