RH Q1 Earnings Call Highlights

Key Points

• RH raised its fiscal 2026 outlook after first-quarter revenue of $800.3 million and adjusted EBITDA margin of 7.1% topped the high end of expectations. The company now sees revenue growth of 4.5% to 8%, adjusted EBITDA margin of 14.2% to 16%, and adjusted free cash flow of $300 million to $400 million.
• Management said elevated back orders and special orders, about $75 million above normal, were largely driven by tariff-related resourcing and transportation issues. Despite that, RH expects business to accelerate in the second half of the year as backlog eases, new stores ramp, and RH Estates contributes growth.
• A major focus of the call was RH Estates, a new luxury concept aimed at expanding the company’s reach in the high-end home market through new brands, ateliers, and customization offerings. RH also highlighted international expansion in Paris, Milan, and London, while emphasizing continued investment and debt reduction through asset sales.

RH NYSE: RH raised its fiscal 2026 outlook after first-quarter revenue and adjusted EBITDA margin exceeded the high end of its expectations, even as the luxury home furnishings company said tariff-related resourcing kept back orders and special orders elevated.

Chairman and Chief Executive Officer Gary Friedman said first-quarter revenue was $800.3 million and adjusted EBITDA margin was 7.1%. He said results came despite back order and special order balances that were approximately $75 million higher than a year earlier, primarily due to tariff-related resourcing.

“As a result of our better-than-expected first quarter results, we are raising our outlook for fiscal year 2026,” Friedman said while reading the company’s shareholder letter.

RH Raises Fiscal 2026 Outlook

For fiscal 2026, RH now expects:

• Revenue growth of 4.5% to 8%.
• Adjusted EBITDA margin of 14.2% to 16%.
• Adjusted free cash flow of $300 million to $400 million.

The company said the full-year outlook includes an approximate 270-basis-point negative impact to adjusted EBITDA margin from pre-opening and start-up costs tied to international expansion.

For the second quarter, RH guided for revenue growth of 0.5% to 2.5% and adjusted EBITDA margin of 11.5% to 13%. That outlook includes an approximate 380-basis-point negative adjusted EBITDA margin impact from pre-opening and start-up costs to support international expansion.

Friedman said the company expects its business to accelerate from roughly flat revenue growth in the first half to about 12% growth in the second half. He identified three elements behind that expected acceleration: backlog reduction contributing 4.5 percentage points, new store growth adding 2.5 percentage points and new concept growth from RH Estates contributing five points.

Chief Financial Officer Jack Preston clarified during the question-and-answer session that the $75 million backlog figure represents back orders and special orders above the company’s normal rate. “This is elevated because of unnatural things happening,” Preston said, citing resourcing and transportation impacts.

RH Estates Takes Center Stage

Much of the call focused on RH Estates, a new concept Friedman described as a major step in the company’s effort to build a global luxury brand. Friedman said the concept is intended to bring high-end, trade-only design and craftsmanship to a broader audience through RH’s platform.

Friedman said the company has aggregated brands and ateliers including Dmitriy & Co, Joseph Jeup, Dennis & Leen, Formations, Waterworks and Michael Taylor. He characterized RH Estates as an effort to remove barriers that have historically limited consumer access to certain categories of luxury home design.

“With the launch of RH Estates, we are removing the barriers that have segregated taste from scale,” Friedman said. “We are amplifying the work of the world’s most elite designers, artisans, and manufacturers on our global platform.”

Friedman also outlined new customization capabilities, including RH Bespoke Furniture and RH Couture Upholstery. He said RH Bespoke will allow interior designers and architects to specify dimensions for case goods such as dressers, dining tables, sideboards and cabinets. RH Couture Upholstery will include custom sizing and customer’s own material, or COM, for sofas, sectionals, chairs, ottomans and beds.

In response to a question from Guggenheim analyst Steven Forbes about the addressable market, Friedman said the traditional classic market represents roughly 60% of the luxury home market and that RH is “vastly under-penetrated” in that category. He said the company now views its business around three major aesthetic segments: Estates, Interiors and Modern.

Trade Program Aimed at Designers and Architects

RH also plans to introduce an exclusive program for interior designers, architects and trade members. Friedman said the program is designed to compensate professionals for the value they create for consumers and to encourage them to use RH’s platform.

During the call, Friedman said RH already has a large trade business and provides services such as design support, renderings, presentations, delivery and installation assistance. He said the company has not historically offered the same kind of incentive structure to the design trade that some professionals use in their business models.

“Interior designers have a markup model, right? An hourly model. They kind of need both to make the business work,” Friedman said. He added that RH Estates makes this the right time to more directly engage high-end designers because the new assortment is aimed at the top of the market.

When Jefferies analyst Jonathan Matuszewski asked why now was the right time to pursue a loyalty program that compensates trade clients, Friedman said the timing is tied to Estates. “Estates opens up the very top of the market for this brand,” he said.

International Expansion Remains a Major Investment

Friedman described RH Paris, Milan and London as key foundational openings for the company’s global luxury ambitions. He said the three markets are important to earning recognition from European, U.K. and global customers.

Asked by Wells Fargo analyst Zach Fadem about the initial response from Milan and expectations for Paris, Milan and London, Friedman said the company is still building brand awareness, customer relationships and design books in Europe. He said London is expected to be an accelerator for the broader international platform.

“London is the accelerator for all of it,” Friedman said. “Because everybody goes to London.” He said London has higher brand awareness for RH than some other international markets, citing expats and customer familiarity with the brand.

Preston said first-quarter pre-opening costs ended up at about 450 basis points of margin impact, compared with prior commentary of 420 basis points. He said the second-quarter guide includes a 380-basis-point impact, while the full-year figure is expected to be 270 basis points.

Margins, Cash Flow and Balance Sheet

Executives said RH expects margin leverage as investments peak and sales improve. Friedman said the company is not assuming a recovery in the housing market in its guidance and said he would be surprised if RH did not beat the numbers if the market worsened, absent more severe macroeconomic disruption.

On tariffs, Preston said the free cash flow guidance does not assume any additional tariff refunds. “The refunds started coming, but they’ve been kind of paused,” he said.

On the balance sheet, Morgan Stanley analyst Simeon Gutman asked about RH’s goal of becoming debt-free by 2029. Friedman said debt reduction remains a priority and pointed to planned asset sales of $200 million to $250 million per year over the next two years. He said RH recently completed a transaction related to its Aspen real estate that gave the company 100% control of eight properties, which he said could help monetization efforts.

Preston said free cash flow is expected to build over time and reiterated that making progress on debt reduction remains a focus. Friedman added that as spending declines and sales rise, the company expects asset sales and business performance to support the balance sheet.

Friedman closed the call by thanking RH employees and saying the company is entering “one of the most important times in the history of RH,” driven by new products, international galleries and the company’s broader luxury positioning.

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.

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