RH Q2 EPS Beat Estimates, but a Tariff Refund Did the Heavy Lifting
As seen on the 24/7 Wall St. homepage on September 10, 2026.
A $55.1 million one-time tariff refund added 600 basis points to gross margin, so the enormous earnings beat is far less clean than it looks. Revenue growth accelerated 4.2 points from Q1, and management raised full-year growth guidance to 5.5% to 7.0% with Q4 growth pegged at 16.1% to 21.2% on the new RH Estates launch.
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Adjusted earnings of $2.70 per share for the fiscal second quarter came in far above the Wall Street consensus of $0.46, but a one-time IEEPA tariff refund was recognized directly in gross margins during the quarter. Management excluded it from normalized EBITDA, flagging it as a discrete item that will not recur.
Revenue of $922.15 million rose 2.6% year over year and edged past the consensus estimate. CEO Gary Friedman noted that growth accelerated 4.2 percentage points relative to Q1, which he attributed to strategic initiatives gaining traction.
Over the prior seven quarters, the company missed consensus EPS estimates in six of them, including a Q1 2027 loss of $1.97 per share against an estimate of negative $2.07. The Q2 beat is dramatic in percentage terms but is substantially explained by the tariff refund rather than a clean operational inflection.
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The company raised its full-year fiscal 2026 revenue growth outlook to a range of 5.5% to 7.0% and is projecting Q4 growth of 16.1% to 21.2%, driven in part by RH Estates, a new brand extension Friedman believes will double the company's total addressable market. Estates arrived in homes via a Sourcebook from late June through mid-July, and management says momentum is already embedded in its Q4 growth assumptions.
Net debt stood at 4.2 times trailing twelve-month adjusted EBITDA, and international pre-opening and startup costs are expected to create a 340 basis point drag on adjusted EBITDA margin for the full fiscal year. That drag is projected to shrink to 150 basis points in fiscal 2027 as gallery opening costs fall, leaving the near-term margin picture complicated by expansion spending.
Mentioned: RH