RH 10-K & 10-Q changes, risk factors and insider trading

We are undertaking a large number of new business initiatives at the same time, including efforts to expand our business through (i) international expansion, (ii) product transformation and platform expansion, and (iii) launching new business initiatives, such as real estate development and the expansion of RH Hospitality, including by constructing our second RH Guesthouse in Aspen.

We opened RH England in June 2023, RH Munich and RH Düsseldorf in November 2023, RH Brussels in March 2024 and2024, RH Madrid in June 2024.2024 and RH Paris in September 2025. We have introduced a number of new product categories such as RH Modern, expanded the RH Hospitality offering, which includes integrated restaurants and wine bars in a number of our Galleries and in our Guesthouse, asand wellalso as other innovations such asexpanded our privateplatform jets,with RH1the andopening RH2, andof our luxuryfirst yacht,freestanding RH3.RH Interior Design Studio. We are also developing additional product categories, including the planned launch of RH Estates in 2026, and are investing in other new business initiatives, including business acquisitions and investments in joint ventures, such as those related to real estate development projects.

We can provide no assurances that customers will respond favorably to, or that we will successfully execute on, such business initiatives or that we will be successful in expanding our operations into any new geographies, businessesbusinesses, product lines and product lines.platforms.

As of FebruaryJanuary 1,31, 2025,2026, we have an integrated RH Hospitality experience in 2125 of our Gallery locations, including restaurants and wine bars, and based on the success of our hospitality offering to date, we plan to incorporate an integrated RH Hospitality offering in many of the new Galleries that we open in the future. In addition, we have one RH Guesthouse in New York and are constructing our second RH Guesthouse in Aspen. Although we have experienced a number of positive business outcomes from the RH Hospitality operations, there can be no assurance that these benefits will be sustained, that we will avoid operational or other complications from the hospitality business or that new aspects of our hospitality offering such as the launch of Guesthouses will be successful.

We have experienced significant fluctuations in the growth of our business in the past and may continue to experience wide fluctuations in our quarterly performance. We are currently engaged in a number of growth initiatives, including investments to elevate our brand, transform our products, expand our platform and improve our customer experience. There can be no assurance that these efforts will be successful or that we will not encounter other operational difficulties that may have a material negative impact on our growth and profitability. In addition, these initiatives may have near-term material negative impacts on our growth and profitability as we incur costs or pursue strategies that may not contribute to our profits and margins until future periods, if at all. Some factors affecting our business, including macroeconomic conditionsconditions, geopolitical uncertainty and government policies, are not within our control. In prior periods, our results of operations have been adversely affected by weakness in the global economic environment. For example, we believe that the pandemic and the resulting trends in housing and consumption patterns drove increased demand in our business during a substantial portion of the pandemic, while the demand for home furnishings has since decreased as consumer demand has shifted into other areas such as travel and leisure. In addition, our rates of revenue growth have sharply fluctuated from quarter-to-quarter and we expect volatility in the rates of our growth to continue in future quarterly periods. Unique factors in any given quarter may affect period-to-period comparisons in our revenue growth, including the overall economic and general retail sales environment as well as factors affecting the housing market, such as high interest rates and mortgage rates, housing prices, the pace of housing construction, secondary market transactions in the housing market and other activities in the housing sector.

Due to these kinds of factors, our results for any particular quarter are not necessarily indicative of the results that we may achieve for a full fiscal year. Our results of operations may also vary relative to corresponding periods in prior years. We believe that period-to-period comparisons of our results of operations are not necessarily meaningful and cannot be relied upon as indicators of future performance. We cannot assure you that we will succeed in offsetting any increases in our expenses with improved efficiency or price increases for our products and services or that cost increases associated with our business will not have a material adverse effect on our financial condition or results of operations.

Changes in consumer spending and factors that influence spending of the specific categories of consumers that purchase from us may significantly impactaffect our revenue and results of operations.

We must successfully manage our supply chain and vendors in order to produce sufficient quantities of products that our customers wish to purchase in a timely manner. We must manage our inventory levels, including predicting the appropriate levels and type of inventory to stock within each of our distribution centers, such that our “in stock” position in merchandise correlates well to consumer demand and expected delivery times. Because much of our merchandise requires that we provide vendors with significant ordering lead times, often before market factors are known, we may not be able to source sufficient inventory to meet demand if our products prove more popular than anticipated. Various business conditions and operational initiatives, such as the launch of new products and changes in the global supply chain, require us to establish new vendor relationships and supply chain operations, which may expose us to new counterparty, regulatory, market or other risks. We have experienced periods in which some of our vendors were not able to meet customer demand for certain products resulting in significant back ordersbackorders for goods, higher rates of cancellation on orders in process and, in some instances, loss of customer sales when orders could not be completed in a timely manner. We have also experienced periods in which we had excess inventory. If we are unable to accurately predict and track demand for our products,products and have excess inventory as a result, we may be required to mark down the price of certain products in order to sell excesssuch inventory or we may be required to sell such inventory through our outlet stores. We expect these factors to continue from time to time as we add new product assortments and new merchandise categories into our business.business and the high-end home furnishings market fluctuates.

From time to time, some of our merchandise has failed to meet our expectations and objectives concerning quality. Our emphasis on merchandise quality is increasing as we strive to elevate our brand. In recent periods we have recalled products due to quality or other issues and may recall others in the future. Despite our ongoing efforts to improve customer satisfaction, we may fail to maintain the level of quality for some of our products that is necessary to satisfy our customers. For example, our vendors may not adhere to our quality control standards, and we may not identify a quality deficiency before merchandise ships to our customers. Similarly, our merchandise may be damaged by vendors during transportation, delivery or installation, which could be viewed as a quality issue by our customers. Failure to supply our customers with high-quality merchandise in a timely and effective manner, additional product recalls, or any perception that we are not maintaining adequate sourcing and quality control processes could damage our reputation and brand image and lead to an increase in product returns, exchanges or customer litigation (including class-action lawsuits), increasing routine and non-routine litigation costs. In addition, social media may magnify any harm to our business, reputation and brand image. We are continually changing many aspects of our business processes, including improving product quality and enhancing sourcing and product availability, which may complicate our supply chain and quality control processes and result in quality issues or product recalls. Even if we detect that merchandise is defective or otherwise not in compliance with our product quality standards, we may not be able to return such products to the vendor or obtain a refund or other indemnification from the vendor. The limited capacities of certain of our vendors may constrain the ability of such vendors to replace any defective merchandise in a timely manner. Similarly, the limited capitalization and liquidity of certain of our vendors and their lack of insurance coverage for product recall claims may result in such vendors being unable to refund our purchase price or pay applicable penalties or damages associated with any such defects or resulting product recalls. Any of the foregoing risks, if realized, could have a material adverse effect on our business, reputation and brand image.

As a luxury brand, we rely on a number of initiatives to sustain our image and to promote our products in the marketplace. Our physical retailing presence, primarily in the form of our Galleries, is one of the most important initiatives that we use to display our product offerings. We also use our website and other digital efforts, as well as our Sourcebooks, to showcase a larger portion of our assortment. We continue to adjust and refine our strategy based on a variety of factors, including the success of the various initiatives that we adopt. Expenditures on our Sourcebook strategy have historically represented a substantial portion of our expense in advertising and promoting our business. We arehave adjustingin the past and may in the future adjust our strategies with respect to the use of Sourcebooks, including the frequency and scope of mailings, the format of the Sourcebooks and the use of Sourcebooks as an advertising and promotional tool, including with respect to prospecting for new customers. There can be no assurance that we will be successful as we make changes to optimize our Sourcebook strategy. Future increases in shipping rates, paper costs or printing costs would have a negative impact on our results of operations to the extent that we are unable to offset such increases through increased sales or by raising prices, by implementing more efficient printing, mailing, delivery and order fulfillment systems, or by using alternative direct-mail formats.

The home furnishings sector is highly competitive. We compete with a number of other home furnishing retailers, including national and regional businesses, as well as new market participants. We also compete with the interior design trade and specialty stores, as well as antiqueantiques dealers and other merchants that provide unique items and custom-designed products. We will face new competitors as we expand our business into new geographic markets. In addition, we compete with mail order catalogs and online retailers focused on home furnishings. There are an increasing number of online and digital-centric business models in the home furnishings sector and the impact of these competitors on other home furnishing businesses is uncertain. Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including aggressive expansion, competitive pricing, different approaches to advertising and marketing, and expansion into markets where we currently operate. Competition from any of these sources could cause us to lose market share, revenues and customers, increase expenditures, divert resources to new or responsive business initiatives and slow the rate of our growth and adversely affect our business and results of operations. There can be no assurance that such competitors will not be more successful than us, based on imitation of our products or strategies or through other competitive initiatives, or that we will be able to continue to maintain a leadership position in style and innovation or product position in the future. Many of our competitors seek to compete with us by offering products that are similar to our merchandise at lower price points. Some of our competitors have taken an aggressive approach to expansion of operations and introducing new stores and products that compete with our business. To the extent that we do not respond effectively to these and other sources of competition to our business, we may lose market share to our competitors and suffer negative consequences to our business and results of operations.

Based on total dollar volume of purchases for fiscal 2024,2025, 72%69% of our products were sourced from Asia, including 35%39% from Vietnam, 23%13% from China and the remainder predominantly from Indonesia and India, 18%21% from North America, including 10%13% from the U.S.,United States, as well as 10% from Europe and other countries. In addition, some of the merchandise we purchase from vendors in the U.S.United States also depends, in whole or in part, on vendors located outside the U.S.United States. As a result, our business highly depends on global trade, as well as any trade and other factors that impact the specific countries where our vendors’ production facilities are located. Our future success will depend in large part upon our ability to maintain our existing foreign vendor relationships and to develop new ones, and any changes in trade dynamics that might dictate changes in the locations for sourcing of products. In addition, we face risks related to the ability of our vendors to scale their operations, whether in connection with new products we introduce, or new production manufacturing locations added to our supply chain, which in some cases would require substantial ongoing investments to support additional capacity. In addition, we have previously encountered difficulties in the ability of our vendors to scale production commensurate with demand from our customers. While we rely on long-term relationships with many of our vendors, we do not rely on long-term contracts with our vendors and generally transact business with them on an order-by-order basis.

Many of our imported products are subject to existing duties, tariffs and other similar trade restrictions that may limit the quantity or affect the price of some types of goods that we import into the U.S.,United States, United Kingdom, Canada and Europe. We typically seek to reduce our exposures to any anti-dumping duties by minimizing our sourcing of products from countries where anti-dumping duties apply, however, such duties may apply to our products in the future, which in turn may cause us to reconsider sourcing certain targeted product groupings. In addition, substantial legal and regulatory uncertainty exists regarding international trade relations and trade policy. Global trade policy continues to evolve and the ultimate impact of recent developments with respect to U.S. tariffs is unclear. Throughout 2025, the U.S. government implemented multiple new tariff measures under various authorities, including the International Emergency Economic Powers Act (“IEEPA”) and Section 232 of the Trade Expansion Act of 1962, many of which were announced, modified, suspended, or reinstated with limited notice. These 2025 U.S. tariff actions included broad “reciprocal” tariff measures affecting imports from most countries and new Section 232 tariffs targeting wood and wood-containing furniture products. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the IEEPA. Following the U.S. Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. An introduction of new duties, tariffs, quotas or other similar trade restrictions, or increases in existing duties or tariff rates, on products imported into the U.S.,United States, United Kingdom, Canada and Europe, whether actual, pending or threatened, may have a negative impact on our results of operations. Significant uncertainty exists as to whether and when tariffs may be reduced or imposed, and what countries may be implicated. Given that we cannot reasonably predict the timing or outcomes of trade actions by the U.S. government or other countries, the impact of such actions on our business and results of operations remains uncertain. Additionally, such uncertainties, even if not directly applicable to our imported products, may have a negative influence on the domestic and international economy generally and indirectly reduce market demand for our products.

Recent events,events includingand thegeopolitical U.S. presidential election,developments have resulted in substantial regulatory uncertainty regarding international trade and trade policy.policy, which has led to market volatility. For example, Presidentthe TrumpU.S. presidential administration and members of the U.S. Congress have called for substantial changes to tax policies, including the possible implementation of a border tax. TheAlthough Trumpa administrationcomprehensive border tax has alsonot been enacted, the current and prior U.S. presidential administrations have raised the possibility of other initiatives that may affect importation of goods including renegotiation of trade agreements with other countries and the introduction of new or increased import duties or tariffs with respect to products from a number of different countries. The U.S.United States has imposed or proposed the imposition of new tariffs on products imported into the U.S.United States from a number of countries, including but not limited to China, Mexico, Canada and other countriescountries, and couldmay proposecontinue additionalto modify, expand or increase such tariffs orin increasesthe future. The review of the United States-Mexico-Canada Agreement (USMCA) in 2026 by the parties to thosethe alreadyagreement may also result in place.changes to U.S., Canada and Mexico trade, tariffs, and preferential treatment between the three countries. A significant subset of our products sourced from ChinaAsia has been affected by increased tariffs imposed in 2018, 2019 and 2025 and may be subject to further increased tariffs. Additionally, during 2025, tariffs on certain Chinese-origin goods were significantly increased before being partially suspended under short-term bilateral frameworks, creating further volatility and uncertainty. We rely upon vendors outside of the U.S.United States for the substantial majority of our products. TheAs a result, the possible implementation of a border tax or new or increased tariffs could materially increase our cost of goods sold with respect to merchandise that we purchase from vendors who manufacture products outside the U.S.,United States, which could in turn require us to increase our prices and, in the event consumer demand declines as a result, negatively impactaffect our results of operations. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes, tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors. Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the U.S.United States or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition and results of operations.

We also face uncertainty in the interpretation of new tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our vendors seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that U.S. Customs and Border Protection or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain merchandise. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results. This risk has increased as a result of 2025 U.S. tariff measures that rely heavily on product-specific harmonized tariff schedule (“HTS”) classifications, including the new Section 232 tariffs applicable to certain wooden kitchen cabinets, vanities, and upholstered wooden furniture.

In addition, the U.S. Government has imposed import restrictions under the Withhold Release Orders and under the Uyghur Forced Labor Prevention Act for goods such as cotton, aluminum, polysilicon, and other targeted input products originating or allegedly originating from the Xinjiang Uyghur Autonomous Region which may induce greater supply chain compliance costs and delays to us and to our vendors. We may not be able to anticipate the exact contours of tariffs and other burdens on global trade that become applicable and our efforts to respond to these circumstances may be inadequate. In particular, we may not be able to receive or sustain adequate pricing concessions from our vendors with respect to applicable tariffs and any applicable pricing increases that we seek to pass through to our customers may not be successful in achieving our objectives. Our sales may fall in response to any price increasesincreases, and our vendors may not be able to support the level of pricing concessions that we seek.

Our dependence on foreign imports makes us vulnerable to other risks associated with products manufactured abroad, including, among other things, risks of damage, destruction or confiscation of products while in transit to our U.S. distribution centers; product quality control charges; trade restrictions, including without limitation trade sanctions and the loss of “most favored nation” trading status by our foreign trading partners with the U.S.United States; work stoppages, including without limitation as a result of events such as longshoremen strikes; transportation issues and other delays in shipments, including without limitation as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the U.S.United States, United Kingdom or Europe; freight cost increases; political unrest; foreign government regulations; increased labor costs and other similar factors that might affect the operations of our vendors in or transacting with third parties in specific countries, such as China, Russia, Venezuela, Ukraine and the Middle East; and other restrictions resulting from geopolitical tensions. Increased port congestion and heightened inspection protocols associated with tariff enforcement actions could further contribute to supply chain delays. In addition to tariffs and import restrictions, evolving U.S. and international sanctions and export control regimes may restrict transactions with certain countries, entities, vessels, or financial institutions used in global trade, and could limit our ability or our vendors’ ability to procure inputs, arrange transportation, or receive payment, resulting in delays, increased compliance costs, or supply chain disruptions.

In addition, there is a risk of compliance violations by our vendors, which could lead to adverse consequences related to the failure of our vendors to adhere to applicable manufacturing requirements or other applicable rules or regulations. Any such noncompliance could have an adverse impact on our business and may result in product recalls, regulatory action, product liabilities, investigation by governmental agencies and other similar adverse consequences. Any failure by our vendors outside the U.S.United States to adhere to applicable legal requirements or our global compliance standards, such as fair labor standards and prohibitions on forced labor and child labor, could give rise to a range of adverse consequences, including supply chain disruption, potential liability, harm to our reputation and brand, and boycotts by consumers or special interest groups, any of which could negatively affect our business and results of operations.

We purchase substantially all of our merchandise from a number of third-party vendors. Many such vendors are the sole sources for particular products, and we generally transact business with such vendors on an order-by-order basis without any long-term or other contractual assurances of continued supply, pricing or access to new products with our vendors. Therefore, we may be dependent on particular vendors that produce popular items, and any vendor could discontinue selling to us at any time. Any disruption affecting such vendors, whether due to regulatory action, labor shortages, geopolitical events, financial distress, or capacity constraints, among other factors, could materially disrupt the availability of specific products and adversely affect our sales and customer satisfaction. In addition, the expansion of our business into new markets or new product categories could put pressure on our ability to source sufficient quantities of our products from suchour vendors. In the event that one or more of our vendors is unable or unwilling to meet the quantity or quality of our product requirements, we may not be able to develop relationships with new vendors in a manner that is sufficient to supply the shortfall. We also may be required to develop such new vendor relationships in response to changes in our supply chain. Even if we do identify such new vendors, we may experience product shortages and customer backorders as we transition our product requirements to incorporate alternative suppliers.

We arehave currentlyin pursuingthe severalpast, and may in the future, pursue other models for the transformation of our real estate beyond a traditional leasing approach, including a real estate development model, aor joint venture modelmodels, andor lease models where a substantial portion of the capital lightrequirement model.is funded by the landlord. While these alternative models are designed to achieve superior financial returns compared to traditional real estate lease structures for a retail business, somethey ofmay these new ways of operating willalso expose us to a broader range of different risks. VariousFor aspects of our multi-tier real estate strategy may expose us to new forms of risk versus our traditional leasing model. Our strategies include, (1)example, our real estate development model wheremay wecreate expectrisks eitherrelated to doour ability to execute a successful sale-leaseback transactiontransaction. or to pre-sell the property and structure the transaction such that the capital to build the project is advanced by the buyer during construction, (2) variousSimilarly, joint venture approaches,arrangements, where we share thedevelopment upside of the development with third parties such as thedevelopers developer/landlordor andlandlords, (3)may result in greater-than-anticipated capital funding requirements or lower financial returns than if we pursued our “capitalown light”real leasingestate deals,development where a substantial portion of the capital requirement would be funded by the landlord.model.

In fiscal 2020, we entered into equity method investments in connection with real estate development initiatives in Aspen, Colorado with a third-party real estate development partner (the “Aspen Development Partner”). The investments include properties that will be developed into retail locations, hospitality concepts, residential developments and workforce housing projects. We have also selected Aspen as the locationplan to develop thean firstecosystem RHin EcosystemAspen, inclusive of an RH bespoke Design Gallery, RH Guesthouse, RH Bath House & Spa, RH RestaurantsGuesthouse and ourrestaurants, firstwhich RH Residences. Wewe are currently constructing our RH Guesthouse in Aspen.constructing. We plan to operate the RH branded businesses and be a real estate investor and partner for the remaining properties.

We are focused on sizing our assortments and our Galleries to the potential of the market by adjusting the square footage and number of Galleries on a geographic market-by-market basis. We plan to optimize our real estate by continuing to open larger square footage Galleries in key markets and relocating or closing selected Galleries in these or adjacent markets. In addition, we have developed alternative Design Gallery formats with varying sizes that are suited to many smaller and mid-sized North American markets, and we are testing this approach as we open new Galleries in different new locations. We intend to continue to open bespoke Design Galleries in important second home markets and larger bespoke Design Galleries in top domestic and international markets. We also expect to continue to open smaller Interior Design OfficesStudios in some new markets. When we introduce new Galleries in a particular market or make changes to or close existing Galleries, we must make a series of decisions regarding the size and location of new Galleries (or the existing Galleries slated to undergo changes or closure), the impact to our business of the change or closure on our other existing Galleries in the area, or being without a Gallery presence or “out of the market” in an area when we close a Gallery.

We have experienced delays in opening some new Galleries and may experience further delays in the future. We also have incurred higher than expected levels of capital and other expenditures associated with the opening of some of our new Gallery locations. In addition, construction costs and the price of construction materials have increased substantially in recent years. While we are adopting various measures to improve the efficiency and effectiveness of our real estate development efforts with respect to opening new Galleries, the strategies may not be effective or have the effects that we anticipate. Any of the above challenges or other similar impediments could delay or prevent us from completing store openings and adversely affect the return on investment that we target from these initiatives. To the extent that we experience delays in the opening of a store or cost overruns, our results of operations will be negatively affected as we could incur various costs during a delay without associated store revenue at such location and such delays and increased costs could impactaffect our overall return on investment and profit goals for some locations. Unfavorable economic and business conditions and other events could also interfere with our plans to expand or modify store footprints. Changes in regulation or increases in building or construction costs, including with respect to the cost of building materials, could result in unanticipated increases in real estate development costs or delays in the completion of our real estate projects. Our failure to effectively address challenges such as those listed above could adversely affect our ability to successfully open new Galleries or change our store footprint in a timely and cost-effective manner and could have a material adverse effect on our business, results of operations and financial condition.

If we are unable to successfully optimize and operate our fulfillmentdistribution centers, furniture home delivery centers and other aspects of our supply chain and customer delivery network, or if we are not able to fulfill orders and deliver our merchandise to our customers in an effective manner, our business and results of operations will be harmed.

Our business depends upon the successful operation of our fulfillmentdistribution centers, furniture home delivery centers and other aspects of our supply chain and customer delivery network, as well as upon our order management and fulfillment services. The efficient flow of our merchandise requires that our facilities have adequate capacity to support our current level of operations and any anticipated increased levels that may follow from any growth of our business.

We are continually engaged in efforts to improve the quality of our customer experience as well as productivity and efficiency, which includes making changes to the way in which we operate our fulfillmentdistribution centers, furniture home delivery centers and other aspects of our supply chain and customer delivery network. There can be no assurance, however, that any of these efforts will be successful or that we will not encounter additional difficulties in achieving higher levels of customer satisfaction.

We also are engaged in initiatives to introduce new products and to optimize our merchandise assortment and inventory levels to meet current and future demand, and in order to realize the anticipated benefits of such initiatives, we have focused on optimizing the use of our fulfillmentdistribution centers, furniture home delivery centers and outlets. For example, we have consolidated our fulfillmentdistribution center network and reconfigured our furniture home delivery centers in order to streamline our operations. Not all of these initiatives have worked in the manner that we originally anticipated and in some instances the investments we have made in changes to our home delivery have not returned corresponding benefits commensurate with the costs to us. While we believe that these efforts will allow us to more efficiently manage our inventory and optimize our uses of capital, in the short term, such strategies may result in additional costs, including increased freight costs and lease early termination fees. Furthermore, in the past, during periods of significant customer growth and demand, our fulfillmentdistribution centers often run at capacity. If we fail to accurately anticipate the future capacity requirements of our fulfillmentdistribution centers, we may experience delays and difficulties in fulfilling orders and delivering merchandise to customers in a timely manner. We also may be unable to remedy such issues quickly due to operational difficulties, such as disruptions in transitioning fulfillment orders to the new fulfillment facilities, competition for distribution facility space and problems associated with operating new facilities or reducing the size and changing functions of existing facilities. These difficulties can result in a negative experience for our customers and could have a material adverse effect on our results of operations.

We currently rely upon independent third-party transportation providers for product shipments from our vendors to our fulfillmentdistribution centers, home delivery centers and retail locations and to our customers outside of certain areas. Our utilization of third-party delivery services for shipments is subject to risks, including increases in rates and fuel prices, which would increase our shipping costs, as well as strikes, work stoppages, port closures, disruption to shipping routes and inclement weather, which may impact shipping companies’ abilities to provide delivery services that adequately meet our shipping needs. For example, strikes or even threat of strikes involving longshoreman and clerical workers at ports in the past have completely shut down such ports for periods of time, impacting retail and other industries. If we change shipping companies, or are forced to reroute our shipments, we could face logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such changes. Moreover, we may not be able to obtain terms as favorable as those received from the third-party transportation providers we currently use, which in turn would increase our costs. Any of the foregoing risks, if realized, could have a material adverse effect on our business, financial condition and results of operations.

We will have significant capital requirements for the operation of our business in the near term if we are to continue to pursue all of our current business initiatives. We have substantial capital requirements related to investments in our business, our real estate strategy, our international expansion, the development of new businesses and our significant number of concurrent initiatives. We have invested significant capital expenditures in remodeling and opening new Galleries, and these capital expenditures have increased in the past and may continue to increase in future periods as we open additional Design Galleries, which may require us to undertake upgrades to historical buildings or construction of new buildings. During fiscal 2024,2025, our adjusted capital expenditures were $282$289 million in aggregate, net of cash related to landlord tenant allowances of $28$4.1 million. In addition, we also received tenant allowances under finance leases subsequent to lease commencement of $4.8$15 million, which are reflected as a reduction to principal payments under finance leases within financing activities on the consolidated statements of cash flows. We expect to continue to incur significant capital expenditures in respect of new Galleries and other initiatives in fiscal 2025,2026, but the exact scope of our capital plans in future fiscal years, including fiscal 2025,2026, will depend on a variety of factors such as the level of gross capital expenditures that we undertake in our business, the amount of any proceeds from the sale of assets, including sales of real estate,assets and the way that our business performs. Our efforts to sell assets, including real estate, may not be successful, or the proceeds we receive from completed sales may not be successful in achieving the results we are seeking. Our capital expenditures in connection with our expansion plans and other investments may require us to rely significantly on our existing credit facilities and other sources of financing, which could increase our exposure to various risk, including the availability of adequate capital to fund our investments. We may elect to pursue additional capital expenditures beyond those that are anticipated during any given fiscal period inasmuch as our strategy is to be opportunistic with respect to our investments and we may choose to pursue certain capital transactions based on the availability and timing of unique opportunities.

At various times we have elected to incur substantial levels of aggregate indebtedness in connection with our business, including in connection with our share repurchase program. Although we have previously been successful in reducing such indebtedness due in part to the strong cash flowflows offrom our business, there is no certainty that our future efforts to repay indebtedness or manage our overall level of financial leverage will be as successful as in prior periods. In addition, we may in the future elect to incur further debt in addition to the $2.5$2,500 billionmillion of Term Debt that we borrowed.borrowed or undertake other strategies to manage our overall levels of indebtedness. Existing and future increases in debt and in the aggregate level of our indebtedness could expose us to greater risks in the event of a financial or operational downturn or other events, including unanticipated adverse developments that affect our financial performance or the ability to access financial markets. To the extent we pursue additional debt as a source of liquidity, our capitalization profile may change and may include significant leverage, and as a result we may be required to use future liquidity to repay such indebtedness and may be subject to additional terms and restrictions which affect our operations and future uses of capital. Our ability to raise funds will depend in part on the capital markets and our financial condition at such time and we cannot assure you that we will be able to raise necessary funds on favorable terms, if at all, or that future financing requirements would not be dilutive to holders of our capital stock. If we fail to raise sufficient additional funds, we may not be able to meet our payment obligations under our convertible senior notes and other debt obligations. We may also be required to delay or abandon some of our planned future expenditures or aspects of our current operations.

The success of our business depends upon our ability to retain certain key personnel, particularly our Chairman and Chief Executive Officer, Gary Friedman, and our ability to attract and retain additional qualified key personnel in the future. We have experienced a number of changes in our senior leadership in recent years and face risks related to losses of key personnel, particularly in key senior leadership positions. Any disruption in the services of our key personnel could make it more difficult to successfully operate our business and achieve our business goals and could adversely affect our results of operationoperations and financial condition. These changes could also increase the volatility of our stock price.

Over the last several years, there has been a substantial increase in the scope of reported cybersecurity threats and attacks. During this time, we have experienced numerous cybersecurity threats and have had to expend increasing amounts of human and financial capital to address this issue. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers and may be breached due to error, malfeasance or other disruptions that could result in unauthorized disclosure or loss of sensitive data. Because techniques used to obtain unauthorized access to networks, or to sabotage systems, are constantly evolving and generally are not recognized until launched against a target, we may be unable to anticipate applicable threats or vulnerabilities in our systems and processes and may fail to implement adequate preventative measures. We expect that these cybersecurity threats will continue and that the scope of sophistication of these efforts may increase in future periods. While we aim to remediate known vulnerabilities and identified breaches on a timely basis, and to adopt countermeasures to address risks, we do not expect that our efforts will eliminate these risks or result in a 100% success rate in thwarting attacks. Any failure to address vulnerabilities or breaches in a timely and comprehensive matter,manner, including shortcomings in our efforts to timely replace and upgrade network equipment, servers, or other technological assets, could result in a serious adverse event with respect to our systems and business operations.

Foreign laws and regulations relating to privacy, data protection, information security, and consumer protection often are more restrictive than those in the U.S.United States. The European Union, for example, traditionally has imposed stricter obligations under its laws and regulations relating to privacy, data protection and consumer protection than the U.S.United States. In the European Union, the General Data Protection Regulation (“GDPR”) governs data practices and privacy. The GDPR requires companies to meet more stringent requirements regarding the handling of personal data of individuals in the European Union than were required under predecessor European Union requirements. The United Kingdom has implemented legislation similar to the GDPR, including the U.K. Data Protection Act and legislation similar to the GDPR referred to as the U.K. GDPR.

These laws have increased the costs of doing business and, if we fail to implement appropriate safeguards or we fail to detect and provide prompt notice of unauthorized access as required by some of these laws, we could be subject to potential claims for damages and other remedies. If we were required to pay any significant amount in satisfaction of claims under these laws, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully with any such law, our business, results of operations and financial condition could be adversely affected. We may also incur legal costs if we are required to defend our methods of collection, processing and storage of personal data. Investigations, lawsuits, or adverse publicity relating to our methods of handling personal data could result in increased costs and negative market reaction. We expect that new laws, regulations and industry standards will continue to be proposed and enacted relating to privacy, data protection, marketing, advertising, consumer communications and information security in the U.S.,United States, the U.K,United Kingdom, the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business. If our systems, or those of third parties on whom our business depends, are damaged, interrupted or subject to unauthorized access, information about our customers, vendors or workforce could be stolen or misused. Any security breach could expose us to risk of data loss, fines, litigation and liability and could seriously disrupt our operations and harm our reputation, any of which could adversely affect our business. We may be subject to one or more claims or lawsuits related to the intentional or unintentional release of confidential or personal information, including personally identifiable information about our customers, vendors or workforce. In addition to the possibility of fines, lawsuits and other claims, we could be required to expend significant resources to change our business practices or modify our service offerings in connection with the protection of personally identifiable information, which could have a material adverse effect on our business. Any breach could also cause consumers to lose confidence in the security of our website and information technology systems and choose not to purchase from us.

We face product liability, product safety and product compliance risks relating to the design, manufacturing, raw material sourcing, testing, contents, importation, sale, use and performance of some of our products. The products we sell must be designed and manufactured to be safe for their intended purposes. Some of our products must comply with certain federal and state laws and regulations. For example, some of our products are subject to the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008 and the Federal Hazardous Substances Act, which empower the Consumer Product Safety Commission (the “CPSC”) to establish product bans, substance bans, substance limits, performance requirements, test methods and other compliance verification processes. The CPSC is empowered to take action against hazards presented by consumer products, up to and including product recalls. We are required to report certain incidents related to the safety and compliance of our products to the CPSC, and failure to do so could result in a civil penalty. The CPSC is particularly active in regulation and enforcement activities related to the kinds of children’s products sold in our RH Baby & Child division. Certain of the products we sell are subject to the Lacey Act, prohibiting the importation and sale of products containing illegally harvested wood, among other things. Likewise, many of our products are subject to the regulations of the California Air Resources Board and the Environmental Protection Agency regarding formaldehyde emissions from composite wood products (e.g., plywood and medium density fiberboard). If we experience negative publicity, regardless of any factual basis, customer complaints or litigation alleging illness or injury,injury related to our products, or if there are allegations of failure to comply with applicable regulations, our brand reputation would be harmed.

We maintain a product safety and compliance program to help ensure our products are safe, legal and made consistently in compliance with our values. Nevertheless, our products have in the past been, and may in the future be, subject to recall for product safety and compliance reasons. Our efforts to address the sources of these product recalls, including those due to products sourced from our vendors, may not be successful and we may continue to face additional product recalls. Concerns of product safety and compliance could result in future voluntary or involuntary removal of products, product recalls, other actions by applicable government authorities or product liability, personal injury or property damage claims. To the extent future product recalls create a negative public perception of our business, we could face reputational harm or could be subject to elevated levels of legal claims. ThereWe do not currently have insurance coverage for product recalls, and there can be no assurance that we will have the benefit of adequate insurance or payments from third parties, including our product vendors,partners, in order to address losses and expenses that we may incur in connection with product recalls. Not all of the costs and expenses that we have previously incurred in connection with product recalls have been covered by insurance or reimbursement from third parties, including our product vendors. We and our product vendors may be unable to obtain such insurance, or the insurance may be prohibitively expensive and any coverage that is available may be inadequate to cover costs we incur in connection with product recalls.partners.

Legislators and regulators in the U.S.,United States, Canada, the United Kingdom and within the European Union, where our products are sold, continue to adopt new product laws and regulations. These new laws and regulations have increased or likely will increase the regulatory requirements governing the manufacture and sale of certain of our products as well as the potential penalties for noncompliance. In addition, product recalls, removal of products, product compliance enforcement actions and defending product liability claims can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs, any of which could have a material adverse effect on our business and results of operations.

Claims and legal proceedings may involve arbitration, mediation, private litigation, class action matters, derivative claims, internal and governmental investigations and enforcement matters. We are subject to regulatory oversight and legal enforcement by a range of government and self-regulatory organizations, including federal, state and local governmental bodies both within the U.S.United States and in other jurisdictions where we operate such as, among others, the Equal Employment Opportunity Commission, the CPSC, the Federal Trade Commission, U.S. Customs and Border Protection, the U.S. Department of the Treasury’s Office of Foreign Assets Control, the Department of Labor, the SEC, FINRA, the NYSE, the Department of Justice and numerous state and local governmental authorities, including state attorney generals and state agencies. Litigation against us, depending on the outcome of such claims, could lead to further claims and proceedings, including on new and otherwise unrelated matters, for example, by attracting the attention of plaintiff’s firms or of regulators.

In the past, we have faced certain securities litigation matters, including securities class action cases that were consolidated by the court and certain related legal proceedings and various governmental investigations, including with respect to trading in our securities. Currently, we face a number of legal proceedings in connection with our business, including numerous cases for which plaintiffs are seeking class action status in areas such as wage and hour and employment practices. We may face similar legal proceedings and claims in the future. Legal proceedings and investigations often involve complex factual, legal and other issues, which are subject to risks and uncertainties, and which could require significant leadership time that could otherwise be focused on our operations. Furthermore, legal proceedings and investigations where the related matters under review involve members of our leadership team could distract our senior leadership from the operation of our business, damage the reputation of our leadership team and otherwise materially adversely affect our operations and leadership morale. Litigation, investigations and other claims and regulatory proceedings against or involving members of our senior leadership team or us could result in unexpected expenses and liability and could also materially adversely affect our operations and our reputation. We maintain insurance forthat covers certain types of legal proceedings, but there can be no assurance that such insurance will be available for the payment of all or any portion of the costs associated with any particular investigation, legal proceedings or other claims against us, or that coverage under any such insurance will be adequate to fund the full cost of any such legal proceedings, including the costs of investigation, defense and resolution of any such legal proceedings.

Compliance with laws, including laws relating to our business activities outside of the U.S.,United States, may be costly, and changes in laws could make conducting our business more expensive or otherwise change the way we do business.

We are subject to numerous federal and state laws and regulations, including labor and employment, customs, sanctions, truth-in-advertising, consumer protection, e-commerce, privacy, health and safety, real estate, environmental and zoning and occupancy laws, intellectual property laws and other laws and regulations that regulate retailers and hospitality providers or otherwise govern our business. In addition, to the extent we expand our operations as a result of engaging in new business initiatives or product lines, pursuing our multi-tier real estate strategy or expanding into new international markets, we may become subject to new regulations and regulatory regimes. We may need to continually reassess our compliance procedures, personnel levels and regulatory framework in order to keep pace with the numerous business initiatives that we are pursuing, and there can be no assurance that we will be successful in doing so. If the regulations applicable to our business operations were to change or were violated by us or our vendors or buying agents, the costs of certain goods could increase, or we could experience delays in shipments of our goods, detentions, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our products and harm our business and results of operations. In addition to increased regulatory compliance requirements, changes in laws could make the ordinary conduct of our business more expensive or require us to change the way we do business. In addition, as a retail business, changes in laws related to employee benefits and treatment of employees, including laws related to limitations on employee hours, supervisory status, leaves of absence, mandated health benefits or overtime pay, could negatively impact us by increasing compensation and benefits costs for overtime and medical expenses. Changes to laws or regulations in the U.S.United States or foreign jurisdictions where we have employees or operations, including laws and regulations regarding environmental or social practices including in connection with greenhouse gas emissions and other environmental matters, could result in increased direct compliance costs, increased transportation costs or reduced availability of raw materials (or may cause our vendors to raise the prices they charge us because of their increased compliance costs).

We may pursue growth opportunities by acquiring value-creating, add-on businesses, solutions or technologies through strategic acquisitions, investments or partnerships that we believe will broaden our existing position and market reach. We have completed several such acquisitions in recent years. The identification of suitable acquisition, strategic investment or strategic partnership candidates can be costly and time consuming and can distract our leadership team from our current operations. If we choose to acquire businesses or assets in the future, there can be no assurance that we will be able to find suitable businesses or assets to purchase, acquire such businesses or assets on acceptable terms, or realize the benefits of any acquisition we pursue or that any of the businesses or assets which we acquire will meet our objectives. If we are unsuccessful in any such acquisition efforts, then our ability to continue to grow at rates we anticipate could be adversely affected. The success of any completed acquisition will depend on our ability to effectively manage the business or assets after the acquisition.

macroeconomic conditions, including inflation, high interest rates and mortgage rates and other factors affecting the housing market;

natural or man-made disasters or other similar events, including global health emergencies and the impact of climate events;

issuances or expected issuances of capital stock; and global economic, geopolitical, legal and regulatory changes unrelated to our performance.

This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees. While the Delaware courts have determined that such choice of forum provisions areis facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us or our directors, officers or other employees in a venue other than in the federal district courts of the United States of America. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our Certificate of Incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and we cannot assure you that the provisions will be enforced by a court in those other jurisdictions. If a court were to find the exclusive-forum provisions in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm our business.

We repurchased approximately 3.7 million shares of our common stock during fiscal 2022 pursuant to our share repurchase program at an average price of approximately $269 per share, for an aggregate repurchase amount of approximately $1.0 billion. We repurchased approximately 3.9 million shares of our common stock during fiscal 2023 pursuant to our share repurchase program at an average price of approximately $321 per share, for an aggregate repurchase amount of approximately $1.3 billion. We did not repurchase any shares of our common stock during fiscal 2024 or fiscal 2025 and the remaining amount outstanding and available under our share repurchase program is $201 million. During fiscal 2022, we also repurchased $237 million of principal value of convertible senior notes in privately negotiated transactions and terminated all of the outstanding convertible note bond hedges and repurchased all of the outstanding warrants that had been previously issued in connection with the final two series of convertible senior notes.

Although we believe that our previous decisions regarding the allocation of capital to repurchase common stock have been very beneficial to our investors, there can be no assurance that any decisions to allocate capital to the repurchase of our shares of common stock or other equity linked instruments will be a beneficial long-term decision for investors in our common stock or that we will receive the benefits from these repurchases that we anticipate. We may face a variety of risks associated with allocation of capital to the repurchase of our securities, including the incurrence of substantial indebtedness to fund such repurchases, the possibility that prices at which we purchase securities will not represent a good investment for our remaining securities holders or the possibility that the capital allocated to such repurchases may mean that adequate funds are not available for other aspects of our business. The amount, timing and execution of our share repurchase program and other repurchases of equity linked instruments from time to time may fluctuate based on our priorities for the use of cash for other purposes such as operational spending, capital spending, acquisitions or repayment of debt. Changes in our business operations and financial results, regulatory and other legal developments, including potential changes in tax laws, could also impactaffect our share repurchase program and other capital allocation activities.

Expectations of our Companyus relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, customers and other key stakeholders concerning corporate responsibility, specifically related to environmental, social and governance (“ESG”) factors. We expect that an increased focus on ESG considerations will affect some aspects of our operations, particularly as we expand into new geographic markets. There are a number of constituencies that are involved in a range of ESG issues, including investors, special interest groups, public and consumer interest groups and third-party service providers. As a result, there is an increased emphasis on corporate responsibility ratings and a number of third parties provide reports on companies in order to measure and assess corporate responsibility performance. In addition, the ESG factors by which companies’ corporate responsibility practices are assessed may change in the U.S.United States and differ in our new geographic markets, which could result in greaterdiffering or evolving expectations of us and cause us to undertake costly initiatives to satisfy such new criteria. Alternatively, if we are unable to satisfy such new criteria, investors may conclude that our policies with respect to corporate responsibility are inadequate. We riskcould damageexperience toreputational our brand and reputationharm in the event that our corporate responsibility procedures or standards do not meet the standards set by various constituencies. We may be required to make substantial investments in matters related to ESG which could require significant investment and impactaffect our results of operations. Any failure in our decision-making or related investments in this regard could affect consumer perceptions as to our brand. Furthermore, if our competitors’ corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our competitors instead. In addition, in the event that we communicate certain initiatives and goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. IfAny wesuch failadverse toperceptions satisfycould thenegatively expectations of investors and other key stakeholders or our initiatives are not executed as planned,affect our reputation andand, financialin turn, our business or results couldof be materially and adversely affected.operations.

We are subject to income taxes in the U.S.United States and certain foreign jurisdictions. We record income tax expense based on our estimates of future payments, which include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets, including net operating loss carryforwards. At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. We expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated. In addition, our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings, timing of the utilization of net operating loss carryforwards, changes in the valuation allowance for deferred taxes or changes to existing accounting rules or regulations.

Our operations are subject to risks of natural or man-made disasters, acts of war, terrorismterrorism, geopolitical uncertainty or widespread illness, any one of which could result in a business stoppage and negatively affect our results of operations.

Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel. Our operations and consumer spending may be affected directly or indirectly by natural or man-made disasters or other similar events, including as a result of climate change, floods, hurricanes, earthquakes, widespread illness, fires, loss of power, interruption of other utilities, industrial accidents, social unrest and riots. In particular, our corporate headquarters is located in Northern California and other parts of our operations are located in Northern and Southern California, each of which is vulnerable to the effects of disasters, including fires and earthquakes that could disrupt our operations and affect our results of operations, and there is evidence that extreme weather, extended droughts and shifting climate patterns have intensified the frequency and severity of wildfires in California. Many of our vendors are also located in areas that may be affected by such events. Moreover, geopolitical conflict, including war or public safety conditions which affect consumer behavior and spending, economic conditions, global trade or overall business conditions may adversely affect our business. Terrorist attacks, armed conflict such as what has occurred in Ukraine and the Middle East,conflict, or other hostilities, or threats thereof, in the U.S.United States or in other countries around the world, as well as future events occurring in response to or in connection with such events and circumstances, could again result in reduced levels of consumer spending or other adverse effects on business conditions.conditions, including as a result of an economic recession. Any of these occurrences could have a significant impact on our results of operations, revenue and costs.

The discussion of our financial condition and changes in our results of operations, liquidity and capital resources areis presented in this section for fiscal 2025 and a comparison to fiscal 2024. The discussion for fiscal 2024 and a comparison to fiscal 2023. The discussion for fiscal 2023 and fiscal 2022 has been omitted from this Annual Report, but is included in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended February 3,1, 2024,2025, filed with the Securities and Exchange Commission (“SEC”) on MarchApril 28,2, 2024.2025.

We are a leading retailer and luxury lifestyle brand operating primarily in the home furnishings market. Our curated and fully integrated assortments are presented consistently across our sales channels, including our retail locations, websites and Sourcebooks. We offer merchandise assortments across a number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, and baby, child and teen furnishings. Our retail business is fully integrated across our multiple channels of distribution. We position our Galleries as showrooms for our brand, while our websites and Sourcebooks act as virtual and print extensions of our physical spaces, respectively. We operate our retail locations throughout the United StatesStates, Canada and Canada as well as in the United Kingdom, Germany, BelgiumEurope, and Spain andwe have an integrated RH Hospitality experience in 2125 of our Design Gallery locations, which includes restaurants and wine bars.

We have recently undertaken efforts to introduce the most prolific collection of new products in our history, with a substantial number of new furniture and upholstery collections across RH Interiors, RH Modern, RH Contemporary, RH Outdoor, RH Baby & Child and RH TEEN.Teen Theseand the introduction of RH Estates in 2026, featuring RH Bespoke furniture and RH Couture upholstery. We believe these new collections reflect a level of design and quality inaccessible in our current market, and a value proposition that we believe will be disruptive across multiple markets.

As of FebruaryJanuary 1,31, 2025,2026, we operated the following number of locations:

Since the majority of our product assortment is imported from vendors outside the U.S.,United States, we also face uncertainty and risks related to tariffs and other trade policies, which may increase the costs of securing products from our vendors. Tariffs and other non-tariff trade practices and policies may adversely affect our business in other ways beyond increased costs for our products. We have taken steps to move our supply chain away from countries with higher tariff rates in favor of other jurisdictions, but these countermeasures may prove to be ineffective and the ability to predict tariff rates in different countries may be difficult as policies may change on short notice. For example, on February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the IEEPA. Following the U.S. Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels and whether further additional tariffs or other retaliatory actions may be imposed, modified or suspended. Uncertainty about trade policy, tariff rates,rates and other changes in practices affecting international trade might have an adverse effect on our business and results of operationoperations, and we may face challenges in implementing the optimal responses to changing trade conditions.

In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S.United States. While our expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements isare uncertain. We also believe we have positioned the business to take advantage of any favorable progression in macroeconomic conditions.

Product Elevation. We believe we have built the most comprehensive and compelling collection of luxury home furnishings under one brand in the world. Our products are presented across multiple collections, categories and channels that we control, and we believe their desirability and exclusivity have enabled us to achieve strong revenues and margins. Our customers know our brand concepts as RH Interiors, RH Modern, RH Contemporary, RH Outdoor, RH Beach House, RH Ski House, RH Baby & Child, RH TEENTeen and Waterworks. Our strategy is to continue to elevate the design and quality of our product. Beginning with the mailing of our RH Interiors Sourcebook in the fall of 2023 and with additional Sourcebook mailings throughout 2024,2024 and 2025, we have introduced the most prolific collection of new products in our history.history, Inwhich addition,will overcontinue with the nextspring few2026 years,launch we plan to introduceof RH Couture,Estates, featuring RH Bespoke furniture and RH Color.Couture upholstery.

Gallery Transformation. Our products are elevated and rendered more valuable by our architecturally inspiring Galleries. We believe our strategy to open new Design Galleries in every major market in Norththe AmericaUnited States and Canada will unlock the value of our vast assortment, generating an expected total annual revenue opportunity for our business of $5 to $6 billion. We believe we can significantly increase our sales by transformingcontinuing to transform our real estate platform from our existing legacy retail footprint to a portfolio of Design Galleries sized to the potential of each market and the size of our assortment. In addition, we plan to incorporate hospitality into many of the new Design Galleries that we open in the future, which we believe further elevates and renders our product and brand more valuable. We believe hospitality has created a unique new retail experience that cannot be replicated online,online and that the addition of hospitality drives incremental sales of home furnishings in these Galleries.

Brand Elevation. Our strategy is to move the brand beyond curating and selling product to conceptualizing and selling spaces,spaces by building an ecosystem of Products, Places, Services and Spaces that establishes the RH brand as a global thought leader, taste and place maker. We believe our seamlessly integrated ecosystem of immersive experiences inspires customers to dream, design, dine, travel and live in a world thoughtfully curated by RH, creating an impression and connection unlike any other brand in the world. Our hospitality efforts will continue to elevate the RH brand as we extend beyond the four walls of our Galleries into RH Guesthouses, where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion North American hotel industry. We entered this industry with the opening of the RH Guesthouse New York in September 2022 and are in the process of constructing our second RH Guesthouse in Aspen. In June 2023, we opened RH England, The Gallery at the Historic Aynho Park, a 400-year-old landmark estate representing one of the most inspiring and immersive physical expressionexpressions of the brand to date.brand. RH England marked the beginning of our global expansion beyond North America. Additionally, we offer bespoke experiences like RH Yountville, an integration of Food, Wine, Art & Design in the Napa Valley; RH1RH One & RH2,RH Two, our private jets; and RH3,RH Three, our luxury yacht that is available for charter in the Caribbean and Mediterranean, where the wealthy and affluent visit and vacation. These immersive experiences expose both new and existing customers to our evolving authority in architecture, interior design and landscape architecture.

Global Expansion. We believe that our luxury brand positioning and unique aesthetic have strong international appeal,appeal and that pursuit of global expansion will provide RH with a substantial opportunity to build over time a projected $20 to $25 billion global brand in terms of annual revenues. Our view is that the competitive global environment globally is more fragmented and primed for disruption than the North American market, and there is no direct competitor of scale that possesses the product, operational platform,platform and brand strength of RH. As such, we are actively pursuing the expansion of the RH brand globally, which began with the opening of RH England, RH Munich and RH Düsseldorf in 2023, followed by the opening of RH Brussels in March 2024 and RH Madrid in June2024. 2024.In September 2025, we opened RH Paris, The Gallery on the Champs-Élysées, located just off the Avenue Montaigne, which stands at the global epicenter of fashion and luxury. We arebelieve alsothe underopening constructionof RH Paris marks a major step forward in Paris,the LondonEuropean expansion of our business. In 2026, we expect to open RH Milan, The Gallery on Corso Venezia, and MilanRH London, The Gallery in Mayfair, which we believe will be inspiring spaces that will celebrate the heritage of the historic structures and will integrate full expressions of our hospitality experiences. In addition, we plan to open RH Sydney, The Gallery in Double Bay, in Australia in the coming years.

Digital Reimagination. Our strategy is to digitally reimagine the RH brand and business model both internally and externally. Internally, our multiyear effort began with the reimagination of our RH Center of Innovation to incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation. Externally, our strategy comes to life digitally through The World of RH, an online portal where customers can explore and be inspired by the depth and dimension of our brand. We expect to continue to elevate the customer experience on The World of RH with further enhancements to content, navigation and search functionality. We believe an opportunity exists to create similar strategic separation online as we have with our Galleries offline, reconceptualizing what a website can and should be. We arehave makingmade meaningful investments to elevate and differentiate our online experience within plans2025, and we expect to upgradecontinue ourinvesting websitein throughoutthese 2025.initiatives in 2026.

Our Strategic Initiatives. As a result of the number of current business initiatives we are pursuing, we have experienced in the past, and may experience in the future, significant period-to-period variability in our financial performance and results of operations. While we anticipate that these initiatives will support the growth of our business, costs and timing issues associated with pursuing these initiatives can negatively affect our growth rates in the short term and may amplify fluctuations in our growth rates from quarter to quarter.quarter-to-quarter. Delays in the rate of opening new Galleries and pursuit of our international expansion have resulted in delays in the corresponding increase in revenues that we experience as new Design Galleries are introduced. In addition, we anticipate that our net revenues, adjusted net income and other performance metrics will remain variable as our business model continues to emphasize high growth and numerous, concurrent and evolving business initiatives.

Our Ability to Source and Distribute Products Effectively. Our net revenues and gross profit are affected by our ability to purchase our merchandise in sufficient quantities at competitive prices. Our current and anticipated demand and our level of net revenues have been adversely affected in prior periods by constraints in our supply chain, including the inability of our vendors to produce sufficient quantities of some merchandise to match market demand from our customers, leading to higher levels of customer back ordersbackorders and lost sales. For example, a number of our vendors experienced delays in production and shipment of merchandise orders related to direct and indirect effects of the pandemic, as well as other geopolitical conflicts that have occurred in recent years. In addition, we have undertaken a number of substantial shifts in our approach to merchandise sourcing in response to tariffs, including shifting a significant portion of our vendor base away from China to other countries such as Vietnam that we have chosen with the objective of reducing the financial impact of increased tariff rates. As we introduce new products and expand our merchandise assortments into new categories, we expect tomay experience delays in the introduction and production of some new offerings, as we have had similar experiences during prior periods when we adopted substantial newness in our business.

During the first half of fiscal 2022 we experienced increased net revenues due to fulfillment of orders generatedChanges in priortariffs quartersimposed asby elementsgovernment of our supply chain continued to catch up with customer demand. However, throughout fiscal 2023 and fiscal 2024 we experienced softening demand trends as compared to fiscal 2022. While we believe the majority of the supply chain dislocation has now been resolved, there can be no assurance as to the exact course that our supply chain will take and a number of factors could contribute to further complications in our supply chain, including increases inagencies, raw material costs related to inflation and other macroeconomic factors, including negative effects in countries where our vendors produce merchandisemerchandise, andcould contribute to further complications in our supply chain. We partner with vendors to optimize our supply chain across geographies to mitigate the potential effectimpact of tariffsthese imposed by the U.S. government.items. Based on total dollar volume of purchases for fiscal 2024,2025, 72%69% of our products were sourced from Asia, including 35%39% from Vietnam, 23%13% from China and the remainder predominantly from Indonesia and India, 18%21% from North America, including 10%13% from the United States, as well as 10% from Europe and other countries.

Consumer Preferences and Demand. Our ability to maintain our appeal to existing customers and attract new customers depends on our ability to originate, develop and offer a compelling product assortment responsive to customer preferences and design trends. We have successfully introduced a large number of new products in past and current periods, which we believe has been a contributing factor in our sales growth and results of operations. If we misjudge the market for our products or the product lines that we acquire, we may be faced with excess inventories for some products and may be required to become more promotional in our selling activities, which would impactaffect our net revenues and gross profit.

Overall Economic Trends. The industry in which we operate is cyclical, and consequently our net revenues are affected by general economic conditions, including primarily by conditions that affect the housing market. For example, substantially higher interest and mortgage ratesrates, andas well as higher cost of consumer credit may reduce demand for our products. We have determined that our customer purchasing patterns are influenced by economic factors, including the health and volatility of the stock market. We have seen that previous declines in the stock market and periods of high volatility have correlated with a reduction in consumer demand for our products and may continue in future periods. We target consumers of high-end home furnishings. As a result, we believe that our sales are sensitive to a number of macroeconomic factors that influence consumer spending generally, but that our sales are particularly affected by the financial health of the higher-end customercustomers and demand levels from that customer demographic.

While the overall home furnishings market may be influenced by factors, such as employment levels, interest rates, demographics of new household formation and the affordability of homes for first-time home buyers, the higher-end of the housing market may be disproportionately influenced by other factors, including stock market prices, disruption in financial markets, the number of second and third homes being bought and sold, the number of foreign buyers in higher-end real estate markets, foreign currency volatility, inflation, tax policies andpolicies, interest rates,rates and the perceived prospect for capital appreciation in higher-end real estate. Shifts in consumption patterns may also have an impact on consumer spending in the high-end housing market. We have in the past experienced volatility in our sales trends related to many of these factors and believe our sales may be impacted by these economic factors in future periods. We expect the impact of such macroeconomic factors on our business may continue in future quarters. For more information, refer to Item 1A—Risk Factors—Changes in consumer spending and factors that influence spending of the specific categories of consumers that purchase from us may significantly impactaffect our revenue and results of operations.

Net Revenues and Demand. Net revenues reflect our sale of merchandise plus shipping and handling revenue collected from our customers, less returns and discounts. Revenues are recognized when a customer obtains control of the merchandise. We collect annual membership fees related to the RH Members Program, which are recorded as deferred revenue when collected from customers and recognized as revenue based on expected productmerchandise revenues over the annual membership period.

We also track “demand” in our business, which is an operating metric linked to the level of customer orders. Demand is an operating metric that we use in reference to the dollar value of orders placed (ordersfrom all of our businesses and excludes exchanges, shipping fees and cancellations. Orders convert to net revenue upon a customer obtaining control of the merchandise)merchandise. Demand also includes Membership and excludessales exchangesfrom RH Hospitality and shippingRH fees.Outlet.

Gross Profit and Gross Margin. Gross profit is equal to our net revenues less cost of goods sold. Gross profit as a percentage of our net revenues is referred to as gross margin. Cost of goods sold includes the direct cost of purchased merchandise; inventory shrinkage, inventory reserves and write-downs and lower of cost or net realizable value reserves; inbound freight; all freight costs to get merchandise to our retail locations and outletsoutlet locations; design, buying and allocation costs; occupancy costs related to retail andretail, outlet operations and our supply chain,chain operations, such as rent and common area maintenance for our leases; depreciation and amortization of leasehold improvements, equipment and other assets in our retailretail, locations, outletsoutlet and distributionsupply centers.chain locations. In addition, cost of goods sold includes all logistics costs associated with shipping product to our customers, which are partially offset by shipping income collected from customers (recorded in net revenues on the consolidated statements of income).

Our gross profit and gross margin can be favorably impacted by sales volume increases, as occupancy and certain other costs that are largely fixed do not necessarily increase proportionally with sales volume increases. Changes in the mix of our products may also impactaffect our gross profit and gross margin. We review our inventory levels on an ongoing basis in order to identify slow-moving merchandise and use product markdowns and our outlets to efficiently sell these products. The timing and extent of markdowns are driven primarily by customer acceptance of our merchandise.

The primary drivers of our product cost of individual goods are raw materials costs, which fluctuate based on a number of factors beyond our control, including commodity prices, changes in supply and demand, general economic conditions, competition, import duties, tariffs and government regulation and labor costs in the countries where we source our merchandise. In addition, our gross profit is also impacted by logistics costs, which may increase in the event of, for example, expansions of or interruptions in the operation of our distribution centers, furniture home delivery centers and customer service centercenters or damage or interruption to our information systems. We place orders with merchandise vendors primarily in United StatesU.S. dollars and, as a result, are not currently exposed to significant foreign currency exchange risk. However, our exposure may increase in connection with our global expansion strategy as we expect to have more operations related to currencies other than the United StatesU.S. dollar.

In recent periodsperiods, we have experienced higher cost of goods sold primarily related to ourchanges in trade policy and increased costs of merchandise and inbound freight.tariffs. Our strategy is to address cost factors as they occur, where possible, including through tariff mitigation strategies via partnership with key vendors, strategic pricing and efficiency in our operations.

Our gross profit and gross margin may not be comparable to other specialty retailers, as some companies may not include all or a portion of the costs related to their distribution network and store occupancy in calculating gross profit and gross margin as we and many other retailers do, but instead may include them in selling, general and administrative expenses. In addition, certain of our retail leases are accounted for as finance leases, which result in our recording a portion of the expense related to these agreements included in interest expense—net on the consolidated statements of income.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include all operating costs not included in cost of goods sold. These expenses include payroll and payroll-related expenses, retail relatedretail-related expenses other than occupancy, and expenses related to the operations at our corporate headquarters, including rent, utilities, depreciation and amortization, credit card fees and marketing expense, which primarily includes Sourcebook production, mailing and print advertising costs. All retail pre-opening costs are included in selling, general and administrative expenses and are expensed as incurred. We expect certain of these expenses to continue to increase as we open new retail locations and outlets, develop new product categories and otherwise pursue our current business initiatives. Additionally, our selling, general and administrative expenses as a percentage of net revenues can be impacted by the timing of our Sourcebook distributions. Selling, general and administrative expenses as a percentage of net revenues are usually higher in lower-volume quarters and lower in higher-volume quarters because a significant portion of the costs are relatively fixed.

In addition, in recent periods we have experienced increased selling, general and administrative expenses, including asset impairments, product recalls, reorganizations, non-cash compensation expense,expense reorganizations,and legal settlements, product recalls, employer payroll taxes on CEO option exercises, professional fees associated with debt transactions and compensation settlement arrangements, as discussed in “Basis of Presentation and Results of Operations” below.

Non-GAAP Financial Measures. To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we use non-GAAP financial measures, including adjusted operating income, adjusted net income, EBITDA, adjusted EBITDA, and adjusted capital expenditures (collectively, “non-GAAP financial measures”). We believecompute thatthese adjustedmeasures operatingby income,adjusting adjustedthe netapplicable incomeGAAP measures to remove the impact of certain recurring and adjustednon-recurring EBITDA are useful measures of operating performance, as the adjustments eliminate non-recurringcharges and other itemsgains that are not reflective of underlying business performance, facilitate a comparison of our operating performance on a consistent basis from period-to-period and provide for a more complete understanding of factors and trends affecting our business. We also use these adjusted measures as methods for planning and forecasting overall expected performance and to adjust for evaluatingthe onimpact aof quarterlyincome andtax annualitems basisrelated to such adjustments to our actualGAAP resultsfinancial against such expectations.statements.

EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income before depreciation and amortization, interest expense—net andnet, income tax expense (benefit).and depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of non-cash compensation, capitalized cloud computing amortization, our share of equity method investments net (income) loss and other (income) expense—net, as well as certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Adjusted Capital Expenditures. We define adjusted capital expenditures as capital expenditures from investing activities and cash outflows of capital related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received.received during the construction period.

RH Segment net revenues for fiscal 20242025 increased primarily due to higher revenue in our core business,business driven by theour introductioncontinued ofproduct new collections,transformation and theplatform nearlyexpansion. doublingIn of our Sourcebook circulation, as well as higheraddition, hospitality revenue increased primarily as a result of new Gallery openings.openings Weand alsowe recognizedhad higher outlet revenue.

Waterworks net revenues decreasedincreased $0.6$5.2 million, or 0.3%,2.7%, to $198 million in fiscal 2025 compared to $193 million in fiscal 2024 compared to $194 million in fiscal 2023.2024.

RH Segment gross profit increased $27$98 million, or 2.1%,7.4%, to $1,411 million in fiscal 2025 compared to $1,313 million in fiscal 2024 compared to $1,286 million in fiscal 2023.2024. As a percentage of net revenues, RH Segment gross margin decreased 14050 basis points to 43.5% of net revenues in fiscal 2025 compared to 44.0% of net revenues in fiscal 2024 compared to 45.4% of net revenues in fiscal 2023.2024. The decrease in RH Segment gross margin was partiallyprimarily dueattributable to deleveragedecreased margins in the RH core business and increased occupancy costs, partially offset by leverage in shipping costs year over year due to higher expense related to our Galleries and supply chain in support of continued global expansion. Additionally, we experienced a decrease in product margin in the core and outlet business primarily driven by price adjustments and a higher mix of discontinued products.year.

Waterworks gross profit decreasedincreased $1.2$3.1 million, or 1.1%,3.0%, to $105 million in fiscal 2025 compared to $102 million in fiscal 2024 compared to $103 million in fiscal 2023.2024. As a percentage of net revenues, Waterworks gross margin decreasedincreased 5020 basis points to 52.9% of net revenues in fiscal 2025 compared to 52.7% of net revenues in fiscal 2024 compared to 53.2% of net revenues in fiscal 2023.2024.

RH Segment selling, general and administrative expenses wouldincreased have$30 beenmillion, 32.7%or and2.9%, 32.3%to of$1,046 netmillion revenues forin fiscal 20242025 andcompared to $1,016 million in fiscal 2023, respectively, when excluding the adjustments to2024. RH Segment selling, general and administrative expenses mentionedwere above.32.3% and 34.0% of net revenues in fiscal 2025 and fiscal 2024, respectively. The increasedecrease in selling, general and administrative expenses as a percentage of net revenues was primarily driven by higherasset compensationimpairments costs,related higherto openingtwo Design Galleries in Germany and property and equipment of Galleries under construction in fiscal 2024. In addition, decreases in advertising and occupancy costs driven by new Gallery openings, most of which include hospitality, and additional advertising costs due to increased Sourcebook circulation year over year,were partially offset by lowerincreases professionalin feescompensation costs and other corporate costs.costs year over year.

Waterworks selling, general and administrative expenses forincreased $6.4 million, or 8.4%, to $83 million in fiscal 20242025 includedcompared $3.2to $77 million relatedin tofiscal a favorable legal settlement. Excluding the favorable legal settlement,2024. Waterworks selling, general and administrative expenses wouldwere have41.8% increasedand 70 basis points to 41.3%39.7% of net revenues infor fiscal 20242025 compared to 40.6% of net revenues inand fiscal 2023.2024, respectively.

The discussion of our financial condition and changes in our results of operations, liquidity and capital resources is presented in this section for the three and six months ended MayAugust 2,1, 2026, and a comparison to the three and six months ended MayAugust 3,2, 2025. The discussion related to cash flows for the threesix months ended MayAugust 3,2, 2025, has been omitted from this Quarterly Report on Form 10-Q, but is included in Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations on our Form 10-Q for the quarter ended MayAugust 3,2, 2025, filed with the Securities and Exchange Commission (“SEC”) on JuneSeptember 12,11, 2025.

Basis of Presentation and Results of Operations. This section provides our condensed consolidated statements of income (loss) and other financial and operating data, including a comparison of our results of operations in the current period as compared to the prior year’s comparative period, as well as non-GAAP measures we use for operational decision-making and as a means to evaluate period-to-period comparisons.

Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. Matters that we identify as “short term,” “non-recurring,” “unusual,” “one-time” or other words and terms of similar meaning may, in fact, not be short term and may recur in one or more future financial reporting periods. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the section titled Risk Factors in our 2025 Form 10-K and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I of this Quarterly Report, in our Quarterly Report on Form 10-Q for the quarterly period ended May 2, 2026 and in our 2025 Form 10-K. All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.

As of MayAugust 2,1, 2026, we operated the following number of locations:

In recent years, our business has been negatively affected and limited by macroeconomic conditions, including high interest rates and mortgage rates, volatility in the global financial markets and the slowdown in the luxury home marketmarket, as well as other negative factors related to the effects of lingering higher inflation and increased costs, including higher construction expenses.

Since the majority of our product assortment is imported from vendors outside the United States, we also face uncertainty and risks related to tariffs and other trade policies, which may increase the costs of securing products from our vendors. Tariffs and other non-tariff trade practices and policies may adversely affect our business in other ways beyond increased costs for our products. We have taken steps to move our supply chain away from countries with higher tariff rates in favor of other jurisdictions, but these countermeasures may prove to be ineffective and the ability to predict tariff rates in different countries may be difficult as policies may change on short notice. For example, on February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the IEEPA. Following the U.S. Supreme Court’s decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. In April 2026, the IEEPA refund process was launched,launched andat which time we beganfiled to receivefor refunds for tariffs previously paid in an aggregate amount of $69 million, of which $67 million was received in the second quarter of fiscal 2026. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels and whether further additional tariffs or other retaliatory actions may be imposed, modified or suspended. Uncertainty about trade policy, tariff rates and other changes in practices affecting international trade might have an adverse effect on our business and results of operations, and we may face challenges in implementing the optimal responses to changing trade conditions.

Product Elevation. We believe we have built the most comprehensive and compelling collection of luxury home furnishings under one brand in the world. Our products are presented across multiple collections, categories and channels that we control, and we believe their desirability and exclusivity have enabled us to achieve strong revenues and margins. Our customers know our brand concepts as RH Interiors, RH Modern, RH Outdoor, RH Beach House, RH Ski House, RH Baby & Child, RH Teen and Waterworks. Our strategy is to continue to elevate the design and quality of our product. Beginning with the mailing of our RH Interiors Sourcebook in the fall of 2023 and withthrough additional product launches and Sourcebook mailings throughoutsince 2024then, andincluding 2025,most recently the launch of RH Estates in 2026, we have introduced the most prolific collection of new products in our history, which will continue with the 2026 launch of RH Estates, featuring RH Bespoke furniture and RH Couture upholstery.history.

Global Expansion. We believe that our luxury brand positioning and unique aesthetic have strong international appeal and that global expansion will provide RH with a substantial opportunity to build a projected $20 to $25 billion global brand in terms of annual revenues. Our view is that the competitive global environment is more fragmented and primed for disruption than the North American market, and there is no direct competitor of scale that possesses the product, operational platform and brand strength of RH. As such, we are actively pursuing the expansion of the RH brand globally, which began with the opening of RH England, RH Munich and RH Düsseldorf in 2023, followed by the opening of RH Brussels and RH Madrid in 2024. In September 2025, we opened RH Paris, The Gallery on the Champs-Élysées, located just off the Avenue Montaigne, which stands at the global epicenter of fashion and luxury. In April 2026, we opened RH Milan, The Gallery on Corso Venezia, and expectin toJune open2026, we opened RH London, The Gallery in Mayfair in June 2026.Mayfair. In addition, we plan to open RH Sydney, The Gallery in Double Bay, in Australia in the coming years.

As a result of the number of current business initiatives we are pursuing, we have experienced in the past, and may experience in the future, significant period-to-period variability in our financial performance and results of operations. While we anticipate that these initiatives will support the growth of our business, costs and timing issues associated with pursuing these initiatives can negatively affect our growth rates in the short term and may amplify fluctuations in our growth rates from quarter-to-quarter. Delays in the rate of opening new Galleries and pursuit of our international expansion have resulted in delays in the corresponding increase in revenues that we experience as new Design Galleries are introduced. In addition, we anticipate that our net revenues, adjusted net income (loss) and other performance metrics will remain variable as our business model continues to emphasize high growth and numerous, concurrent and evolving business initiatives.

The following table sets forth the condensed consolidated statements of income (loss):

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income, adjusted net income (loss),income, EBITDA, adjusted EBITDA, and adjusted capital expenditures (collectively, “non-GAAP financial measures”). We compute these measures by adjusting the applicable GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by senior leadership in its financial and operational decision-making. The non-GAAP financial measures used by us in this Quarterly Report on Form 10-Q may be different from the non-GAAP financial measures, including similarly titled measures, used by other companies.

Reconciliation of GAAP Net Income (Loss) to Operating Income and Adjusted Operating Income

Adjusted Net Income (Loss).Income. Adjusted net income (loss) is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income (loss) as consolidated net income (loss),income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Loss)

EBITDA and Adjusted EBITDA. EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income (loss) before interest expense—net, income tax expense (benefit) and depreciation and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of non-cash compensation, as well as certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income (Loss) to EBITDA and Adjusted EBITDA

Adjusted Capital Expenditures. We define adjusted capital expenditures as capital expenditures from investing activities and cash outflows of capital related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received during the construction period.received.

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $1.4$6.2 million in the threesix months ended MayAugust 3,2, 2025, which are reflected as a reduction to principal payments under finance leases—net of tenant allowances within financing activities on the condensed consolidated statements of cash flows. No such amounts were received from landlords during the threesix months ended MayAugust 2,1, 2026.

Includes approximately 130,000 square feet as of MayAugust 2,1, 2026 related to four owned retail locations and approximately 89,000 square feet related to three owned retail locations as of MayAugust 3,2, 2025.

Three Months Ended MayAugust 2,1, 2026 Compared to Three Months Ended MayAugust 3,2, 2025

Consolidated net revenues decreasedincreased $14$23 million, or 1.7%,2.6%, to $800$922 million in the three months ended MayAugust 2,1, 2026 compared to $814$899 million in the three months ended MayAugust 3,2, 2025.

RH Segment net revenues decreasedincreased $13$21 million, or 1.7%,2.4%, to $752$867 million in the three months ended MayAugust 2,1, 2026 compared to $765$847 million in the three months ended MayAugust 3,2, 2025, primarily due to lower revenue in our core and Contract businesses, partially offset by an increase in hospitality revenue primarily as a result of new Gallery openings.openings as well as higher revenue in our core business driven by our continued product transformation and platform expansion.

Waterworks net revenues decreasedincreased $0.8$2.4 million, or 1.7%,4.6%, to $48$55 million in the three months ended MayAugust 2,1, 2026 compared to $49$52 million in the three months ended MayAugust 3,2, 2025.

Consolidated gross profit decreasedincreased $24$36 million, or 6.8%,8.7%, to $331$445 million in the three months ended MayAugust 2,1, 2026 compared to $355$409 million in the three months ended MayAugust 3,2, 2025. As a percentage of net revenues, consolidated gross margin decreasedincreased 230270 basis points to 41.4%48.2% of net revenues in the three months ended MayAugust 2,1, 2026 from 43.7%45.5% of net revenues in the three months ended MayAugust 3,2, 2025.

RH Segment gross profit decreasedincreased $24$30 million, or 7.2%,8.0%, to $306$411 million in the three months ended MayAugust 2,1, 2026 fromcompared $330to $381 million in the three months ended MayAugust 3,2, 2025. As a percentage of net revenues, RH Segment gross margin decreasedincreased 240 basis points to 40.7%47.4% of net revenues in the three months ended MayAugust 2,1, 2026 from 43.1%45.0% of net revenues in the three months ended MayAugust 3,2, 2025. The decreaseincrease in RH Segment gross margin was primarily attributable to tariff refunds recognized in cost of goods sold of $51 million, or 590 basis points, partially offset by decreased product margins in the RH core business as well as higher occupancy costs as a result of new Gallery openings and decreased product margins in the RH outlet and core businesses.openings.

Waterworks gross profit decreasedincreased $0.3$5.3 million, or 1.2%,18.6%, to $25$34 million in the three months ended MayAugust 2,1, 2026 fromcompared $26to $28 million in the three months ended MayAugust 3,2, 2025. As a percentage of net revenues, Waterworks gross margin increased 20720 basis points to 52.4%61.3% of net revenues in the three months ended MayAugust 2,1, 2026 from 52.2%54.1% of net revenues in the three months ended MayAugust 3,2, 2025. The increase in Waterworks gross margin was primarily attributable to tariff refunds recognized in cost of goods sold of $3.7 million, or 680 basis points.

Consolidated selling, general and administrative expenses decreasedincreased $2.4$57 million, or 0.8%,20.3%, to $297$337 million in the three months ended MayAugust 2,1, 2026 fromcompared $299to $280 million in the three months ended MayAugust 3,2, 2025.

RH Segment selling, general and administrative expenses decreasedincreased $3.8$55 million, or 1.4%,21.3%, to $275$314 million in the three months ended MayAugust 2,1, 2026 compared to $279$259 million in the three months ended MayAugust 3,2, 2025. RH Segment selling, general and administrative expenses were 36.6%36.2% and 36.5%30.6% of net revenues infor the three months ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively. The increase in selling, general and administrative expenses as a percentage of net revenues was primarily driven by increases in compensation,advertising costs, primarily from the launch of RH Estates in the second quarter of fiscal 2026, as well as compensation, pre-opening and advertisingother costscorporate costs, primarily related to new Gallery openings. TheseRH increasesSegment selling, general and administrative expenses were offsetalso negatively impacted by a$14 favorable legal settlement associated with credit card interchange feesmillion of $32expense millionrelated into the threevariable monthsinterest endedentities May 2, 2026.restructuring.

RH Segment selling, general and administrative expenses for the three months ended MayAugust 3,2, 2025 werewas negatively impacted by $0.9$1.2 million of non-cashreorganization compensationrelated costs, $1.0 million of asset impairments and $0.5 million related to ana optionproduct grant made to Mr. Friedman in October 2020.recall.

Excluding the $32$14 million and $0.9$2.7 million of such costs noted above for the three months ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively, RH Segment selling, general and administrative expenses would have increased 440430 basis points to 40.8%34.6% from 36.4%30.3% of net revenues for the three months ended MayAugust 2,1, 2026 and MayAugust 3,2, 2025, respectively.

Waterworks selling, general and administrative expenses increased $1.4$1.8 million, or 6.9%,8.5%, to $22$23 million in the three months ended MayAugust 2,1, 2026 compared to $20$21 million in the three months ended MayAugust 3,2, 2025. Waterworks selling, general and administrative expenses were 42.5% and 41.0% of net revenues for the three months ended August 1, 2026 and August 2, 2025, respectively.

Other (income) expense—net consisted of the following:

The increase in our effective tax rate for the three months ended MayAugust 2,1, 2026 compared to the three months ended MayAugust 3,2, 2025 is primarily attributable to thereporting lower net loss in the current period,income, as well as the discrete tax impact of the favorable legal settlement associated with credit card interchange fees andhigher net excess tax windfallsbenefits from stock-based compensation in the threecurrent months ended May 2, 2026period as compared to net tax shortfalls in the threeprior months ended May 3, 2025.period.

Our share of equity method investments net loss in the three months ended May 2, 2026operations was $0.4 million. Our share of equity method investments net income of $8.2$18 million and a loss of $1.4 million in the three months ended MayAugust 3,1, 20252026 wasand primarilyAugust attributable2, 2025, respectively. The income in the three months ended August 1, 2026 is inclusive of income of $20 million related to anthe Aspenvariable LLCinterest distributionentities ofrestructuring. $7.9 million (referRefer to Note 56—Variable Interest Entities in the condensed consolidated financial statements).statements.