RH (NYSE: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.
Updated outlook includes Estates growth and international costs
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.
RH Estates positioned as a major brand extension
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 architecture.
RH said it 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 expand the collection’s assortment rapidly 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 said 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.
The company also expects Estates to be margin accretive, citing both higher expected gross margins and operating leverage from the collection’s higher average price points. Friedman said 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 evolving 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 said larger, complex projects will take several months to convert into revenue.
Friedman said 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. RH is continuing to learn how consumer and trade behavior differs across European markets, he said.
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 designed to reduce construction costs and improve returns. 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, where separate RH Estates, Interiors, Modern and Outdoor locations can operate near one another rather than requiring a single large new gallery.
On the trade side, Friedman said RH’s recently revamped program has driven a meaningful acceleration in business and that the higher volume has already offset the program’s increased discounting. The company is also expanding support for designers through bespoke furniture, custom sizes, customer’s-own-material offerings, floor plans, renderings, delivery and installation services.
About RH (NYSE:RH)
RH, formerly Restoration Hardware, is a design-driven luxury retailer specializing in high-end home furnishings, décor, textiles, lighting and outdoor living products. The company offers a curated collection of furniture pieces—including seating, casegoods, beds and dining items—alongside rugs, art and decorative accessories. RH’s product lines are organized into distinct collections, each reflecting a cohesive design philosophy and premium craftsmanship aimed at the residential and hospitality markets.
Founded in 1979 in Eureka, California, by Stephen Gordon, Restoration Hardware began as a small warehouse in Northern California.
