RH Raises Full-Year Outlook After Estates Launch
GAAP net revenues were $922.2 million in the quarter ended August 1, 2026, up 2.6% from a year earlier and 4.2 points faster than the first quarter.
RH (RH), the luxury lifestyle retailer, reported GAAP net revenues of $922.2 million for the second quarter ended August 1, 2026, up 2.6% from a year earlier and accelerating 4.2 points over the first quarter, exceeding the high end of its guidance.
Momentum was beginning to build from growth strategies recently put into motion, including the launch of RH Estates, a brand extension introduced with a 268-page Sourcebook that arrived in homes from late June through mid-July. Friedman said the new line has the potential to double the total addressable market of the RH brand.
GAAP net income was $60.2 million. EBITDA was $168.3 million, for an 18.3% margin. Adjusted EBITDA was $178.5 million, a 19.4% margin, inclusive of $55.1 million, or 600 basis points, of tariff benefit. Normalized adjusted EBITDA was $123.5 million, a 13.4% margin that also exceeded the high end of guidance for adjusted EBITDA margin.
Gross margins were lifted by $55 million of IEEPA tariff refunds based on an application for a total refund of $69 million. The company also recognized $14 million as a reduction of costs in merchandise inventories and expects to recognize that benefit to gross margins over the third and fourth quarters of fiscal 2026. Cash generation was $72.3 million, inclusive of free cash flow and a $42.0 million distribution from Aspen Joint Ventures, exclusive of $69.2 million of cash received for tariff refunds.
An additional $13.9 million of tariff benefit is expected in the second half of the year, which RH plans to use to offset $50 million of unplanned cost increases across the supply chain from a spike in oil prices tied to the conflict in the Middle East. The remaining $19 million of tariff proceeds will benefit earnings and is included in the updated adjusted EBITDA margin outlook for fiscal 2026.
The fiscal 2026 outlook was raised to revenue growth of 5.5% to 7.0% and an adjusted EBITDA margin of 15.0% to 16.2%. RH now expects free cash flow, asset sales and distribution of equity method investments of $300 million to $400 million. The outlook includes an approximate negative 340 basis point adjusted EBITDA margin impact from pre-opening and startup costs to support international expansion.
For the third quarter, RH guides to revenue growth of 5.0% to 6.0%, inclusive of backlog reduction of 2.5 points, RH Estates of 2.0 points, and new galleries and other of 1.0 point, with an adjusted EBITDA margin of 12.5% to 13.5%. The fourth-quarter outlook calls for revenue growth of 16.1% to 21.2%, inclusive of backlog reduction of 6.5 points, RH Estates of 8.0 points, and new galleries and other of 4.0 points, with an adjusted EBITDA margin of 19.7% to 22.9%.
RH launched Estates with a conservative initial mailing and plans to expand the assortment and circulation in November, placing Estates on the main floor of galleries that represent 80% of the business. That November expansion is the driver of the fourth-quarter acceleration in the outlook. Friedman said the company predicts Estates will represent 50% of the offering over the next five years and that the average price point is currently 45% higher than the existing assortment.
RH London, The Gallery in Mayfair, opened June 27. The design pipeline reached almost $7 million in the first eight weeks, rivaling the pipelines for RH Newport and RH New York. Friedman said the drag from international operations is expected to decrease from 450 basis points in the first half of the year to 250 basis points in the second half, or 340 basis points for the year, and further to 150 basis points in 2027 as three Global Flagships in Paris, Milan and London cycle through a 10-month opening period from September 2025 to July 2026.
Adjusted capital expenditures are expected to decrease from $240 million to $260 million in 2026 to $175 million to $200 million in 2027. Gallery opening costs are expected to decrease from $48 million in 2026 to $18 million in 2027. RH has cycled through a real estate pipeline that included the three Global Flagships and several multi-story galleries, with one multi-story gallery left to complete in Houston in 2027.