RH "What's the Estate of Affairs?" (Neutral) Lasser

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RH "What's the Estate of Affairs?" (Neutral) Lasser

Plus, any reduction in its top-line forecast would probably drive more deleverage

on fixed costs such as occupancy.

What are the key considerations that could impact RH's guidance?

The full launch of RH Estates seems to have been pushed back. Recall, this is

the company's newest brand extension, which is aimed to target the traditional

(core) market where RH believes it's underpenetrated today. It will include the

introduction of RH Bespoke Furniture and RH Couture Upholstery. Notably, the

launch was supposed to be accompanied by a sourcebook mailing in mid-May,

accompanied by an international advertising campaign. We don't think the

sourcebook was circulated as of yet. In terms of a real estate strategy, it will have

RH Estate galleries in Greenwich, CT, and at the upcoming openings of San

Francisco (Summer '26) and West Hollywood (sometime in '27). Bottom line, while

it was tough to estimate what this initiative was set to contribute to sales in

1Q/2Q, it's likely the impact of this will be pushed out.

The company’s 1H sales will probably still see an impact from the timing of

special orders and a higher than anticipated backlog. The co. pointed to

$30m of revenue shortfall in its 4Q revenue performance due to having to resource

goods as a result of tariffs. Our sense is that in some cases, RH's suppliers were

moving manufacturing locations towards the end of 2025. This has created some

timing issues between when orders are placed and when they are actually

delivered to customer. Importantly, we don't think this will start to be fully worked

off until the second half of this year, per our conversations with the company

following its 4Q print. While the co. has messaged this is largely a timing