RH (NYSE:RH) stock rose in premarket trading Friday after the luxury home furnishings retailer reported second-quarter fiscal 2026 results that beat Wall Street earnings expectations despite a revenue miss.
RH Estates Could Double Addressable Market
The company said its new Estates collection could potentially double its total addressable market.
The company launched RH Estates from late June through mid-July. The collection focuses on traditional and classic styles found in more than 60% of luxury homes in North America. Those styles are even more prevalent in Europe.
RH expects the aesthetic to drive a major industry trend for more than 20 years. The company expects Estates to account for 50% of its offering within five years.
Expands Galleries And Hospitality
The company is also developing RH Compounds. The company plans a multi-building shopping destination in Naples, Florida, with garden courtyards and a central atrium restaurant. It expects the location to open in late 2026 or early 2027.
Another RH Compound in Aventura, Florida, is expected to begin construction soon and open in 2027.
RH expects its growth projects to deliver payback periods of 12 to 18 months. The company said returns on capital should eventually return to pre-pandemic levels.
It also sees 12-to-18-month payback periods for single-story Design Galleries with integrated restaurants. Its restaurants generate significant traffic and brand awareness. On average, they generate revenue equal to 65% of aggregate gallery rent at locations where they operate.
Meanwhile, the company is developing a residential interior design business. The initiative would expand the company beyond selling products to designing and selling complete spaces.
Earnings Beat, Revenue Misses
RH reported adjusted earnings of $2.70 per share, beating the $1.78 Street estimate.
Revenue rose 2.6% year over year to $922.15 million but missed the $936.25 million analyst consensus estimate.
It recorded a $55.1 million tariff benefit during the quarter. It expects another $13.9 million benefit in the second half.
Those benefits will offset $50 million in unplanned supply-chain costs tied to higher oil prices amid the Middle East conflict. The company expects the remaining $19 million to benefit earnings.
The company generated $72.3 million in cash, including free cash flow and a $42 million distribution from its Aspen joint venture. That figure excludes $69.2 million in tariff refunds.
RH Narrows Full-Year Outlook
RH narrowed its fiscal 2026 sales guidance to $3.629 billion to $3.681 billion from $3.594 billion to $3.715 billion. The analyst estimate is $3.631 billion.
For the third quarter, the company expects sales of $928.001 million to $936.839 million, below the $968.207 million estimate.
It expects third-quarter revenue growth of 5% to 6%. That includes contributions from backlog reduction, RH Estates, new galleries and other initiatives.
For the fourth quarter, RH projects sales of $978.285 million to $1.021 billion. That compares with the $948.946 million estimate.
It expects fourth-quarter revenue growth of 16.1% to 21.2%, helped by RH Estates, backlog reduction and new galleries.
Meanwhile, the drag from RH’s international business is expected to ease. The company expects the impact to fall from 450 basis points in the first half to 250 basis points in the second half. It expects a 340-basis-point drag for the full year and 150 basis points in 2027 as it cycles investments in Paris, Milan and London.
RH Price Action: RH shares were up 8.94% at $146.00 during premarket trading on Friday, according to Benzinga Pro data.
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