Hello, everyone. Thank you for joining us and welcome to the RH second quarter fiscal 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Alison Malkin of ICR. Alison, please go ahead. Thank you. Good afternoon, everyone. Thank you for joining us for our second quarter fiscal 2026 earnings fall. 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 issue today for a more detailed description of the risk factors that may affect our results. Please also note that these forward-thinking 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-gap financial measures and a reconciliation of these non gap to gap 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 and now i'd like to turn the call over to gary good afternoon everyone um we're coming live from york city today uh we got in last night uh for the opening of our first artist stage gallery in greenwich connecticut so uh i know i saw some of you there last night and uh those who haven't seen it uh i would encourage everyone to get there our newest latest greatest work so let me start with the letter to our people partners and shareholders gap net revenues of 922.2 million exceeded the 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 recently put into motion. Normalized adjusted EBITDA margin of 13.4% also exceeded the high end of Our Guidance for adjusted EBIDDA margin, and we generated $72.3 million of cash in the quarter, inclusive of a free cash flow and a $42 million distribution from our Aspen joint ventures, excluding tariff refunds of $69.2 million. We recognize the tariff benefit of $55.1 million in the second quarter and expect to recognize an additional $13.9 million tariff benefits in the first half of the year, which we plan to use to offset $50 million of unplanned cost increases across our supply chain with 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 it's 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 negative 340 basis point adjusted EBIDDA margin impact from pre-opening and startup costs to support our international expansion. third quarter 2026 outlook revenue growth of five to six percent inclusive of backlog reduction of 2.5 points rh estates of two points new galleries and other one point adjusted ebitda margin of 12.5 to 13.5 percent the above outlook includes an approximate negative 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 percent inclusive of backlog reductions of 6.5 points, RHS states growth of eight points, points, new galleries and other of four points, adjusted EBITDA margin of 19.7% to 22.9%. The above outlook includes an approximately negative 190 basis points of adjusted EBIDDA margin impact from pre-opening and startup costs to support our international expansion. the brand and doubling the town 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 percent 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 group 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 californian look was amplified and refined by by Richard Hallberg, Daniel Cuevas, and Barbara Weasley, designers who together launched Formations, one of the most admired and respected design firms to the trade luxury furniture showrooms in the United States, recognized and respected globally. The three later acquired Denison-Lean, 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 six years of Michael Taylor Designs, Formations, Denison Lean, Joseph Ju, and Dimitri, plus our decades-long relationship with many of world's distinguished antique collectors, such as Ed Hardy in San Francisco, Ludovic Messenger, who set the tone and trends at the world-famous Paris Flea Market, and Rebecca Hill of London in Muging, who now leads product curation for RH Upholstery, plus designers such as Anushka Hempel, the inventor of Blake's, the first and most famous boutique hotel in the world, who also designed the world of RH Bar and Lounge and the Perch 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 Estate with the conservative initial mailing, our plan is to aggressively expand the assortment in circulation in November, but 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 output. You can expect this to continue to rapidly expand the Assortment over the next five years, and we predict it will represent 50% of her offering at that time. We also believe our two states will be margin-accretive on multiple levels. One, we believe the quality, design, and exclusivity of the offering will command higher margins, and two, the average price point is currently 45% higher than our existing assortment, thus creating cost leverage and margin accretion throughout our operating model. 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 R.H. Estates collection is currently protected by trade dress or have design patents pending due to the acquisitions of Michael Taylor Formations, Denison Lean, and Dimitri, as well as pieces developed with internal and external designers you will note on the back of the 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 oxidol 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 and we found it very hard to monetize ordinary and unremarkable and yes it has taken more time cost more money involved more people doing more things in a more complicated manner and yes it has always been worth it and this time will be no different if you're a long term shareholder an owner like i am thank you for belief and pace and patience while we've been running through the mud for the past four 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 and have two or 340 basis points for the year. We further expect the drag from international to decrease from 340 uh 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 27th, 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 maker i'm happy to report the design pipeline reached almost seven million in the first eight 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 from 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 to $260 million in 2026 to $175 to $200 million in 2027. We expect gallery opening costs to decrease from new gallery opening cost to decrease from 48 million in 26 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-storey 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. growth 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 have developed a single story rh design gallery with integrated restaurants with similar expected 12 to 18 months payback ranges and we are confident that our multiple multiple go to markets 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 that certain 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 tan. 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 gallery's rent they reside in. Building the world's largest residential interior design firm that is moving our brand beyond presenting and selling products to sexualize and installing 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. We will now begin the question and answer session. We kindly ask that you limit yourself to one question and return to the queue for any additional. If you would like to ask a question, please press star 1 to raise your hand, and to withdraw your question, press star 2 again. We ask that you pick up your handset when asking a question for optimum sound quality, and if muted locally, please unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Stephen Zaccone with Citigroup. Your line is currently opening. Please go ahead. head. 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? And then the price point premium of 45%, that seems sizable uh there was a point in the past you talked about pricing being a bit too high why is the states different in terms of pricing sure thank you steven thanks for coming to our opening last night um let's uh i'll kind of try to take the questions backwards uh why is 45 reasonable uh and why is this different well the one that the product's completely different so start there if you think about that kind of pricing miscues we made with contemporary you know that was more of a simple modern aesthetic and a contemporary aesthetic that was a product that was simpler to make and I don't think there's anything like our each states in the market today at least know where we can find if you try to do a Google search on any of our product you're not going to find it you might find it you know foreign website that tried to pick stuff to pick up some of our pictures and you know pop them on a you know no name no name kind of location so it has to do with 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 you know I don't know anybody found selling this level of quality these kind of finishes if you look at the Estates book and what we did with the product you know you open and you see you know the picture that The pictures of the photos are very close, tight shots showing that 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 never had finishes like this in this history. It's available to a consumer, right? that wasn't a design showroom only available to the trade and um you know with long lead times and special order finishes and you know where you might have to wait you know four to six months or longer um you Know my first wife is a high-end interior designer and that's why I understand this industry I was I was her client on two projects and uh and then her someone business partner you know for 11 years and saw the inefficiencies in the industry and you know that really framed the opportunity I think for our ages and we see it today is that that experience so you know when you've got when you're only one with the level of design and quality in a marketplace you know you can command a premium like our the price is too high I think they're incredible value you can't find this kind of product at these kind of prices so um 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 right if nobody likes the design nobody cares about the price you know so first you have to you know with a consumer you have they love the design they love design they'll you know they'll look closer they'll either click on the website or they'll walk up to the product you know and and then the second thing a consumer generally does is they perceive the quality right so they'll walked up to it in a gallery in a store they'll zoom in on a website you know look closer at a page there you know if it's a source book or catalog and they'll make a perception about quality and then and then they'll look at the price and at that point you know the consumer will make a decision about you know that design at that quality it is that price of good value right so it's it's not a one-dimensional price discussion discussion error is always a design quality value discussions we don't care about the price of anything if we don' love the design right neither does customer um so i think you've got to start with where where can you know when you know if you're a consumer what do you think about the design you know how do you Think about the quality you know walk up to it touch it open a drawer with the details look at the hardware with the finishes um and um and then look at The Price you know and i think that's the hierarchy everybody should look get any product with uh so you know for this design this quality we believe this is a tremendous value and we you know i should probably read it maybe the next call i'll read some of the letters we're getting about rh estates uh because they're incredible yeah we have people that weren't they've never bought from us we're never a customer and all of a sudden they stumbled into a stage they got the book or they walked into an RH and now we've got a large design job we just recently had someone in Orange London who their interior designer was going to augment you know a million plus design job with probably about 50 to 80,000 of RH and broader client in the RH London and now we're doing 95 percent of a 1.1 million dollar design job so I think this is is I think you asked me about incrementality or what was it really the management said new customers yeah our Our people in the galleries will tell you it's almost entirely a new customer. And I think that makes sense. You know, it's, like I said, you know, I think we turned the company over the last eight years or so too modern, too contemporary, too one-dimensional. You know? But we're quick learners here. And, you know, as we mature and understand the industry and the consumer even more, I think if you watch the earnings video I think I did two quarters ago, I tried to outline how we think about our age and the opportunity and how we see kind of three major kind of design vernaculars. you know call it kind of traditional classic which we call estates contemporary which we call interiors and modern which we come broader and we kind of think about ourselves now is kind of a juggler if you will but there's three balls and then there's always one ball in the air and the ball that's in the error is generally the ball is that the major trend you know for anywhere in our industry a short trend might be seven to ten years that the major trends are more 15 to anywhere 15 to as long as 25 or 30 years and you know people have asked me before the yeah the last meeting where did the trends come from and I think I've said it on conference calls that the trends come from the dead right generations passed away their belongings go to a estate sales estate sales feed the high-end antique markets the high end antique markets feed and inform the high and interior design market uh the high intensity by market then um uh you know informs the high in reproduction market and then it kind of trickles down you know and uh uh and so the next trends i outline i talk about him pretty fulsomely in the letter to try to help people see why we're so excited about states because it's it's a you know like almost a magnifying opportunity so one we're not addressing the traditional classic market today very well at all I think hardly at all and I think we're dominant in contemporary modern so you know if you get 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 they were getting 10 you know with a few older collections so you know the math would tell you this this could could and should be half our business or more than half our business and the data you know all the data we look at you know once we start digging and think about it I mean we've been working on this now got on seven years yeah it's been conceptualizing this opportunity and you know we're smarter and smarter and seeing a bigger and bigger market and and we think this is you know as incremental or more incremental than when we did our each modern yeah we did Irish modern no one was waking up in the morning saying hey honey needs some modern furniture we just got a modern condo or new house modern nobody was thinking about going to our age for modern furniture you know of 2012, 13, or 14, until we launched RH Modern in 2015. And RH Modern was highly incremental. One of the most incremental things we've done. And it very quickly went from zero to a billion dollars. And we think this is as incremental, might be more incremental. And we were in Greenwich last night for our opening party. And, you know, I mean, I don't know how, like, we had to take some back roads, we're coming to the airport, and you go through the neighborhoods and you realize, like, you could drive around here for hours and you might not see modern homes, yes. And some of the homes might have been remodeled, you know some contemporized interiors, and that, you might play, but when you really look at the bones of the houses, you look at exterior of the house, my sense is, the market of greenwich connecticut west court new canada and canaan you know that whole area i kind of believe it's like 90 10 85 15 somewhere like that and i and by the way we have i'm going to we don't talk about our store long so i'll let our competitors know this one like we do like 47 million in greenwich right um we we have what 14 000 interior selling in the post office and we have about 4 500 in the outdoor gallery today right and it's all contemporary and so i think if we're doing 47 million dollars in greenish connecticut 14 000 feet of interior selling space what could a stage do you know we have you know 12,000 feet of interior selling in the new you know the former Ralph Lauren building which is a perfect building for a stage site by the way Thank You Ralph you know so we didn't have to we didn' have to build that one and so it's highly capital efficient for those of you gonna ask me that question so so this is this is a big deal you know it's a big deal we've been working on this for a long time we've never made so many acquisitions to set ourselves up you know for a business you know Michael like if you saw my 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 tailor dining diamond table in the kitchen I let the team reproduce the 17th 17th century antique monastery table I have in the dining room that it's almost identical I mean somebody could switch my daughter saw it and our center of innovation you know 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 room but that's our dining people i mean they didn't know like but it's a very expensive antique i mean i guess i could say it you know it's that it i bought it 27 years ago for 58 000 you know 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 put it into context it's an 11 foot table that has two extensions extends i think to 14 15 feet you know can seat up to 16 people because it's uh i think almost 50 inches wide you can sit two people at the end so it's really great if you're you know if you entertain and you know give a big family and i don't think anybody addresses that business very well. You know, those are the kind of businesses that we're addressing with the states. We said, you know, our initial goal when we're launching, we want to dominate the primary bedroom, the primary living room, and the primary dining room. That's where we'll start. And then we'll continue to expand and dimensionalize the assortment. But 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 and if you look down first dibs you know you looked at dining tables like they go up to about 250 and 300 thousand dollars that table would probably get somewhere between 100 to 200 000 if it was on first it's today so we we've got that we'll start we would finally land we were going back and forth so that That one's $14,995, and that's for the 12 to 1, or the 11 to 1. It's an incredible value. I mean, I think a lot of people, again, 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 through selling knickknacks and tchotchkes and had an average order value of 125 dollars with an average shorter value you know you know from around 10 000 and so uh um and that's with our order split you know if you really look at because we split a lot of divine orders we deliver them so yeah our true average order is much higher than that but we you know we moved we kept elevating the brand we kept shedding lower value customers acquiring higher value customers um and yeah we'll continue to do so until we kind of say we hit the right spot that doesn't mean we won't sell bedroom furniture that's appropriate for second third fourth bedrooms you know in in houses and second homes and things like that um but we we think we're we're going to be like alone in the market for a while here i mean i challenge anybody take the rh states book go scanning go scan the internet tell me who's going to compete with this and then then look at this second drop which is really kind of like the first drop you know because it's going to oh it's it's basically the same book with about 30 percent uh 30 percent more items in it and product in it uh but it's we're just going to an increased number of customers so we're not nailing the same people we're just broadening it broadening the contacts which will which will significantly lift the business and when we do that you know 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 will be the main thing it'll be well represented it'll be in stock so November's you know transition time like you know early mid November we'll have galleries transition that are somewhere between 75 and 85 percent of the business and then it'll continue to go to the rest of the galleries and I think all galleries by December right yeah so this last 15 to 20 percent of you know our volume so that's one is really meaningful right and I these products will get an even bigger lift when the customer sees as the finishes are so intricate in the detail and the qualities I think important to see and date data would say that you know look like 90 when you look at the furniture industry today about 80% furniture is is done in retail stores when you look at a luxury furniture industry it's like 95 5 and that's just because the customer is more discerning they're spending more money it's more of an investment and you know has everything to do with comfort you know sit finish color scale and all the things you know but you don't want to get wrong like this it's one thing if you're an internet shopper today you know you ordered five things and you return three or you know some people order ten things and they keep one or you send all ten back you really can't do that furniture business you'll bankrupt you know people and most people charge for restocking fees i mean we haven't yet we're going to probably change that um because we we do think some people take advantage of like the ordering stuff and then just go oh we'll just you know this is this is what we'll keep let's go and send that but it's very expensive to uh to make mistakes in the furniture you know when you're buying furniture okay thanks for all that detail appreciate it the fault 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 like you'll be cycling flagship openings right um and i guess we haven't really gotten the revenue but curious when you think about in the UK versus continental Europe are we at the point where the UK can be you know much larger from a revenue perspective and that's really helping from a profitability perspective thanks very much yeah one of the biggest things is just the cost to open in Europe right we you know the number of people that we have to have fly from America put up in America you know for months you know you're training the three global flagships were the first hospitality experiences success yeah orange england we did but you know there's not a very high volume hospitality experience that's out in the countryside and these were real complex hospitality experience so you have you know 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 that hospitality side and so when you're opening restaurants and hospitality it's longer training it's uh you know more complex more people and um you know just to support that you know you're needed from america you know we had a lot of people on the road for a long time you know making sure we're opening these right you know get a second chance to make a first impression and um You know, we're not the most popular people or content right now, right? You know. And so, you want to open correctly, you wanna be respectful, you know, a lot of things that are important. But assumptions-wise, Steve, I guess it's, you Obviously, the drag of the opening costs that Gary just mentioned, you have to build up the revenue that's helping to reduce the drag, to obviously the absence of these large costs. We have no more European OPEX in 27. So those are the building blocks, and they're kind of self-evident, but just point them out. Okay. Thanks for all that detail. Best of luck. Thank you. As a reminder, we kindly ask to limit yourself to one question and return to the queue for any additional follow-ups. Your next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open. Please go ahead. Simean Gutman Hi, guys. Hi, everyone. I guess maybe more of a math question. So 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 or and can you speak to the momentum you're seeing within that that brand and then what else is it if it's not if it is not just estates yes to me and it's listed right there so you have it in front of you the press release If you look at it, inclusive of backlog reduction is 6.5 points, RH Estates at 8 points, and new galleries, another at 4 points. And that was Q4, obviously we have three there as well. So you see the quarter to quarter increases in this. okay I guess if I may restate I guess what gives you confidence and and and I get the backlog reductions but you know can we talk about the confidence in you know in in that in that acceleration yeah I mean that's what we do right that's how we built this company is expanding product in mailing books and setting products and galleries and you know we have a lot of math around this and you know the big important launch we think is meaningful and we've done meaningful things a lot I mean even if we if you look back at you know product transformation we went and accelerated into after we kind of stumbled on the first contemporary you know round we double down and you we were able to move business 15 to 20 points right so you know this could be conservative and if you look at our history like if you think about modern help modern move to business when you think about yeah when we you know accelerated product transformation in contemporary I I mean, we moved, you know, with the prior two and a half years. Yeah. I don't think this is that aggressive. Okay. Thanks, guys. Good luck. Your next question comes from the line of Stephen Forbes with Guggenheim Securities. Your line is open. Please go ahead. Hey, Gary and team. So Gary, maybe just following up on RH Estates as all of us try to gauge your conviction here in 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? And we'd 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 five-year target? We have data right now with the estates building just in the mail and just on the website with long lead times and not in stock. So we know if something has a four week wait, a six week wait and eight week wait. If something's running backwards with X, Y, Z, there's math around all of that that we can forecast demand based on what we're seeing. Then there's in stocks, there's wait times, then there's then the big move is when the product goes into the galleries you know and I think we've said publicly list factors like you know maybe not you know our competitors know all that okay I can't remember I get the newest long time yeah you know the list after we're putting some on the ball yeah yeah we said yeah fifty to one hundred percent you know and it can't go as high as hundred so yeah so we have that and then and then the other thing like when we say other and stuff like that just think about we're going to make a big transformation I can think of our big galleries that are mostly two-floor galleries yeah so 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 what we do is we look at what are the best sellers everything's ranked and we take the bottom stuff off the floor right so you take the least productive goods on the floor and your bed and hopefully again this is you know why we don't put it on the floor it right away we generally like to look at things for three to six months here because we believe it's so incremental and and we have data of of classic things we've sold and still sell. Things that we didn't realize we couldn't kill it, right? So we just know the market's still there. I mean, we've been selling St. James for, since 2008. We still have St. Jams. Can't stop selling St James. Or some of our other, just classic things like that. And we realized that we transitioned the business too far. And if you look at most specialty brands, most specialty brand are built around an aesthetic point of view. Whatever category, apparel or this or that, it's got a stylistic point of you and usually stay within the stylistic view. And I think we've thought about the furniture business, like most of us here started in apparel. And so, you know, Armani looks like Armani, Ralph Lauren looks like Ralph Lauren, you know Gap's got their point of view, American Eagle's got theirs, or Albuquerque, whoever you're looking at, right? And Chanel's got her point of you, you know May's got a point of do. So most of us come from that, and you know the longer we're in this, the more we learn. And again, if you go back and look at the video, think I outlined it very clearly about what we want to do is own the kind of seven major product categories of the three major aesthetics and we think that we do that really well we can have you know we can be relevant to all the customers at that level in the market across you know all the architectural vernaculars and major major stylistic points of view and there might be some stuff like you know I'm likely not going to let the brand go after grandma chic right it's a little trend I mean you know Kendall Jenner it's an art digest and did a tour of her new cabins and you know kendall jenner it was great for a brand right she cloud and you have this is that two people to her home then and you know I don't know maybe it's just because it's me and I'm like I don t like flower sofas and stuff like that but you know it's so you do have to kind of keep your brand a little disciplined you know so we're going to let everybody else have grandma she or things like that and I don' t know what some of the other weird trends we're seeing right now that we're not you know like we don't have to own everything you know and I mean to this day people think that you know we're gonna go bankrupt because we don't sell enough color yeah it's those are the same people that you know haven't really looked at that many homes like it's just going Zillow or Redfin and go look at a hundred homes and find out how many have a red sofa but you'll realize like not a lot of people in the world have red sofas so if you want to be in the red sofa business go right ahead if you wanna be in a flower grandma sheet you know printed sofa business go for it like I'm happy for it you're not gonna see us in those things so fun but you know they I think the you know when you think about just you know revenue for states and it's it's you're gonna see the big ramps happen when the goods get in the galleries the in stocks you know start to peak and we expand the circulation meaningfully right so yeah we have a lot of customers lined up right now just waiting when when can I see this in the gallery when can i see this in a gallery so 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 like 90-10 or 95-5. People want to see the goods. Thank you. I'll pass it on. Your next question comes from the line of Max Raklenko with TD Cowan. Your line is open. Please go ahead. Hey, guys, thanks a lot. So first question, when we think about the 4Q contribution from estates, that's on a delivered basis. So just curious how we should think about how much higher the demand could be. And 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 when age 27. So, I'm 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. I don't know, Max. I was going to ask you how you like the pizza or any of the pastas last night. you uh because i saw you in the restaurant you know how do you think that demand relatives i mean clearly max demand is in excess of the revenue growth as this business is building and ramping and you know you're leading us to the same conclusions if it's that's evident that in q1 that that continues especially with the investment but you know presentation of product in the gallons and newness that Gary talked about 30% bulk and whatnot. So we don't talk about demand growth, at least at the moment we don t. There are times and conditions we do but today we don t and so you know this is a growing business so clearly the main growth rates as we build in stocks as we present the product etc. that Gary s talked about are some level higher than this. when you ask about when you think about how half one versus half two looks maxi maybe well we're leaning into h1 2027 how does that you know that check you know states how that continues but clearly there's a stepping stone for elevated growth yeah i i would say you know there's I mean a good five years of building here like a you know it's gonna be like a new business a growing business I think the most similar thing is our each modern right I mean we we weren't known for modern we didn't have that aesthetic no one was coming to us yeah they're going to find it and reach or go 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 thought the influence of technology, influencing customers that haven't worked from modern point of view, we're all walking around with iPhones, you know the big commercial architectural trends were all modern and if you look back at in the 1950s a mid-century modernist what was it really that big I mean you had the bird streets in LA you had yet different places Miami Florida places like that you know but you probably didn't have too much mid-century modern you know Boston New York Philadelphia places like probably down in Greenwich maybe there's a collector to you know like but and then you just saw a lot of places being remodeled all the yeah a big boom in l.a that's why we opened the first r.e.s modern i guess the first and the only freestanding r.h. modern because they were building the big one in dallas briefly oh yeah yeah we had dallas for a little while um so yeah that's what we wanted to open in greenwich right to really get a sense for okay here's a market we do a lot of volume for fourteen 15,000 square foot main gallery with a four or five thousand square foot outdoor gallery. It was 47 the right number 46 something so close, okay Yeah, and like I don't know like Could we do another I mean 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 about estates and I think people buying estates or you know they're looking for something like that and then right now that something like doesn't exist and there's a lot of classic traditional like really you know I mean like see you know not good looking furniture out there yes it's not like there's not there's a lot I mean you go look at a lot of the classic furniture stores that you know look the same for 40 years something there's lot of them out there you know so the market share I mean people doing business I mean go to High Point near North Carolina something a lot classic furniture go to the furniture market Nebraska you know the big Berkshire Hathaway thing I do like 700 million now here they got to be 85% classic tradition so it's there you know I think think and I think in a lot of ways we'll create a new high-end market for you know for the aesthetic the way we're going to build it out and you know and the whole point of view and the aesthetic point of you will evolve and change what we will shape part of it we're going earlier than we normally go on a trend so I should like to let the wait break and see who's writing it and how we can exploit it I think because the platform we have because we you know this is I mean good and bad for me right I lived through this trend I was consumer so first trend I actually participated in consumer that's really good news I've got it I mean yes I have been Michael Taylor Taylor diamond tables I have a lot of the things and stuff you know so I've got a point of reference and on all this stuff and you know that's good and bad too by the way you know because it's never the trends never come through exactly the same they always you know get shaped you know by designers and yeah and you know it always comes through fresh yet familiar but it has to be fresh and it has be familiar and so but I think you know I think we can help shape this one but you know we're going to evolve it we're going to be inspired by other people they're going be inspired by us you know other small furniture you know businesses that are run by you know highly aesthetic people will do some really great things and yeah and then you know the market will evolve and we'll you know we'll hopefully get a very good share of this you know evolving new trend and you know and be a permanent player in classic tradition got it that's helpful and then just quickly i appreciate the color in 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 sgna associated with the new format uh compared to what we've seen previously yeah like we think um you know what happened we were building our multi-level design galleries with a restaurant on the roof uh pre-COVID uh anywhere from you know a lower cost market i think we hit a low of like 27 million you know in a couple of years yeah yeah yeah you know so some of the lower cost 27 to 30 um a more expensive market to build might have cost us 35 and you know the cost of those you know went to 40 to 60 you know i mean with this all the all the inflation costs um that happening construction especially better quality high-rank construction so that you know necessity is the mother of invention right we you know we were already pavement with a lot of you know real estate we had to build we were committed you know under construction or too far down down the pipelines or change course but uh you know we've invented a new concept we said look if you say what's really good about one of our multi-level galleries with the restaurant and you know that that whole breed there's there's a really a lot of good things about it what are the bad things about it um multiple floors require grand staircases they require elevators generally two they require two sets of uh basic stairs those are not cheap to build you know so you've got multiple stairways uh that by the way do zero dollars per square foot you know there's no transactions happening in the elevator to the stairway there's the grand stairwells there's a lot of square footage and then when you take that and start you know compounding floors then you put a furniture on the roof and all of a sudden you've got a whole different coating you know you need different footings and foundations and steel gets upsized and you know with all the inflation steel that was a big problem for us and you know those those just became very expensive and then everything you do on a multi-floor building right you've got cranes and pickers you got guys trying to put metal awnings on windows on the second floor the third floor and get cranes that everything all around and you're trying to plaster the whole building multiple floors so if you think about a compound this aggregated one of those big galleries and we said okay what can what can we get rid of and you know you know there's some fortunate real estate opportunities because of um you know I think Saks went bankrupt first right and then Saks came out of bankruptcy and then Nordstrom went bankrupt and then Saks bought Nordstrom's and Nemons yeah Nemons went back too so you you know different opportunities were coming up for real estate we think more will come up you know high-end tabs also think about what's happening with transportation and driverless cars you know even uber and driver less 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 and it's already happening now the zoning laws are changing so you know we said how could we be opportunistic with um which we think is the you know reduction of real estate like you know saxon if they didn't come out of there sucks did yeah yeah they did oh they did okay yeah but again i think they're not going to keep the same footprint so there's going to be opportunities with luxury department stores kind of closing we so we took um one of them were taking just a parking lot space in alpatora and then naples was a nordstrom to close and um you know and so they're relatively big paths and what we did is we said hey what you know if we build this really interesting and divine is really interesting and we said well what if we you know 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 you know it's beautifully landscaped and uh so 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 um uh mechanical systems so much less complex you know mostly the buildings are four to five thousand fifty five hundred square feet if i think we have one two three four five six kind of seven connected uh seven you know independent structures in naples and um uh you know and they and they're designed in a way that it's it's designed for outdoor furniture outdoor uh and uh designed the rooms are designed you know very efficient ways we actually get more product per square foot but i think it's going to feel just as elegant and grand um uh you know which doesn't take any cranes doesn't take any stairways doesn't tell you any exit stairs doesn't say from the elevators doesn't take big footings does that affect most of mine even in i think in maples right saltwood no steel Yeah, 100% wood. Some of these we believe we can prefab, build the walls and just tilt them up, you know, plaster the outsides. We designed them so they only have a couple of kind of windows because we thought we could, you know manufacture the windows and do a lot of things. So, you know, they're going to cost us, we were hoping the price was going to be half and it's half. you know so and we get more product density and I think they're I think they're going to be more exciting to shop I mean you're really walking it's like a resort I call it like a design resort walking through this depending where you are the u.s. in Florida you're gonna have palm trees and ponds all kinds of tropical foliage and staffing California you'll have all the trees and other things and they're going to be cool they're gonna be very interesting and um and i think the restaurants are gonna be beautiful it's like a glass box in the middle of an atrium indoor outdoor indoor seating outdoor seating um so uh we're super excited about it everybody who's kind of seen them you know dave you just got back from naples right like walked through it's that feels good like even though it's a construction site still um you know you get the feeling like it's nothing nobody has anything like it and what else is is you know dave and i were talking about good about it for the landlords you know they'll take more risk on these and i think participate more financially because we're building all these smaller buildings so you know they're always worried like oh what if something goes wrong with our age i'm stuck with this three-story building with the restaurant on top like who's going to lease that from me right not a lot of people but you know you sell them on hey look i've built you a little village you know you can put eight retailers in here yeah it's beautiful we all connected it's just an extension of you know your shopping experience so we i think we have a good selling point and i think we're gonna you know be really good partners for developers uh so we're excited and and the single floor galleries that we're doing that are anywhere from 18 to 20 right 23,000 24,000 square feet with you know 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 and some of going to ask if my mom was a good italian cook and she wasn't but and uh as in i mean i can't honor right she did like to eat and but my uncle gina was the cook of the day so uh so i also talk about him if you see the menu and stuff like that but some of these compounds we're doing is really fine you can see big pizza oven and you know we think we have the best pieces in america like if any of us here like you know really wanted to take a flyer you know um i think you could take our pizzas on the road and we might have the best pizza concept in america i wouldn't want to be you know any of those papa john's or anything eat against our pizzas like they're so good we have this pizza expert that works for us in europe uh mateo who's he's perfected the crust is did you you had you have pizza last night max next no i did not no you eat last night i saw you or you just yeah you're just you're trying to get information on the gallery but no like uh anyway these 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 and i mean single floor galleries will be as given or better that anything we we've done and uh um and so i i think you know you're going to see a capital spending go down returns go up and and i think you very quickly see our you know return on investment capital kind of return to where it was um you know at our peak that's great uh appreciate all the color uh good luck to the entire team the second half speak soon thank you your next question comes from the line of chris nardone with bank of america your line is open please go ahead 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 rollout as we look into 2027 It's not really a clearing way for Estates, right? Estates is going to be incremental to the assortment. So we're not really clearing out Estates. I mean, we're going to, you know, some of the things that are in the galleries today will come out of the galleries and, you know we've got a pretty good outlet network and ability to, you know rotate through that. But Estates isn't going to cause, it's not going to cause markups I mean the environment in our category is very promotional right now and has been right so there's I mean it's a lot of data out there you know people are I mean down to this you know by week how many you know how promotional how many skews does our age have versus pottery barn versus our house versus this you know like i mean everybody you know when you're in the home business like this and you get a down housing market you know four million homes four straight years um unless you want to lose market share you you know you've got to be competitive so it's been somewhat of a promotional uh environment uh you know margins are holding up find you know and i mean if you just take our model and and extract you know a lot of these drags our underlying model on rh is a really good model it's a really big model like we weren't we didn't have the drags from international and you know i don't know like it's right up there with anybody's right so that's the word yeah we're happy to you know we're in cycle through here a stage is going to be incremental you know like a look at think of a stage like a new category you know it's like when you've got a new aesthetic like that it's really like a neat cat it's not a new business so most but we get you know we get to sell it on our platform so it becomes very incremental and and it's very leverageable I mean this is it things like this are the biggest drivers of profitability credit they're like yeah we we spent some capital here yeah we bought some businesses you know things like that to to build this but you don't have to do that one time and you know built a freestanding state store here we bought um we bought formations we also bought the four nations real estate formations index and lean and we're going to transform that property to an rh estates gallery the scientists have done you know west hollywood on melrose avenue so you know melrose ave we will have the orange interior gallery we'll have um the orange space gallery and then we three doors down from the earth's state uh footprint which is a 195 feet of frontage right on Melrose and our current gallery is 145 feet and then we we took another smaller location for RH outdoor so a freestanding RH outdoor and then on Beverly Boulevard a couple blocks away we have an RH modern freestand so the question is do we need to keep modern and modern consolidate into the kind of core building that's had some modern and contemporary. We may keep the whole footprint, we may consolidate some of it, but I think you'll see, you'll see us test, I think we've talked about it in the past about our 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 the historic post office for the best location in Greenwch. We were able to get the second best location in Greenchwch, the Ralph Lauren building. And so we call that an ecosystem. So we'll have, you know, the historic Post Office will have Arch Contemporary and Arch Modern states within the former Ralph Lauren Building, and then we've got a 5,000 square 4,000 square foot outdoor gallery. Outdoor is a very important business to us and so a lot of the key markets we might have a freestanding outdoor presence but instead of trying to get rid of our real estate that we're in and going out and having to build a big new thing or you know we'd never find a big thing that's location I'm running a job we have to go kind of off the beaten track and I don't know if we want to there. So we call that an ecosystem we've got an ecosystem in Palm Desert. We're doing one in West Hollywood, as I just described. And it's just a much more capital-efficient way to continue to deploy the brand and to nationalize the brand. All right. Thanks, Gary. Good luck. Thank you. Your next question comes from the line of Christina Fernandez with Telsey Advisory Group. Your line is opening. Please go ahead. 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 um you know the end consumer shop more there or is it more um geared towards the trade like what you're seeing at the other european locations maybe an update on how paris and milan are ramping up thank you Yeah, you're asking at a funny time, right? In August, it's not usually the best month. Everybody's on vacation, so people are just getting back. Especially Milan, they fire cannon down the 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. Yeah, 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's different. I mean, obviously the languages are different. think that surprises a bit just how unique they are so yeah you know how do we market how do we you know build awareness how do you build the business with the trade we have a lot of learnings that 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 you know we'll be in London Saturday evening and Sunday yeah we'll we'll be in Europe a lot this year and you know connecting with our teams listening learning right now we're doing smart right now what we're doing down yeah I'm not different than you know building businesses and kind of new markets these are these are very different right I mean London you just got it London had a running head start start for multiple reasons one the country speaks English right his primary language to it has the most expats and we had most customers over there so we ship the London's the number one place we don't ship to other countries but customers can buy from us and we help them get their goods containerized right as they take control of the shipping but London we have the most you know shipping to and then and then we've had RH England open for three years right and you know RH England kind of ramped up by you know around 38 million uh demand uh so you you know see awareness has been built up there over three years um and yes that's why we expected london you know we we wanted to open londons first it's just that was the most complex of the deals and was going to take the longest and so on and and so forth and that's why we did re-chainment to kind of get you know get positioned in the marketplace uh so uh you know but yeah like we're happy we're learning um you know about the business and um you have lots and lots of opportunity and the key is you know you can't be an absentee kind of leadership team like we can't leave everybody on an island in these individual you know geographic so if we're ever going to be on the east coast likely we're going to hop over to europe and then we're gonna go to europe at least if at least four times a year just to go to europe you know spend you know half a week or a solid week and really spend time with their teams you know going to stay inside our company the smartest people in the company there's people closest to the customer and those of us that have gotten promoted you know generally get farther and farther away from the customer we get dumber and dumber right so the only way you can lead is if you you know first listen a second learn and then you can effectively lead so uh so we're in listening and learning mode and yeah I'm trying to be better leaders of our business but we have to do a lot of listening you know let's spend a lot of time you know yeah or people yeah they've been very helpful learned a lot so okay get in stocks we've got to deal with the different if you do different raw material issues and different plant ability issues you know whole street lighting things like that it's been a little bit more complicated for us and And so we're working through our supply chains to be more responsive and compete better. But I like the direction we're going, and I think we're gonna get better and better and better and this drag's gonna go away. And so, and London's, yeah, very exciting. I mean, we had our fingers crossed I was thinking, what should this be, what could it be? And to see the first eight-week grant there, it was really exciting for us. And we've got a great team, we've got a good leader, building a great design team there. And I've never seen customers like that. How many days was I there? Nine days or something like that? So I was in the gallery quite a bit at the opening. And I've never seen a level of customer and a level wealth like that in our galleries. I mean, these are really important, big projects. So I would say it wouldn't surprise me in two years, maybe by year three, that London's not the number one RH in the world, unless we open in 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 in Dubai. Your next question comes from the line of Marius Maurer with Zelman. Your line is open. Please go ahead. Good evening. I'm just curious, Gary, you mentioned that most of estates is protected by IP. And obviously, you know, 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. So I just 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, you know, that the finishes are more intricate and just easier to defend than contemporary, or is there something else? Well, there's a lot of levels to it. So in cases where we bought the brands, you Know, brands have IP, and, you know, it's pretty strong that we think is good. but a lot of the businesses we bought more uh more item focused you know we um dimensionalize our assortments and so yeah use our design teams to dimensionalize things and stuff so forth so they're those become original rh designs and so we you know filed design patents on almost everything and you know I we're pretty big in our industry I think if you get a letter from us that we're cotton-pending on a design I don't know if you want to go to court with us I don' like to go court with people like my people screw up and we've been influenced by something we get a letter here I I usually hold the tent like why do I want to fight in court and spend a lot of money so and we don't doesn't happen to us often but I you know I tell people like let's not waste our time like I don't we want to spend time with that but but we're we think you know that the work we've done with the states is very defendable we have yet I don't think the government invested this much into design patents and so you know we'll see maybe no one's ever invested in protecting you know intellectual property in this industry that well I mean I flip go try to knock off a Giacometti table there's a reason we haven't they they they will take your ass to court so unless you want to go spend millions of dollars fighting over it like we don't have any Giacometti influence coffee tables even though I'd like to I think they sell great so a lot of it is I just don't think yeah the furniture business hasn't really been a sophisticated industry hasn't been well capitalized you know a lot of mom-and-pop stores you know so nobody really had you know it's a legal department we've got our new chief counsel sitting next to me here Ryan yeah yeah he's going to help get us all teed up and not to play defense to play offense so that's why we're you know we're moving like that and I don't think people want to get received by RH. Thank you. Your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Please go ahead. 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 CALLS REMAIN INCREASINGLY VOLATILE? WHAT DO YOU SAY? IF FUAL CALL PERSISTS INTO THE NEXT YEAR, HOW DO YOU THINK ABOUT POSSIBLE MITIGATION EFFORTS AS WE ELAPT NEXT YEAR'S OIL PRICE SPIKES IN THE OBSCENSE OF REFUNDS? I THINK EVERYBODY'S MITIGATING WHERE YOU CAN MITIGATE. uh like where's oil today it broke 109 yeah okay so yeah so yeah you're 109 like i mean oil is 63 like beginning of the war like you're not going to be able to mitigate that you know there's i mean costs are going out inflation is going to go up um you know there's um there's there's a reason why the administration said that the war you know 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 because it's likely not good for the election you know now it might be too late you know so now the administration what i saw offered voters five thousand dollars to every american you know votes for the president of the administration like that's interesting um you know yes i think you know we're in it we're at a time of conflict we're going to be in a time inflation you know I don't think they're gonna be able to keep the lid on interest rates yeah so you know like I keep thinking gosh I you know it's like my entire career and I've been doing this a long time I never saw a housing market you know that was down longer than 18 months so it looks like we're gonna go to year five so I like the game we're playing I think we're playing offense we're going to build our own bigger market so I think we'll be able to grow pretty well through any kind of market as we look forward but there's going to be costs you know so I mean like Walmart Walmart had two billion dollar tariff refund and it's all going to increase cost and some lower prices home depot like 700 700 something million like all going to increase costs yeah there's massive increased costs nobody's got a magic wand like nobody's going to get that much better price than somebody else you know if you if you have leverage you'll use your leverage and you know but you know you can't make your you know your partners go bankrupt right or you have no partners so it's gonna we're gonna be in a higher cost world for probably at least the next six to 12 months i mean less i mean even if tomorrow they end the war i you know there's too much too much inflation in the pipeline i mean all the raw materials are going up everywhere on everything everything is impacted by oil you know so um Yeah, that's why, yeah, I mean, you're seeing crazy things, right? We're trying to manipulate currencies, buying back things. Like, it's a crazy time. Thank you. Your next question comes from the line of Jonathan Matuszewski with Jefferies. Your line is open. Please go ahead. Oh, great. Good evening, and thanks for taking my question. And 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 estate's launch that's perhaps maybe different from how you've sought to build awareness for prior brand launches in the past thanks so much if you're a really good question yeah the you know our teams our trade teams are over the moon that you know we launched a new program I think designers are you know 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 you know so we've hit the volume levels we needed to kind of offset the discount so and the pipeline is building so it's been fantastic and our teams are working on different engagement methodologies you know we're looking at doing you know more events in our galleries we have very nice spaces so we're even smaller events that designers if you want to come and you know do things you know we're we're going to be a lot more open on multiple levels you know with the trade so um and i think the trade's very happy that we're doing uh bespoke and couture right that we are doing com we're doing bespoke furniture you know custom sizes they can specify um so that's the big deal and And then I even met a gentleman in his family last night that we talked for about 30 minutes and we've done three homes for him and they were building a big new contemporary home and he didn't think that we were gonna be able to do it. And then he said, like, I thought it was great that you guys just launched this bespoke thing because now you're gonna get the fourth home from me. I thought that was great, he said it's a big home. And they're a huge fan, I was talking to the family and last night I was like, I mean, just right there. I mean you don't want to lose customers like that that are building their fourth home and might not have been able to do it with us. So yeah, so we're, again, we're learning, you know, we've got to stay close to our trade teams and our leaders and you know there's more we can do and, but 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 products, but supporting them with designs, supporting them installation. When you think about 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 the services we offer and just the logistical ease of working with us getting a home design getting it all delivered at one time getting it installed you know we we have a lot of resources supporting that part of our business and I think you know as far as someone who also you know it's a furniture retail business you know at our core I think we're I think it's real strategic separation from the next best person here. There are no further questions at this time. I will now turn the call back to Gary Friedman for closing remarks. Thank you everyone, appreciate your participation and all the questions and we look forward to talking to you next quarter. Thank You. This concludes today's call. Thank Thank you for attending. You may now disconnect.