A：For the second quarter of fiscal 2026, RH reported GAAP net revenues of $922.2 million, which exceeded the high end of guidance and increased 2.6% versus last year. Adjusted EBITDA margin was 13.4%, also exceeding the high end of guidance. In terms of cash flow, RH generated $72.3 million in the quarter, inclusive of a $42 million distribution from their Aspen Joint Ventures. For the full fiscal year 2026, the guidance includes revenue growth of 5.5 to 7%, adjusted EBITDA margin of 15% to 16.2%, and free cash flow, asset sales, and distribution of equity method investments of $300 million to $400 million. The guidance also accounts for an approximate negative impact of 340 basis points on the adjusted EBITDA margin from preopening and startup costs to support international expansion.

A：The introduction of RH ofta, the newest brand extension, with a 268-page source book distributed to homes, has the potential to double the total addressable market of the RH fraction over 60% of luxury homes across North America with traditional or classic architecture, with a higher concentration in Europe. This brand extension is seen as pivotal in doubling the TAM due to the stylistic influence on both interior designers and consumers, driven by the architectural vernacular of the homes.

A：RH London, the Gallery in Mayfair, is described as the most innovative and extraordinary brand experience yet. Opened on June 27, it is expected to significantly bolster the brand recognition across Europe and the Middle East. The design pipeline has reached almost $7 million in the first eight weeks, rivaling the design pipelines of RH Manhattan and RH New York. The response to RH London has been 'spectacular', and it is expected to play a crucial role in amplifying the brand's reach and reputation.

A：The new real estate strategy for RH focuses on developing RH compounds, multilevel shopping experiences with connecting garden courtyards and a central atrium restaurant. An example is the R compound under construction in Naples, Florida, scheduled to open at the end of 2026 or the beginning of 2027. Another is planned for Aventura, Florida, set to open in 2027. Growth projects are projected to have a payback in the 12 to 18 month range, with return on capital metrics similar to those prior to the pandemic. A single-story RH Design Gallery with integrated restaurants also aligns with this strategy, carrying similar expected payback ranges.

A：The speaker's company offers products with a high level of design and quality, exclusive to them, not available in regular markets or online. These products have unique, detailed finishes that are not commonly found in the industry and are typically only available to the trade or through special orders with long lead times.

A：The company does not focus on price as such but on value, believing that their products offer incredible value despite being priced higher than similar products in the market. They emphasize the importance of customer love for the design and appreciation for the quality before considering the price.

A：Consumers first need to love the design, which makes them engage closer with the product, either online or in a store. They then assess the quality by examining details like finishes and hardware. Finally, they consider the price, and if they perceive the design and quality to be worth the price, they will make a purchasing decision.

A：The hierarchy of evaluation for products, according to the speaker, begins with the consumer's perception of the design, followed by their assessment of the quality, and then an evaluation of whether the price reflects good value for the observed design and quality.

A：The speaker's company sees an opportunity to address the traditional classic and contemporary markets more effectively. They believe that they dominate the contemporary modern segment but have a smaller presence in traditional classic homes, which could represent more than half of the luxury home market. They are focused on expanding into this underserved segment, which they anticipate could be as incremental or more incremental than their previous expansion into modern furniture.

A：The company has been working on a long-term strategy involving several acquisitions to set themselves up for new business ventures. They have capitalized on these acquisitions in a highly capital-efficient manner, suggesting a strategic approach to entering new markets and strengthening their brand position.

A：The transition time in November will represent a percentage of the business that is somewhere between 75 and 85%, with the full transition expected to occur by September.

A：It is important for customers to see the products in person because the finishes are intricate, the detail is important, and the quality needs to be seen to ensure customer satisfaction.

A：In the furniture industry, about 80% of furniture is typically done in retail stores, whereas in the luxury furniture industry, the percentage is around 95%.

A：The furniture business cannot handle the same return rates as internet shopping because there are restocking fees and mistakes in purchasing furniture are expensive to make, unlike lower-cost items that can be more readily returned.

A：The revenue and profitability perspective in the UK versus continental Europe is influenced by the costs to open in Europe, the number of staff needed to be flown in from America, and the complexities involved in training and operating restaurants and hospitality.

A：The company's strategy to open flagship stores and hospitality experiences is driven by the need to ensure a good first impression, manage complex operations, employ adequate staff, and support these endeavors with training and experience.

A：It is important to build up revenue to reduce the drag of large costs because the company is not planning any more European openings in the current year, and the revenue will serve as a building block to offset those costs.

A：The company's confidence in the acceleration of growth stems from their past performance in product transformation and their ability to scale the business meaningfully, supported by their strategy and execution capabilities.

A：The 8% net revenue growth contribution in the fourth quarter is based on sourcebook only demand, and the assumptions include forecasting demand based on stock levels, wait times, and the impact of introducing products into the gallery.

A：The significance of the product going into the gallery for demand forecasting is that it allows the company to factor in in-stock levels, wait times, and the subsequent movement of products into the gallery, which affects demand and revenue.

A：The company manages inventory and sales in its specialty brands by focusing on the most productive products, not carrying less popular items, and constantly analyzing sales data to ensure relevancy and alignment with market trends.

A：The company's strategy for its product categories and aesthetics is to own the seven major product categories and three major aesthetics, being relevant to customers across various architectural styles and maintaining a disciplined brand approach.

A：The projected demand growth for estates in the upcoming year is expected to be stepped stone or elevated compared to the current period, with a potential leaning into the first half of 2027, driven by revenue growth and investments in the business.

A：The business transitioned towards modern architecture because they noticed an explosion of modern architecture around the world and the influence of technology on customer preferences, leading them to open the first and only free-standing Orange Modern in Mary father.

A：The current state of the market for modern and contemporary art is that there is a gap in the market for a space offering high-end modern and contemporary art in the Greenwich area, as most art currently available is traditional or classic.

A：The company is looking to capitalize on a new high-end market for modern and contemporary art, which they intend to create by building out a specific aesthetic and shaping the market's evolution and point of view.

A：The company's strategy for entering the market involves creating a new high-end market by building out a specific aesthetic and shaping the market's evolution and point of view. They aim to be a permanent player in the classic tradition while also evolving with new trends.

A：The new design gallery formats are intended to be more economically efficient compared to the legacy formats. The costs associated with new formats are expected to be lower, with potential for stronger margins due to less overhead and a more flexible structure.

A：Challenges associated with constructing multi-level design galleries include the costs related to multiple floors such as staircases, elevators, and exit stairs, which are not cheap to build. Additionally, these floors complicate logistics such as placing furniture and managing construction costs like steel and cranes. The new format seeks to address these issues by reducing the complexity and cost of such structures.

A：The company is exploring real estate opportunities arising from changes in laws such as Zonings, potential reductions in large department stores' footprints, and the advent of driverless cars and the reduction in the need for parking lots. They plan to capitalize on these trends to create more dynamic and efficient retail spaces.

A：The new concept of interconnected buildings and courtyards differs from traditional designs by creating a more compact and efficient use of space, with individual buildings of about 4,500 to 5,500 square feet connected by beautiful garden courtyards, pathways, fountains, and fire pits. This design allows for a more product-efficient use of space, fewer complex mechanical systems, and potentially lower costs.

A：The strategy for incremental growth in the stakes involves some of the items from the current galleries being moved out and a focus on building a new aesthetic or category that can be sold on their platform, which is expected to be very incremental and leverageable.

A：The current promotional environment has been very competitive, especially with a lot of data available on the number of SKUs and promotional activities versus competitors. However, the company's margins are holding up fine, and the underlying model is considered a good one.

A：The company plans to transform acquired real estate, such as the formations in gasoline, into an RHS space gallery in the design district on West Hollywood's Melrose Avenue, and other properties will be redeveloped or repurposed to enhance their business. They are also considering consolidating some of their existing footprints.

A：The ecosystem approach is seen as a capital-efficient way to deploy the brand and is especially useful for gaining a presence in strategic locations like Greenwich. They aim to use this strategy to dimensionalize the brand and have successfully established ecosystems in different locations.

A：Challenges in expanding in Europe include varying cultural differences, shopping behaviors, and languages in different countries. Strategies to address these include building brand awareness, engaging with the trade, and listening and learning from their European teams to adapt business practices.

A：The London store has performed well due to several factors including a running head start, English being the primary language, a large number of expats, and an established customer base. The store has received a high level of customer interest and is considered a key driver of future success.

A：The company protects its designs and intellectual property through strong branding, design patents, and active engagement with legal counsel. They are proactive in sending patents and do not hesitate to take legal action when necessary, dissuading others from infringing on their intellectual property.

A：Increasing fuel costs and supply chain challenges have led to unplanned costs, which the company is offsetting with certain strategies. The potential for future cost increases due to global events like conflicts and inflation is acknowledged, and the company is preparing for a higher cost environment possibly lasting 6 to 12 months.

A：The new trade program has been met with positive feedback from the design community, with an acceleration in business that has already offset the discount and built a strong pipeline. The company is exploring new engagement methodologies, and is enhancing its support and services for the trade, emphasizing a commitment to providing extensive support.