Sign in
R

RH (RH)·Q2 2026 Earnings Summary

Executive Summary

  • RH delivered mixed Q2 2026 (fiscal quarter ended Aug 2, 2025): revenue grew 8.4% YoY to $899.2M, GAAP diluted EPS rose to $2.62, but results missed Wall Street consensus on EPS, revenue, and EBITDA; management revised FY2025 guidance lower amid tariff uncertainty .
  • Consensus comparison: EPS $2.93 vs $3.22*, revenue $899.2M vs $905.4M*, EBITDA $162.7M vs $191.5M*; broad-based misses reflect tariff-driven shipment delays and timing of sourcebook mailings .
  • Adjusted margins expanded YoY: adj operating margin 15.1% (+340bps) and adj EBITDA margin 20.6% (+340bps), with Europe investments a 170bps drag; free cash flow was $80.7M .
  • Catalyst: Guidance cut (FY revenue growth 9–11%, adj op margin 13–14%, adj EBITDA margin 19–20%) and escalating tariff risks; strong early read from RH Paris and accelerating European brand plans offset some macro headwinds .

What Went Well and What Went Wrong

What Went Well

  • Adjusted margins expanded meaningfully: adj operating margin 15.1% and adj EBITDA margin 20.6%, up 340bps YoY, despite Europe startup drag (~170bps) .
  • RH Paris launch exceeded expectations: “Traffic in the gallery has exceeded RH New York…design pipeline in the first six days is greater than our first five European galleries combined” .
  • Strong RH England second-year demand trends: gallery demand up 76% and online demand up 34% in Q2, with 2025 demand projected ~$37–39M gallery and ~$8M online .

What Went Wrong

  • Estimate misses on EPS, revenue, and EBITDA vs consensus; management tied variance to tariff-driven disruptions and delayed sourcebook pricing .
  • Tariffs created revenue timing and margin headwinds; ~5.4-pt demand-to-revenue gap expected to shift into H2’25; incremental tariff costs of ~$30M net of mitigation in H2 .
  • FY2025 guidance cut amid uncertainty: revenue growth 9–11% (from 10–13%), adj op margin 13–14% (from 14–15%), adj EBITDA margin 19–20% (from 20–21%), FCF $250–300M (from $250–350M) .

Financial Results

Note: Q2 2026 refers to RH’s fiscal second quarter ended Aug 2, 2025.

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD)$812.4M*$814.0M*$899.2M
Net Income ($USD)$13.9M*$8.0M*$51.7M
Diluted EPS ($)$0.69*$0.40*$2.62
Operating Income ($USD)$91.3M*$55.9M*$128.9M
Gross Margin (%)44.66%*43.66%*45.52%
EBITDA ($USD)$125.4M*$91.1M*$162.7M
EBITDA Margin (%)15.43%*11.20%*18.10%
EBIT Margin (%)11.24%*6.87%*14.30%

Values with * retrieved from S&P Global.

Q2 YoY and Estimates Comparison:

MetricQ2 2025 (YoY Comp)Q2 2026 ActualConsensus EstimateBeat/Miss
Revenue ($USD)$829.7M $899.2M $905.4M*MISS
Diluted EPS ($)$1.45 $2.62 $3.22*MISS
EBITDA ($USD)$124.2M $162.7M $191.5M*MISS

Values with * retrieved from S&P Global.

KPIs and Adjusted Metrics:

KPIQ2 2026
Demand Growth YoY+13.7%
Adjusted Operating Margin15.1%
Adjusted EBITDA Margin20.6%
Free Cash Flow$80.7M
Cash from Operations (QTD)$137.7M
Merchandise Inventories (end of period)$956.9M

Segment breakdown: RH does not report formal segments; core brand drove margin expansion .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue GrowthFY 202510–13% 9–11% Lowered
Adjusted Operating MarginFY 202514–15% 13–14% Lowered
Adjusted EBITDA MarginFY 202520–21% 19–20% Lowered
Free Cash FlowFY 2025$250–350M $250–300M Lowered
Revenue GrowthQ3 2025N/A8–10% New
Adjusted Operating MarginQ3 2025N/A12–13% New
Adjusted EBITDA MarginQ3 2025N/A18–19% New
Tariff ImpactFY/Q3~90bps FY; ~120bps Q3 op margin headwind ~90bps FY; ~120bps Q3 Maintained
Europe Startup DragFY/Q3~200bps FY; ~270bps Q3 op margin drag ~200bps FY; ~270bps Q3 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2025)Previous Mentions (Q1 2026)Current Period (Q2 2026)Trend
Tariffs/MacroRapid tariff changes, “inventory is your friend,” negotiation outlook Reciprocal tariffs disrupting shipments; delayed new brand to Spring 2026 New furniture investigation; $30M tariff cost H2; pricing timing delays Intensifying
Supply Chain/SourcingMoving out of China; US upholstery capacity expansion Receipts shifting; demand/revenue lag from disruptions China receipts to ~2% by Q4; India 50% tariffs mitigation; US/Italy/Mexico upholstery mix Repositioning continues
Promotions/MembershipClearance as market function Membership discount increased to 30% (strategic) and outdoor promo Industry-wide pricing to rise; promotions remain necessary Normalizing with inflation
Europe ExpansionParis/London/Milan schedule; inflection outlook Paris opening plan, London/Milan timing RH Paris strong start; London/Milan expected Spring 2026 with hospitality concepts Accelerating
Real Estate MonetizationAspen JV assets; sale-leasebacks optionality ~$500M real estate equity; monetization opportunistic Opportunistic approach; multiple owned properties (RH England, Detroit, Madrid) Optionality sustained
Inventory/TurnsInventory as advantage under tariffs Excess inventory to reduce in H2/H1 next year Targets mid-2x turns; path to 3x+ over time Improving
PricingPrefer judicious price increases; mitigate via vendors and membership Annual price adjustments; tariff responsive Broad furniture inflation ahead; pricing likely rises H2’25 Upward

Management Commentary

  • “Adjusted operating margin of 15.1% and adjusted EBITDA of 20.6% both increased 340 basis points versus last year…inclusive of ~170bps drag from investments to support our long-term European expansion.”
  • “Traffic in the [RH Paris] gallery has exceeded RH New York day by day…design pipeline in the first six days is greater than our first five European galleries combined.”
  • “We believe it is prudent to revise our guidance for fiscal 2025…updated outlook reflects a $30 million cost of incremental tariffs net of mitigation in the second half.”
  • On promotions: “Furniture is an industry that at the highest level does not sell at full price…this is not fashion.”
  • On inventory turns: “Turn…closer to the mid-twos. Is there room beyond that? We do believe that.”

Q&A Highlights

  • Real estate monetization: Management emphasized opportunistic monetization, highlighted owned assets across RH England, Detroit, and Madrid; not a near-term need given improving FCF .
  • Inventory and new concept: Targeting improved turns to mid-2s with path back to ~3x over time; new brand extension launches spring 2026 with initial galleries (Greenwich and San Francisco; West Hollywood subject to permits) .
  • Pricing and promotions: Expect industry-wide price increases due to tariffs; RH will balance margin protection against revenue impact, continuing strategic membership pricing .
  • Margin cadence: Seasonality in advertising (sourcebooks) drives quarterly operating margin; tariff mitigation embedded in guidance .
  • International margin drag: Europe startup costs persist; Paris ramp informs London/Milan expectations (opening aligned with Salone week) .

Estimates Context

  • Q2 2026 consensus vs actual: EPS $3.22* vs $2.93 actual; revenue $905.4M* vs $899.2M actual; EBITDA $191.5M* vs $162.7M actual. Misses driven by tariff timing and delayed sourcebook mailings that pushed ~$40M revenues into Q4/Q1 2026 .
  • Estimate revisions likely lower for H2 given FY guide cut and stated $30M net tariff cost in H2; watch for adjustments to margins (tariff headwinds ~90bps FY and ~120bps in Q3) .

Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Guidance reset and tariff overhang: FY 2025 revenue growth cut to 9–11% and margin targets lowered; tariff cost ~$30M H2 and documented margin headwinds (90bps FY, 120bps Q3) .
  • Strong adjusted margin execution despite Europe drag: Adj operating margin 15.1% and adj EBITDA margin 20.6% provide resilience; free cash flow $80.7M supports balance sheet optionality .
  • Europe as medium-term growth lever: RH Paris early strength; London/Milan openings in Spring 2026 expected to accelerate brand scale and advertising efficiency .
  • Promotions remain structural in luxury furniture: Membership pricing is strategic; industry pricing to rise amid tariffs—expect ongoing mix of price/membership levers .
  • Inventory/turns trajectory: Management targets mid-2x turns near term with runway to ~3x+ as product transformation and supply chain optimizations mature .
  • Watch H2 revenue timing: ~$40M revenue shifted from Q3 into Q4 and Q1 2026 due to sourcebook schedule changes; intra-quarter timing matters for modeling .
  • Optionality via real estate: Portfolio of owned assets (e.g., RH England, Detroit, Aspen JV) provides monetization flexibility if needed; not required near term given FCF trajectory .