Thank you. Good afternoon, everyone.

Thank you for joining us for our second quarter fiscal 2026 earnings call. Joining me today are Gary Friedman, Chairman and Chief Executive Officer, and Jack Preston, Chief Financial Officer.

Before we start, I would like to remind you of our legal disclaimer, that we will make certain statements today that are forward-looking within the meaning of the federal securities laws, including statements about the outlook of our business and other matters referenced in our press release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially.

Please refer to our SEC filings, as well as our press release issued today, for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

Also, during this call, we may discuss non-GAAP financial measures, which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in today's financial results press release.

A live broadcast of this call is also available on the Investor Relations section of our website at ir.rh.com. Now, I'd like to turn the call over to Gary.

Good afternoon, everyone. We're coming live from New York City today.

We got in last night for the opening of our first RH Estates Gallery in Greenwich, Connecticut. I know I saw some of you there last night and those who haven't seen it, I would encourage everyone to get there.

It's our newest, latest, greatest work. Let me start with the letter to our people, partners, and shareholders.

GAAP net revenues of $922.2 million exceeded the high end of our guidance, increasing 2.6% versus last year and accelerating 4.2 points over the first quarter as our momentum begins to build from the significant growth strategies we've recently put into motion. Normalized adjusted EBITDA margin of 13.4% also exceeded the high end of our guidance for adjusted EBITDA margin.

We generated $72.3 million of cash in the quarter, inclusive of free cash flow and a $42 million distribution from our Aspen joint ventures, excluding tariff refunds of $69.2 million. We recognized a tariff benefit of $55.1 million in the second quarter and expect to recognize an additional $13.9 million tariff benefit in the second half of the year, which we plan to use to offset $50 million of unplanned cost increases across our supply chain due to the significant and sustained spike in oil prices as a result of the continued conflict in the Middle East.

The remaining $19 million of tariff proceeds will benefit earnings and is included in our updated adjusted EBITDA margin outlook for fiscal 2026. Updated fiscal year 2026 outlook: revenue growth of 5.5% to 7%, adjusted EBITDA margin of 15% to 16.2%, free cash flow, asset sales, and distribution of equity method investments of $300 million to $400 million.

The above outlook includes an approximate -340 basis point adjusted EBITDA margin impact from pre-opening and startup costs to support our international expansion. Third quarter 2026 outlook: revenue growth of 5% to 6%, inclusive of backlog reduction of 2.5 points, RH Estates of 2 points, new galleries and other, 1 point.

Adjusted EBITDA margin of 12.5% to 13.5%. The above outlook includes an approximate -310 basis point adjusted EBITDA margin impact from pre-opening and startup costs to support our international expansion.

Fourth quarter 2026 outlook: revenue growth of 16.1% to 21.2%, inclusive of backlog reduction of 6.5 points, RH Estates growth of 8 points, new galleries and other of 4 points. Adjusted EBITDA margin of 19.7% to 22.9%.

The above outlook includes an approximate -190 basis points of adjusted EBITDA margin impact from pre-opening and startup costs to support our international expansion. Expanding the brand and doubling the TAM: We believe the introduction of RH Estates, our latest brand extension, introduced with a 268-page Source Book that arrived in homes late June through mid-July, has the potential to double the total addressable market of the RH brand.

Over 60% of luxury homes across North America have traditional or classic architecture, with a higher concentration in Europe. A home's architectural vernacular is generally the driving factor influencing stylistic direction for both interior designers and consumers.

Additionally, we believe traditional and classic furniture will anchor the next major style trend across the industry over the next 20-plus years, as the dominant trends from the 1980s through 2010, such as eclecticism, based on classic design and antiques, highlighted with contemporary modern pieces, and the California Look, pioneered by Michael Taylor, who Architectural Digest called one of the top 20 greatest designers of all time, and who twisted eclecticism towards a more rustic yet refined point of view, blurring the lines between indoors and outdoors. Michael Taylor's California Look was amplified and refined by Richard Hallberg, Daniel Cuevas, and Barbara Wiseley, designers who together launched Formations, one of the most admired and respected design firms to trade luxury furniture showrooms in the United States, recognized and respected globally.

The three later acquired Dennis & Leen, giving them authority in authentic classical European furniture and antiques, blending them masterfully and creating a stylistic vocabulary that was layered and looked to have been collected over time. Their flagship showrooms on Melrose Avenue in West Hollywood Design District have been the first stop for many of the best interior designers and collectors from around the world.

Our acquisitions over the past 6 years of Michael Taylor Collections, Formations, Dennis & Leen, Joseph Jeup, and Dmitry, plus our decades-long relationship with many of the world's distinguished antique collectors, such as Ed Hardy in San Francisco, Ludovic Messager, who set the tone and trends at the world-famous Paris flea market, and Rebecca Will of London and [Mougins?] , who now leads product curation for RH Upholstery, plus designers such as Anouska Hempel, the inventor of Blakes, the first and most famous boutique hotel in the world, who also designed the world of RH Bar & Lounge and the Birch restaurant at London, RH London, plus the many designers, artisans, and manufacturers who are all part of the intricate and inspiring RH ecosystem of design, have come together to lead, form, and ride this next wave with the launch of RH Estates.

This is a collective effort with a level of talent, experience, and scale unseen before in our industry. While we launched RH Estates with a conservative initial mailing, our plan is to aggressively expand the assortment and circulation in November, where we will have Estates on the main floor of our galleries that represent 80% of our business, and in-stocks will be at an adequate level to meet and fill demand, hence the fourth quarter acceleration in our outlook.

You can expect us to continue to rapidly expand the assortment over the next 5 years, and we predict it will represent 50% of our offering at that time. We also believe RH Estates will be margin accretive on multiple levels.

One, we believe the quality, design, and exclusivity of the offering will command higher margins. Two, the average price point is currently 45% higher than our existing assortment, thus creating cost leverage and margin accretion throughout our operating model.

It's also important to note that we will aggressively protect the exclusivity of our products and the integrity of our brand. Almost the entirety of the RH Estates collection is currently protected by trade dress or have design patents pending, due to the acquisitions of Michael Taylor, Formations, Dennis & Leen, and Dmitry, as well as pieces developed with internal and external designers.

You will note on the back of the Source Book, it reads, "RH vigorously protects and pursues appropriate legal remedies against unauthorized copying, imitation, or misuse worldwide of its product designs, photographs, and collection names through intellectual property rights, including design patents, unregistered design rights, trade dress, trademarks, copyrights, and pending applications." Extraordinary takes more time, costs more money, involves more people doing more things in a more complicated manner, but it's worth it.

Over the entrance of RH Center of Innovation, it reads, "RH, the home of the extraordinary, the remarkable, and the amazing." I'm sure there are people who visit or come in for an interview and think the above is some corporate nonsense.

I'm here to tell you it's not. It's logic, experience, and I would argue, common sense.

What we've learned on our 26-year journey of transforming Restoration Hardware, a nearly bankrupt company with a $20 million market cap and a box of [Oxydol?] laundry detergent on the cover of its catalog, into RH, the leading luxury home brand in the world, with almost $4 billion in annual revenues, is that we always figured out how to monetize extraordinary and remarkable work.

We found it very hard to monetize ordinary and unremarkable. Yes, it has taken more time, cost more money, involved more people doing more things in a more complicated manner.

Yes, it has always been worth it. This time will be no different.

If you're a long-term shareholder and owner like I am, thank you for belief and patience. While we've been running through the mud for the past 4 years of the worst housing market in four decades, we've also made some amazing investments, done remarkable work, and expect extraordinary results over the next several quarters and years.

Let me take you through a few of them. RH International: We expect the drag from international to decrease from 450 basis points in half one of this year to 250 basis points in half two, or 340 basis points for the year.

We further expect the drag from international to decrease from 340 basis points in 2026 to 150 basis points in 2027, as we cycle the significant investments of opening our three global flagships in Paris, Milan, and London over a 10-month period from September 2025 to July 2026. On June 27, we opened what I believe is our most innovative and extraordinary brand experience yet, RH London, The Gallery in Mayfair.

If you want to see our very best work, and maybe the best work in the world of retail, it's at 7 Burlington Gardens in the heart of Mayfair. I'm happy to report that the design pipeline reached almost $7 million in the first 8 weeks, rivaling the design pipelines of RH Newport and RH New York.

It will take several months to turn these high-caliber, complex design jobs, some in the million-dollar range, into demand and revenue, but the response to RH London has been nothing short of spectacular. As I mentioned on our last call, I believe RH London will be the amplifier of the RH brand recognition across Europe and the Middle East.

Our record investment cycle is now post-peak, which will result in lower capital spending and higher returns on invested capital. We expect adjusted capital expenditures to decrease from $240 million to $260 million in 2026 to $175 million to $200 million in 2027.

We expect new gallery opening costs to decrease from $48 million in 2026 to $18 million in 2027. We have cycled through our real estate pipeline that included three global flagships and several multi-story galleries with rooftop restaurants where construction costs doubled post-COVID.

We have one multi-story gallery left to complete in Houston in 2027. Our new real estate strategy includes RH Compounds, a multi-building shopping experience with connecting garden courtyards and a central atrium restaurant under construction in Naples, Florida, scheduled to open at the end of '26 or the beginning of 2027, and another RH Compound that should be under construction soon in Aventura, Florida, opening in 2027.

Both projects are projected to have a payback in the 12 to 18-month range, with return on capital metrics we were accustomed to prior to the pandemic. Additionally, as previously mentioned, we've developed a single-story RH design gallery with integrated restaurants with similar expected 12 to 18-month payback ranges, and we are confident that our multiple go-to-market retail strategies of RH Compounds, RH ecosystems, RH design galleries with a single story, and RH Interior Design offices will significantly increase our return on invested capital and decrease construction timelines.

Our long-term success and strategic separation is the result of innovating and investing during uncertain times, and this time is no different. Launching RH Estates, the most compelling collection in the history of our industry that has the potential to expand the brand and double the TAM.

Opening three most innovative global flagships that will likely never be duplicated in our lifetimes. Developing a global hospitality brand with restaurants that drive significant traffic, brand awareness, and generate on average 65% of the aggregate galleries' rent they reside in.

Building the world's largest residential interior design firm that is moving our brand beyond presenting and selling product to conceptualizing and selling spaces. All during the darkest days and most prolonged housing downturn in four decades is not for the faint of heart.

Never underestimate the power of a team of people who don't know what can't be done, especially these people. Onward, Team RH.

Carpe diem. Gary.

Operator will now open the call to questions.

Great. Good afternoon.

Thanks so much for taking my question. Fun party last night in Greenwich.

Congrats on the opening. Maybe we could start there.

Gary, could you talk a little about the early demand trends for Estates? Are you seeing new customers?

Maybe how this launch has played out relative to ones in the past? Then, the price point premium of 45%, that seems sizable.

There was a point in the past you talked about pricing being a bit too high. Why is Estates different in terms of pricing?

Sure. Thank you, Steven.

Thanks for coming to our opening last night. Let's, I'll kind of try to take the questions backwards.

Why is 45% reasonable, and why is this different? One, that the product is completely different.

Start there. If you think about the kind of pricing miscue we made with contemporary, that was more of a simple modern aesthetic and contemporary aesthetic that was, product that was simpler to make.

I don't think there's anything like RH Estates in the market today, at least nowhere we can find. If you try to do a reverse Google search on any of our product, you're not going to find it.

You might find a, a foreign website that tried to pick up some of our pictures and, pop them on a, no-name kind of location. It has to do a lot with the exclusivity and the quality and the desirability of the product.

These products were being sold for two to three times our retails. I don't know of anybody selling this level of quality, these kinds of finishes.

If you look at the Estates book and what we did with the product, you open and you see the picture, the photos are very close, tight shots, showing the level of detailing and carvings and the hardware details, the finish details. You see two full pages of finishes up close, the size of, real-life finishes.

No one's ever done anything like that in this industry because no one's ever had finishes like this in this industry. It's available to a consumer, right?

That wasn't a design showroom only available to the trade, and, with long lead times and special order finishes and, where you might have to wait, 4 to 6 months or longer. My first wife was a high-end interior designer, and that's why I understand this industry.

I was her client on two projects and then her business partner, for 11 years, and saw the inefficiencies in the industry, and, that really framed the opportunity, I think, for RH, as we see it today, is that that experience. When you've got when you're the only one with the level of design and quality in a marketplace, you can command a premium like our Are the prices too high?

I think they're incredible value. You can't find this kind of product at these kind of prices, So, we don't think about price so much as we think about value, right?

We think about design, quality, and value in that order. If nobody likes the design, nobody cares about the price.

First you have to with a consumer, you have to they have to love the design. If they love the design, they'll, they'll look closer.

They'll either click on the website or they'll walk up to the product, and and then the second thing a consumer generally does is they perceive the quality, right? They'll walk up to it in a gallery, in a store, they'll zoom in on a on a website, look closer at a page if it's if it's a Source Book or catalog, and they'll make a perception about quality.

Then, and then they'll look at the price, and at that point, the consumer will make a a decision about, that design at that quality, is is that price a good value, right? It's it's not a one-dimensional price discussion discussion ever.

It's always a design, quality, value discussion. We don't care about the price of anything if we don't love the design, right?

Neither does a customer. I think you've got to start with where where can one if you're a consumer, what do you think about the design?

How do you think about the quality? Walk up to it, touch it, open a drawer with the details, look at the hardware, with the finishes, and then look at the price.

I think that's the hierarchy everybody should look at any product with. For this design, this quality, we believe this is a tremendous value.

We, I should probably read it, maybe the next call, I'll read some of the letters we're getting about RH Estates because they're incredible. We have people that weren't have never bought from us, were never a customer, and all of a sudden they've stumbled into Estates.

They got the book or they, walked into an RH, and now we've got a a large design job. We just recently had someone in in RH London who their interior designer was going to augment, a million-plus design job with probably about 50,000 to 80,000 of of RH and brought her client into RH London, and now we're doing 95% of a $1.1 million design job.

I think this is is I think you asked about incrementality or what was that? Really demand trends that New customers.

Our people in the galleries will tell you it's almost entirely a new customer. I think that makes sense.

It's like I said, I think we've we turned the company over the last 8 years or so, too modern, too contemporary, too one-dimensional. We're quick learners here, and as we mature and understand the industry and the consumer even more, I think if you watched the earnings video, I think I did two quarters ago, I tried to outline how we think about RH and the opportunity, and how we see kind of three major kind of design vernaculars, kind of traditional classic, which we call Estates, contemporary, which we call Interiors, and modern, which we call Modern.

We kind of think about ourselves now as kind of a juggler, if you will. There's three balls and then there's always one ball in the air.

That ball that's in the air is generally the ball that's the the major trend. For anywhere in our industry, a short trend might be 7 to 10 years, that the major trends are are more 15 to any or 15 to as long as 25 or 30 years.

People have asked me before, they'll, they'll ask me, "Where do the trends come from?" I I think I've said it on conference calls, I say, "The trends come from the dead."

Right? Generations pass away, their belongings go into estate sales.

The estate sales feed the high-end antique markets. The high-end antique markets feed and inform the high-end interior design market.

The high-end interior design market then, informs the high-end reproduction market, and then it kind of trickles down. The next trend, I outline I talk about, pretty fulsomely in the letter to try to help people see why we're so excited about Estates because it's it's a like almost a magnifying opportunity.

One, we're not addressing the traditional classic market today very well at all, I'd say hardly at all. I think we're dominant in in contemporary modern.

If you've got 60% of the home luxury homes in America that are classic and traditional, we're probably not addressing that customer. We might maybe we're getting 5% of that market.

We were getting 10 with a few older collections. The math would tell you this this could could and should be half our business or more than half our business.

The data, all the data we look at once we start digging and thinking about it and we've been we've been working on this now, god, I don't know, 7 years, been conceptualizing this opportunity. We're getting smarter and smarter and seeing a bigger and bigger market.

We think this is, as incremental or more incremental than when we did RH Modern. When we did RH Modern, no one was waking up in the morning saying, "Hey honey, we need some modern furniture.

We just got a modern condo or a new house, and it's modern." Nobody was thinking about going to RH for modern furniture in 2012, '13, or '14 until we launched RH Modern in 2015.

RH Modern was highly incremental. One of the most incremental things we've done and very quickly, went from 0 to $1 billion.

We think this is as incremental, might be more incremental. We were at Greenwich last night for our opening party, and if I don't know how Like, we we took some back roads.

We were coming from the airport, and, you're going through the neighborhoods and you realize like, you could drive around here for hours and might not see a modern home. Some of the homes might have been remodeled with, some contemporaryized interiors and that, might play.

When you really look at the bones of the houses, look at the exterior of the houses, my sense is the market of Greenwich, Connecticut, Westport, New Canaan, that whole area, I got to believe it's like 90/10, 85/15, somewhere like that. I and, by the way, we have I mean a we don't talk about our store volume, but I'll let our competitors know this one, like we'll do like $47 million in Greenwich, right?

We we have 14,000 interior selling in the post office, and we have about 4,500 in the outdoor gallery today, right? It's all contemporary.

I'm thinking if we're doing $47 million in Greenwich, Connecticut, with 14,000 ft of interior selling space, what could Estates do? We have I think 12,000 ft of interior selling in the new, the former Ralph Lauren building, which is a perfect building for Estates, like, by the way.

Thank you, Ralph. We didn't have to we didn't have to build that one, and so it's highly capital efficient for those of you who are going to ask me that question today.

This is this is a big deal. This is a big deal.

We've been working on this for a long time. We've never made so many acquisitions to set ourselves up, for a business.

Michael, like if you saw the my the projects that I did early on, whether it's my condo in San Francisco or the home I still have in Belvedere that has Michael Taylor dining diamond table in the kitchen, I let the team reproduce the 17th-century antique monastery table I have in the dining room that it's almost identical. Somebody could switch My daughter saw it in our Center of Innovation, and they grew up at that dining table, and they're like, "Dad, why is our dining table here at the Center of Innovation?"

I go, "It's not our dining table." They go, "Dad, this is our dining table."

They didn't know, like, but it's a very expensive antique. I think it's safe to say it's safe I bought it 27 years ago for $58,000, statement dining table, built a nice house in Belvedere.

Never spent that much on any piece of furniture or anything, and I'm not saying that to show off. I'm I put it into context.

It's an 11-ft table that has two extensions, extends, I think, to 14, 15 ft. Can seat up to 16 people because it's, I think, almost 50 inches wide.

You could fit two people at the end. It's really great if you're, if you entertain and you have a big family.

I don't think anybody addresses that business very well. Those are the kind of businesses that we're addressing with with Estates.

We said, our initial goal with launching, we want to dominate the primary bedroom, the primary living room, the primary dining room. That's where we'll start, and then we'll continue to expand and dimensionalize the assortment.

That table today, if you take that $58,000 dining table and you just did natural inflation over 27 years, I think it's about $140,000 dining table today, somewhere like that. If you looked on 1stDibs, when you looked at dining tables, they go up to about $250,000 to $300,000.

That table would probably get somewhere between $100,000 to $200,000 if it was on 1stDibs today. We've got that Where's our Where did we finally land?

We were going back and forth. It's sold for $14,995.

That's for the 12-ft one or the the 11-ft one, which, fine, I think, you know And and it's an incredible value. It's I think a lot of people Again, it it's Are we talking about a higher-end customer?

Of course we are. Should that scare anybody?

No. We've moved this brand up over 27 years, right?

The reason the way we built this brand is we went from selling big knick-knacks and tchotchkes and had an average order value of $125 to an average order value, somewhere around 10,000. That's with our order split.

If you really look at because we split a lot of design orders, we deliver them, our our true average order is much higher than that. We, we move we kept elevating the brand.

We kept shedding lower-value customers, acquiring higher-value customers, and, yeah, we'll continue to do so until we, say we hit the right spot. That doesn't mean we won't sell bedroom furniture that's appropriate for second, third, fourth bedrooms, in in houses and second homes and things like that.

We we think we're we're going to be like alone in the market for a while here. I I challenge anybody, take the RH Estates book, go scan go scan the internet, tell me who's going to compete with this.

Then, then look at the second drop, which is really kind of like the first drop, because it's going to It's It's basically the same book with about 30% 30% more items in it and and product in it. It's we're just going to an increased number of customers.

We're not mailing the same people. We're just broadening, yes, broadening the contacts, which will which will significantly lift the business.

And, when we do that, we're going to do that in concert with the product, will be unveiled in the galleries. It'll take over the first floor in all of our big galleries.

It'll be the main thing. Um, it'll be well-represented.

It'll be in stock. No- November's transition time, like, early mid-November we'll have galleries' transition that are somewhere between 75% and 85% of the business.

Then it'll continue to go to the rest of the galleries, and I think all galleries by December, right? The last 15% to 20% of, our volume.

That one is really meaningful, right? I think these products will get an even bigger lift when the customer sees them, as the finishes are so intricate and the detail and the quality is, I think, important to see.

Day- data would say that, like like 90 when you look at the furniture industry today, about 80% of furniture is is done in retail stores. When you look at the luxury furniture industry, it's like 95/5.

That's just because the customer is more discerning, they're spending more money, it's more of an investment, and, has everything to do with comfort, sit, finish, color, scale, and all the things, you know. You don't want to get it wrong.

Like it's It's one thing if you're an internet shopper today, you order five things, you return three, or, some people order 10 things, and they keep one or, send all 10 back. You really can't do that with furniture business.

You'll bankrupt, people. Most people charge for restocking fees.

We haven't yet. We're going to probably change that, because we we do think some people take advantage of like they'll order stuff and then just go, "Oh, we'll just this is this is what we'll keep, this we'll send back."

It's very expensive to to make mistakes in the furniture, when you're buying furniture.

Okay. Thanks for all that detail.

Appreciate it. The follow-up I had is just international.

It was helpful to get the context of where you see the drag going in 2027. Can you talk a little about the assumptions there?

Because you'll be cycling flagship openings, right? I guess we haven't really gotten the revenue, but curious when you think about the UK versus Continental Europe, are we at the point where the UK can be much larger from a revenue perspective, and that's really helping from a profitability perspective?

Thanks very much.

One of the biggest things is just the cost of opening in Europe, right? The number of people that we have to have fly from America, put up in America for months, you're training.

The three global flagships were the first hospitality experiences except RH England we did, but that's not a very high-volume hospitality experience. It's out in the countryside.

These were real complex hospitality experiences, a typical gallery for us, we might employ 30 to 40 people on the gallery side, and we'll employ 120 to 130 people on the hospitality side. When you're opening restaurants and hospitality, it's longer training, it's more complex, more people, and just the support that Europe needed from America.

We had a lot of people on the road for a long time, making sure we're opening these right. You don't get a second chance to make a first impression, and we're not the most popular people or continent right now, right?

We want to open correctly, we want to be respectful. A lot of things, good point.

Assumptions-wise, Steve, obviously, the drag of the opening costs that Gary just mentioned. You have the buildup of revenue that's helping to reduce the drag.

You'll see the absence of these larger costs. We have no more European openings in '27.

Those are the building blocks, and they're kind of self-evident, but just to point them out.

Okay. Thanks for all that detail.

Best of luck.

Great, thank you.

Hi, guys. Hi, everyone.

I guess maybe more of a math question. If you look at the progression within your back-half guide, it looks like there is a bit of a stair step to the third quarter in terms of the underlying stacks and then another step-up into the fourth quarter.

Is that explicitly Estates, and can you speak to the momentum you're seeing within that brand, and then what else is it if it's not just Estates?

Simeon, it's listed right there. I don't know if you have it in front of you, the press release.

If you look at it

as

inclusive of backlog reduction of 6.5 points, RH Estates at 8 points, and new galleries, and other at 4 points.

That was Q4. Obviously, we have Q3 there as well,

you can look at that and

you see the order quarter-over-quarter increases in those.

Okay. I guess if I may restate, I guess what gives you confidence and, I get the backlog reductions, but can we talk about the confidence in that acceleration?

Yeah. That's what we do, right?

That's how we built this company is expanding product and mailing books and setting product in galleries, and we have a lot of math around this and it's the big important launch, we think, is meaningful. We've done meaningful things a lot.

Even if you look back at product transformation we went and accelerated into, after we kind of stumbled on the first contemporary round, we doubled down, and we were able to move business 15 to 20 points, right? This could be conservative.

If you look at our history. If you think about Modern, how Modern moved the business, we've accelerated product transformation in contemporary.

Look at the prior 2.5 years. I don't think this is that aggressive.

Okay. Thanks, guys.

Good luck.

Thank you.

Hey, Gary and team. Gary, maybe just following up on RH Estates as all of us try to gauge your conviction here and the 8% net revenue growth contribution in the fourth quarter.

Can you confirm whether that's based on Source Book-only demand, and/or maybe just comment on how much footage you're dedicating to the collection in the fall? Would love to just hear how weekly demand scaling at the collection level is telling you where that 8% can go over a relatively short period of time versus that 50%, sort of 5-year target.

We have data right now with Estates building just in the mail and just on the website with long lead times and not in stock. We know if something has a 4-week wait, a 6-week wait, an 8-week wait, if something's running backwards of XYZ, there's math around all of that that we can forecast demand, right?

Based on what we're seeing. There's in-stocks, there's wait times, then the big move is when the product goes into the galleries.

I think we've said that publicly, lift factors, no, maybe not. Maybe we don't want our competitors to know all that.

Okay. I can't remember.

I've been doing this a long time. Somebody's laughing.

Okay.

The lift factor for putting stuff on the floor.

Yeah,

50% to

Yeah, 50% to 100%. It can go as high as 150%.

Yep. We have that.

Then the other thing, when we say other and stuff like that, just think about we're going to make a big transformation. Think about our big galleries that are mostly two-floor galleries.

Yeah. When we do a flip and we're bringing newness onto the main floor, one, not everything that's on the main floor leaves.

What we do is we look at what are the bestsellers, everything's ranked, and we take the bottom stuff off the floor, right? You take the least productive goods on the floor.

Again, this is why we don't put it on the floor right away. We generally like to look at things for 3 to 6 months.

Here because we believe it's so incremental and we have data of classic things we've sold and still sell. Things that we didn't realize we couldn't kill it, right?

We just know the market's still there. We've been selling St.

James since 2008. We still have St.

James. Can't stop selling St.

James. Some of our other just classic things like that, and we realized that we transitioned the business too far.

If you look at most specialty brands, most specialty brands are built around an aesthetic point of view. Whatever category, apparel or this or that, it's got a stylistic point of view, and you usually stay within that stylish point of view.

I think we saw that the furniture business, most of us here started in apparel. Armani looks like Armani, Ralph Lauren looks like Ralph Lauren, Gap's got their point of view, American Eagle's got theirs or Abercrombie, whoever you're looking at, right?

Chanel's got their point of view. Hermès got a point of view.

Most of us come from that, and the longer we're in this, the more we learn. Again, if you go back and look at the video, I think I outlined it very clearly about what we want to do is own kind of seven major product categories and three major aesthetics.

We think that if we do that really well, we can be relevant to all the customers at that level in the market across all the architectural vernaculars and major stylistic points of view. There might be some stuff, I'm likely not going to let the brand go after grandma chic, right?

It's a little trend. Kendall Jenner did an Arch Digest tour of her new cabin.

Kendall Jenner was great for our brand, right? She the cloud and this and that and took people through her home then, and I don't know, maybe it's just cuz it's me, and I don't like flower sofas and stuff like that.

You do have to kind of keep your brand a little disciplined. We're going to let everybody else have grandma chic or things like that, and I don't know what some of the other weird trends that we're seeing right now, we don't have to own everything.

To this day, people think that we're going to go bankrupt cuz we don't sell enough color. Those are the same people that haven't really looked at that many homes.

If you just go on Zillow or Redfin and go look at 100 homes and find out how many have a red sofa, you'll realize not a lot of people in the world have red sofas. If you want to be in the red sofa business, go right ahead.

Want to be in the flower grandma chic, printed sofa business, go for it. I'm happy for you.

You're not going to see us in those things. I think when you think about just revenue for Estates, you're going to see the big ramp happen when the goods get in the galleries, the in-stocks start to peak, and we expand the circulation meaningfully, right?

We have a lot of customers lined up right now just waiting, when can I see this in the gallery. There's pent-up demand, people waiting, just want to know when they can see it in person because, again, the data will tell you at the luxury end of the market, it's 90/10 or 95/5.

People want to see the goods.

Thank you. I'll pass it on.

Hey, guys. Thanks a lot.

First question, when we think about the 4Q contribution from Estates, that's on a delivered basis, just curious how we should think about how much higher the demand could be. Then given how your demand builds and sort of some of the color that you've given us in the past couple of questions, 4Q is obviously just a jumping-off point for 1H '27.

Curious if you could just provide a little bit more color on how we should think about how big Estates can get into next year.

Hey, Max, I was going to ask you, how'd you like the pizza or any of the pastas last night? Cuz I saw you in the restaurant.

Clearly, Max, demand is in excess of the revenue growth as this business is building and ramping. Your reading us is the same conclusions.

It's evident that in Q1 that continues, especially with the investment, representation of product in the galleries and newness that Gary talked about, 30% the book and whatnot. We don't talk about demand growth at least at the moment, we don't.

We did during that transition.

We did, but today, we're not. This is a growing business, it's clearly demand growth rates, as we build in-stocks, as we present product, etc., that Gary's talked about are some level higher than this.

When When you ask about how when we think about how half one versus half two looks, Max, you maybe

Well, versus leading into H1 2027, how does that that trend how do you expect growth of, the 8 points from Estates, how that continues?

I

got you. Going into 2027, clearly, there's stepping stones for elevated growth.

I I I would say, there's a good 5 years of building here of like a, it's going to be like a new business, a growing business. I think the most similar thing is RH Modern, right?

We we weren't known for modern, we didn't have that aesthetic, no one was coming to us, they were going to Design Within Reach or going somewhere else. I mean, but we hopped on it because we saw an explosion of modern architecture happening around the world.

We saw the verticalization of cities, we saw the influence of technology, influencing customers to have a more modern point of view. We're all walking around, iPhones, the the big commercial architectural trends were all modern, and, yeah, you look back at in the 1950s at mid-century modern, that look wasn't really that big.

You had the Bird Streets in LA, you had, different places, Miami, Florida, places like that, but you probably didn't have too much mid-century modern in, Boston, New York, Philadelphia, places like probably none in Greenwich. Maybe there's a collector or two, like, but, and then you just saw a lot of places being remodeled all over, a big boom in LA, that's why we opened the first RH Modern, I guess the first and the only freestanding RH Modern because we're building the big

galleries. We opened Dallas briefly, remember?

Oh, yeah. Then we had, yeah, we had Dallas for a little while.

That's why we wanted to open in Greenwich, right? To get really get a sense for, okay, here's a market, we do a lot of volume in 14,000 sq ft main gallery with a, 4,500 sq ft outdoor gallery.

It was Was $47 million the right number?

$46 million something.

$46 million. Okay.

Close. Okay.

Like, I don't know, like, could we do another could we comp up 50% or 70% in a market like that? I I don't think that the customer who's looking and buying contemporary or modern is all of a sudden jumping up and down for Estates.

I think the people buying Estates are, they're looking for something like that. Right now that something like that doesn't exist.

There's a lot of classic traditional, like really like I would say not good-looking furniture out there. It's not like there's not There's a lot.

You go look at a lot of the classic furniture stores that, have looked the same for 40 years or something and there's a lot of them out there. The market share the people doing business go to High Point, North North Carolina, sell a lot of classic furniture.

Go to the furniture mart in Nebraska, the big Berkshire Hathaway thing. They do like $700 million out there.

They gotta be 85% classic, tradition. It's there, you know.

I think I And I think, in a lot of ways, we'll create a new high-end market for it, for the aesthetic the way we're going to build it out. And, and and the whole point of view and the aesthetic point of view will evolve and change.

We We will shape part of it. We're going earlier than we would normally go on a trend, you know.

I usually like to let the wave break and kind of see who's riding it and how we can exploit it. I think because the platform we have and because we've this is I mean good and bad for me, right?

I lived through this trend. I was a consumer.

The first trend I actually participated in as a consumer, that's really good news. I've got a I have the Michael Taylor Taylor diamond tables.

I have a lot of the things and stuff, you know. I got a point of reference like and on all this stuff.

That's good and bad, too, by the way, cuz it's never the trends never come through exactly the same. They always, get shaped, by designers and, how it always comes through fresh yet familiar.

It has to be fresh, and it has to be familiar. So, but I think, I think we can help shape this one.

We're, we're going to evolve it. We're going to be inspired by other people, they're going to be inspired by us.

Other small furniture, businesses that are run by, highly aesthetic people will do some really great things and, and then, the market will evolve. We'll, we'll hopefully get a very big share of this, evolving new trend and, and be a permanent player in classic traditional.

Got it. That's helpful.

Then just quickly, I appreciate the color on the compounds and the design galleries. Can you just compare and contrast how unit economics could look compared to the legacy gallery formats that you've opened for the past decade?

Should revenues and margins be pretty similar, or could the margin profile actually be a little bit stronger given maybe less SG&A associated with the new format compared to what we've seen previously?

Like we think, what happened We We were building our multi-level design galleries with a restaurant on the roof pre-COVID, anywhere from, a lower-cost market, I think we hit a low of like $27 million, in a couple of them.

Charlotte and Yeah. Yeah.

Yeah. Some of the lower costs $27 million to $30 million.

More expensive market to build might have cost us $35 million. The cost for those went to $40 million to $60 million, you know.

With just all the all the inflation costs that happened. Construction, especially better quality, higher-end construction.

That, necessity's the mother of invention, right? We we were already pregnant with a lot of real estate we had to build, we were committed, under construction or too far down the down the pipeline to change course.

We've invented a new concept. We said, "Look, if you say what's really good about one of our multi-level galleries with a restaurant and, that that whole breed?"

There's There's a really a lot of good things about it. What are the bad things about it?

Multiple floors require grand staircases, they require elevators, generally two, they require two sets of exit stairs. Those are not cheap to build, you've got multiple stairways that, by the way, do $0 per sq ft.

There's no transactions happening in the elevators or the stairways or the grand stairwells, it's a lot of square footage. Then when you take that and start, compounding floors and then you put furniture on the roof, then all of a sudden you've got a whole different coding.

You need different footings and foundations, and steel gets upsized, and, of all the inflation, steel, that was a big problem for us. Those those just became very expensive.

Then everything you do on a multi-floor building, right? You've got cranes and pickers, you've got guys trying to put metal awnings on windows on the second floor, the third floor, and, you get cranes and everything all around and you're trying to plaster the whole building, multiple floors.

If you think about a compound, we disaggregated one of those those big galleries, and we said, "Okay, what can what can we get rid of?" There's some fortunate real estate opportunities because of I I think Saks went bankrupt first, right?

Then Saks came out of bankruptcy, and then Lord & Taylor went bankrupt, that then Saks bought Nordstrom's and

You mean Neiman's.

Neiman's. Neiman's.

Neiman's went back So So, lot of different opportunities were coming up for real estate, we think more will come up, high-end pads. Also, see what's happening with transportation and driverless cars, even Uber and driverless cars.

There's going to be a lot of parking lots in very good shopping centers that have way too much parking, very, very soon, right? It's already happening now.

The zoning laws are changing. We said, "How could we be opportunistic with which we think is the, reduction of real estate, like if Saks and if they didn't come out of bankruptcy yet.

Saks did,

yeah. They did.

Oh, they did? Okay.

I gotta think they're not going to keep the same footprint. There's going to be opportunities with luxury department stores kind of closing.

We The We took one of them we're taking just a parking lot space in Aventura, and then Naples was a Nordstrom's that closed. They're relatively big pads.

What we did is we said, "Hey, what what can we build that's really interesting and design that's really interesting?" We said, "Well, what if we, build multiple small buildings connected with beautiful garden courtyards and pathways and fountains and fire pits, and we put a restaurant in the middle, and, it's beautifully landscaped.

We we have a fraction of the square footage under roof. When you really look at all under roof, we have individual buildings that don't have to have connected mechanical systems, it's much less complex.

We mostly the buildings are 4,000 to 5,000, 5,500 sq ft. I think we have 1 2 3 4 5 6 kind of seven connected seven, independent structures in Naples.

They and they're designed in a way that it's it's designed for outdoor furniture, outdoor and it's designed the rooms are designed, very efficient ways. We actually get more product per square foot, but I think it's going to feel just as elegant and grand.

It doesn't take any cranes, doesn't take any stairways, doesn't take any exit stairs, doesn't take any elevators, doesn't take big footings for this or that. In fact, most of even in I think in Naples, right, it's all wood.

There's no steel. Yeah.

100% wood. Some of these we believe we can prefab, build the walls and just tilt them up, plaster the outside.

We designed them so they only have a couple of kind of windows because we thought we could, manufacture the windows and do a lot of things. They're going to cost us we were hoping the price was going to be half, and it's half.

We get more product density, and I think they're I think they're going to be more exciting to shop. You you're really walking It's like a resort.

I call it like a design resort. Walking through there's, depending where you are in the US, in Florida you're going to have palm trees and banana palms, all kinds of, tropical foliage and stuff, and California you'll have olive trees and other things, and they're they're going to be cool.

They're going to be very interesting, and, and I think the restaurants are going to be beautiful. It's like a glass box in the middle of kind of atrium and indoor/outdoor indoor seating, outdoor seating.

We're we're super excited about it. Everybody who's kind of seen them, Dave just got back from Naples, right?

Like walked through, it's like feels good, like even though it's construction site still, you get the feeling of like it's nothing nobody has anything like it. What what else is is, Dave and I were talking about, what's good about it is the landlords, they'll take more risk on these, and I think participate more financially because we're building all these smaller buildings.

They're always worried like, "Oh, what if something goes wrong with RH? I'm stuck with this three-story building with a restaurant on top.

Like, who's going to lease that from me?" Right?

Not a lot of people. You sell them on, "Hey, look, I've who built you a little village, you could put eight retailers in here."

You know. Beautiful.

They're all connected, it's just an extension of, your shopping experience. I we we I think we have a good selling point.

I think we're going to, be really good partners for developers. We're excited.

The single-floor galleries that we're doing that are anywhere from 18,000 to 20,000, right, 23,000 or 24,000 sq ft with, beautiful courtyard restaurants in the middle, we have our new Italian concept that we just opened in in Greenwich, Cucina Angelina. It's named in honor of my Italian mother.

Now some of you can ask if my mom was a good Italian cook, and she wasn't, but and as if meaning I can't honor her, right? She She did like to eat.

My Uncle Gino was the cook in the family, so I also talk about him if you've seen the menu and stuff. Some of these compounds we're doing, it's really fun.

You see big pizza oven and, we think we have the best pizzas in America. Like if any of us here like, really wanted to take a flyer, I think you could take our pizzas on the road.

We might have the best pizza concept in America. I wouldn't want to be, any of the Papa John's or anything competing against our pizzas.

Like they're so good. We We have this pizza expert that works for us in Europe, Matteo, who's he's perfected the crust.

It's Did you Did you have Did you have pizza last night, Max? Max?

No.

I did not, no.

You eat last night? I saw you.

Or you're trying to get information on the gallery. No, anyway, the compounds are going to be great, and I think the returns are going to be as good or better than anything we've ever done.

I think single-floor galleries will be as good or better than anything we've done. I think you're going to see capital spending go down, returns go up, and I think you're very quickly see our return on invested capital kind of return to where it was at our peak.

That's great. Appreciate all the color.

Good luck to the entire team in the second half. Speak soon.

Thank you.

Great. Thanks, guys.

Good evening. Can you guys elaborate on the health of your core inventory, and can you talk about whether you foresee a need to step up promotional activity to help clear way for the Estates roll out as we look into 2027?

It's not really clearing way for Estates, right? Estates is going to be incremental to the assortment.

We're not really clearing out Estates. Some of the things that are in the galleries today will come out of the galleries, and we've got a pretty good outlet network and the ability to rotate through that.

Estates isn't going to cause markdowns. The environment in our category is very promotional right now and has been, right?

There's a lot of data out there. People are down to this by week how many, how promotional, how many SKUs does RH have versus Pottery Barn versus Arhaus versus this, everybody, when you're in the home business like this and you get a down housing market, 4 million homes for four straight years, unless you want to lose market share, you gotta be competitive.

It's a bit of a promotional environment. Our margins are holding up fine, and if you just take our model and extract a lot of these drags, our underlying model on RH is a really good model.

It's a really good model. If we didn't have the drag from international and, I don't know, shredded if there was any drags, right?

We're happy to cycled through here. Estates is going to be incremental.

Think of Estates like a new category. It's like when you've got a new aesthetic like that, it's really It's like a new business almost.

We get to sell it on our platform, it becomes very incremental and it's very leverageable. Things like this are the biggest drivers of profitability, right?

We've spent some capital here. We've bought some businesses, things like that to build this, but you only have to do that one time.

We built a freestanding state store here, we bought Formations, we also bought the Formations real estate, Formations and Dennis & Leen, and we're going to transform that property to an RH Estates Gallery in the design district on West Hollywood on Melrose Avenue. On Melrose Avenue, we will have the RH Interior Gallery, we'll have the RH Estates Gallery, and then three doors down from the RH Estates footprint, which has almost 195 ft of frontage right on Melrose, and our current gallery is 145 ft, and then we took another small location for RH Outdoor.

A freestanding RH Outdoor, and then on Beverly Boulevard, a couple blocks away, we have an RH Modern freestanding. The question is do we need to keep Modern, is Modern consolidate into the kind of core building that's had some modern and contemporary and we may keep the whole footprint, we may consolidate some of it.

I think you'll see us test I think we've talked about in the past about RH ecosystems where one of the capital efficient ways to deploy the brand, especially if we've got a presence like in Greenwich. We don't want to leave this historic post office.

It's probably the best location in Greenwich. We were able to get the second-best location in Greenwich, the Ralph Lauren building.

We call that an ecosystem. We'll have the historic post office will have RH Contemporary and RH Modern, Estates will be in the former Ralph Lauren building, and then we've got a 5,000 sq ft, 4,000 sq ft RH Outdoor gallery.

Outdoor is very important business to us, a lot of the key markets we might have a freestanding outdoor presence. Instead of trying to get rid of our real estate that we're in and going out having to build a big new thing or we'd never find a big enough location on Greenwich Ave, we'd have to go kind of off the beaten track, and I don't know if we want to there.

We call that an ecosystem. We've got an ecosystem in Palm Desert, we're doing one at West Hollywood, as I just described.

Just a much more capital efficient way to continue to deploy the brand, to dimensionalize the brand.

All right. Thanks, Gary.

Good luck.

Thank you.

Great, thanks for taking my question. I wanted to see if you can expand more into the trends you're seeing in Europe.

It looks like London's off to a very good start. Are you seeing the end consumer shop more there, or is it more geared towards the trade like what you're seeing at the other European locations, and maybe an update on how Paris and Milan are ramping up?

Thank you.

You're asking at a funny time, right? August is not usually the best month.

Everybody's on vacation, people are just getting back, especially Milan, you could fire a cannon down streets in most cities in Italy. Same thing with Paris.

Everybody in Europe is on vacation in August, and everybody starts getting back in September and business will ramp. Our focus is how to build the brand in each of those countries.

I think they're all different. It's interesting, each one's culturally somewhat different and shopping behavior is different.

Obviously, the languages are different. I think that's surprised us a bit just how unique they are.

How do we market, how do we build awareness, how do you build the business with the trade? We have a lot of learnings.

We're flying early tomorrow morning to Paris, and so we'll be in Paris tomorrow night and Saturday, and then Saturday evening, we fly to London, we'll be in London Saturday evening and Sunday, and we'll be in Europe a lot this year, and connecting with our teams, listening, learning, finding out what we're doing smart, finding out what we're doing dumb. They're different than building businesses in kind of new markets.

These are very different, right? London had a running head start from multiple reasons.

One, the country speaks English, right, as primary language. Two, it has the most expats, and we had the most customers over there.

We shipped London's a single one place. We don't ship to other countries, but customers who buy from us and we help them get their goods containerized, right?

They take control of the shipping. London we had the most shipping to.

Then we've had RH England open for 3 years, right? RH England kind of ramped up, run $38 million in demand.

You had awareness that had been built up there over 3 years, and so that's why we expected London, we wanted to open London first. It's just that was the most complex of the deals, it was going to take the longest, and so on and so forth, and that's why we did RH England to kind of get positioned in the marketplace.

We're happy, we're learning about the business, and lots of opportunity, and the key is you can't be an absentee kind of leadership team. We can't leave everybody on an island in these individual geographics.

On the East Coast, likely we're going to hop over to Europe, and then we're going to go to Europe at least four times a year just to go to Europe, and spend half a week or a solid week, really spend time with our teams. Inside our company, the smartest people in the company, there's people closest to the customer, and those of us that have gotten promoted generally get farther and farther away from the customer and we get dumber and dumber, right?

The only way you can lead is if you first listen and second learn, and then you're equipped to lead. We're in listening and learning mode, and trying to be better leaders of our business, but we have to do a lot of listening, and spend a lot of time, and our people, they've been very helpful, we've learned a lot.

Got to get in-stocks, we got to deal with different raw material issues and different liability issues, upholstery, lighting, things like that, that have been a little bit more complicated for us. We're working through our supply chains to be more responsive and compete better.

I like the direction we're going, and I think we're going to get better and better, better. These drags are going to go away.

London's, yeah, very exciting. We had our fingers crossed on that one, it's like, "Come on.

What should this be? What could it be?"

To see the first 8-week ramp there, it was really exciting for us, and we've got a great team, we've got a great leader, building a great design team there. I've never seen customers like that.

I spent 8 days, I think, there, 9 days, something like that. I was in the gallery quite a bit at the opening.

I'd never seen a level of customer and a level of wealth like that, and in our galleries. These are really important, big projects.

I would say it wouldn't surprise me in 2 years, maybe by year 3, that London is not the number one RH in the world. Unless we open the Middle East sometime before then, because the more we're learning about the Middle East, a lot of people believe that will be our number one gallery, Dubai.

Good evening. I'm just curious, Gary.

You mentioned that most of Estates is protected by IP. Obviously, the furniture industry is notorious for knockoffs, and there's a long history going back probably 150 years of mixed success in defending designs in court.

I wanted to ask if you could give us maybe a bit more insights into what you think will make Estates easier to defend. Is it maybe that the finishes are more intricate and just easier to defend than contemporary, or is there something else?

There's a lot of levels to it. In cases where we bought the brands, the brands have IP, and that's pretty strong.

That we think is good, but a lot of the businesses we've bought more item-focused, and that we dimensionalize their assortments, and so they used our design teams to dimensionalize things and so on and so forth. Those become original RH designs.

We filed design patents on almost everything. We're pretty big in our industry.

I think if you get a letter from us that we're patent pending on a design, I don't know if you want to go to court with us. I don't like to go to court with people.

My people screw up, and we've been influenced by something and we get a letter here, I usually fold the tent, like, why do I want to fight in court and spend a lot of money? It doesn't happen to us often, but I tell people like, "Look, it's not worth our time."

We don't want to spend time with that. We think that the work we've done with Estates is very defendable.

We have, I don't think we've ever invested this much in design patents, and so we'll see. Maybe no one's ever invested in protecting intellectual property in this industry that well.

Look, go try to knock off a Giacometti table. There's a reason we haven't.

They will take your ass to court. Unless you want to go spend millions of dollars fighting over it, we don't have any Giacometti-influenced coffee tables.

Even though I'd like to, I think they'd sell great. A lot of it is I still think the furniture business hasn't really been a sophisticated industry, hasn't been well capitalized, a lot of mom-and-pop stores.

Nobody really had the legal department. We've got our new chief counsel sitting next to me here, Ryan, and he's going to help get us all teed up, and not to play defense, to play offense.

That's why we're moving like that, and I don't think people want to get sued by RH.

Thank you.

Hi, this is Casey McKenzie on behalf of Brian Nagel. You mentioned tariff refunds will help offset the $50 million of unplanned supply chain costs across the full year.

Do you think that amount is still ramping as fuel costs remain increasingly volatile? If fuel costs persist into the next year, how do you think about possible mitigation efforts as we lap next year's oil price spikes in the absence of refunds?

Thank you. What do you think?

Look, everybody's mitigating where you can mitigate. Look, we're at war with oil today,

right? Crude 109.

Okay. You're at 109, like oil was 63 like beginning of the war.

Like you're not going to be able to mitigate that. There's costs are going to go up, inflation's going to go up.

There's there's there's a reason why the administration said that the war, was ending and we're going to have a deal in a day or two, 38 times. There was an urgency to end this war and end this conflict cuz it's likely not good for the election.

Now it might be too late, you know. Now the administration, what, I saw offered voters $5,000 to every American, vote for the the president and the administration.

Like, that's interesting. So, look, I I think, we're in a we're in a time of conflict, we're going to be in a time of inflation, you know.

I don't think they're going to be able to keep a lid on interest rates. I I keep thinking, "Gosh, I, it's like my entire career, and I've been doing doing this a long time, I never saw a housing market, that was down longer than 18 months, looks like we're going to go into year five."

I like the game we're playing. We're playing offense, we're going to build our own bigger market, I think we'll be able to grow, pretty well through any kind of market as as we look forward.

There's going to be costs, you know. What was it, Walmart Walmart had $2 billion tariff refund, and it's all going to increase cost and some lower prices.

Home Depot like

700 $700-and-something million.

It's all going to increase cost, and yeah, there's massive increased cost. Nobody's got a magic wand, like nobody's going to get that much of a better price than somebody else.

If you if you have leverage, you'll use your leverage and, but you can't make your, your partners go bankrupt, right, or you have no partners. It's we're going to be in a higher-cost world for probably at least the next 6 to 12 months.

Unless even if tomorrow they end the war, I, there's too much too much inflation in the pipeline. All the raw materials are going up everywhere on everything.

Everything is impacted by oil. That's why, I mean you're seeing crazy things, right?

We're trying to manipulate currencies, buying back things. Like it's it's a crazy time.

Thank you.

Oh, great. Good evening and thanks for taking my question.

Gary, it was on the recent revamp of your Trade program. I was curious if you could speak to any indications of early success, how the trade community is embracing it, and relatedly, are you doing anything to activate the interior design community with the Estates launch that's perhaps maybe different from how you've sought to build awareness for prior brand launches in the past?

Thanks so much.

Really good question. Our teams, our Trade teams are over the moon that we launched the new program, and I think designers are happy.

Firms are re-engaging us. We've seen an acceleration of our business, a meaningful acceleration that we're already at a level that offsets the discount.

We've hit the volume levels we needed to to kind of offset the discount. The pipeline's building.

It's been fantastic, and our teams are working on different engagement methodologies. We're looking at doing more events in our galleries, we have very nice spaces, we're going to have even smaller events if designers want to come and do things.

We're going to be a lot more open on multiple levels with the trade. I think the trade's very happy that we're doing bespoke and couture, right?

That we're doing COM, we're doing bespoke furniture in custom sizes, they can specify. That's a big deal.

Then, I even met a gentleman and his family last night that we talked for about 30 minutes, and we've done three homes for him, and they're building a big new contemporary home, and he didn't think that we were going to be able to do it. Then, he said thought it was great that you guys launched this bespoke thing, and now you're going to get the fourth home from me.

That was great because they have, yeah, these are big homes. They're huge fans.

Talking to the family last night, I was like, it's right there. You don't want to lose customers like that that building their fourth home and might not have been able to do it with us.

We're, again, we're learning, we've got say, close to our Trade teams and our leaders, and there's more we can do, and but I think, I don't think that anybody offers the trade more support and services than we do, right? We support them with doing floor plans, doing renderings, doing, we work as like a back office not just supporting them with product, but supporting them with design, supporting them with installation.

When you think about the the hard part of competing with us in the design world is that we've got such a broad assortment and we've got such good experience and tenure in our interior design business and in the services we offer, and just the logistical ease of working with us, getting a home designed, getting it all delivered at one time, getting it installed, we have a lot of resources supporting that part of our business, and I think, as far as someone who also is a furniture retail business at our core, I think we're I think we have real strategic separation from the next best person here.

Great. Thank you, everyone.

Appreciate your participation and all the questions, and we look forward to talking to you next quarter. Thank you.