What changed in this filing

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Item 2. Management’s Discussion and Analysis

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The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, those listed in our 2024 Form 10-K.

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 August 2, 2025, and a comparison to the three and six months ended August 3, 2024.

The discussion related to cash flows for the six months ended August 3, 2024, 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 August 3, 2024, filed with the Securities and Exchange Commission (“SEC”) on September 12, 2024.

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 nine months ended November 1, 2025, and a comparison to the three and nine months ended November 2, 2024.

The discussion related to cash flows for the nine months ended November 2, 2024, 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 November 2, 2024, filed with the Securities and Exchange Commission (“SEC”) on December 12, 2024.

MD&A is a supplement to the condensed consolidated financial statements within Part I of this Quarterly Report on Form 10-Q and is provided to enhance an understanding of our results of operations and financial condition.

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This section provides the condensed consolidated statements of income 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 financial and operational decision-making and as a means to evaluate period-to-period comparisons.

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Liquidity and Capital Resources .

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These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “short-term,” “non-recurring,” “one-time,” “unusual,” “should,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

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Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those that we expected.

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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 entitled Risk Factors in our 2024 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 3, 2025 and in our 2024 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.

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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 States and Canada as well as in the United Kingdom, Germany, Belgium and Spain and have an integrated RH Hospitality experience in 23 of our Design Gallery locations, which includes restaurants and wine bars.

We operate our retail locations throughout the United States, Canada and Europe, and have an integrated RH Hospitality experience in 24 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 Outdoor, RH Baby & Child and RH TEEN.

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.

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FINANCIAL INFORMATION

As of August 2, 2025, we operated the following number of locations:

As of November 1, 2025, we operated the following number of locations:

North America

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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 market, 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 U.S., we also face uncertainty and risks related to tariffs and other trade policies, which may increase the costs of securing products from our vendors.

Since the majority of our product assortment is imported from vendors outside the U.S., we also face uncertainty and risks related to tariffs and other trade policies, which may continue to 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.

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FINANCIAL INFORMATION

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Strategic Initiatives

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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 and in the beginning of 2025, we have introduced the most prolific collection of new products in our history.

Beginning with the mailing of our RH Interiors Sourcebook in the fall of 2023 and with additional Sourcebook mailings throughout 2024 and 2025, we have introduced the most prolific collection of new products in our history.

In addition, over the next few years, we plan to introduce RH Couture, RH Bespoke and RH Color.

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These immersive experiences expose both new and existing customers to our evolving authority in architecture, interior design and landscape architecture.

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FINANCIAL INFORMATION

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The Gallery, spanning seven levels connected by a soaring atrium of floating cast medallion stairs, features a freestanding RH Interior Design Studio opposite the spectacular six-meter cast medallion bronze doors marking the entrance, and two restaurants.

At Le Jardin RH, located on the second-floor terrace, dine under a spectacular curved glass and steel structure inspired by the Grand Palais.

At Le Petit RH, dine in a jewel box of champagne lacquered walls with a sparkling ceiling of over 7,000 handblown glass polyhedrons, or atop one of the most spectacular garden rooftops in all of Paris with views of the Eiffel Tower, Grand Palais and the Louvre.

We believe the opening of RH Paris marks a major step forward in the European expansion of our business.

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We are making meaningful investments to elevate and differentiate our online experience with plans to upgrade our website throughout 2025.

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Basis of Presentation and Results of Operations

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THREE MONTHS ENDED

SIX MONTHS ENDED

NINE MONTHS ENDED

(dollars in thousands)

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Share of equity method investments (income) loss—net

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How We Assess the Performance of Our Business

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These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

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FINANCIAL INFORMATION

Adjusted Operating Income .

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THREE MONTHS ENDED

SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Non-cash compensation (5)

Contract termination settlement—net (6)

Legal settlements—net (7)

Adjusted operating income

(1) Refer to discussion “Three Months Ended August 2, 2025 Compared to Three Months Ended August 3, 2024” and “Six Months Ended August 2, 2025 Compared to Six Months Ended August 3, 2024” below for a discussion of our results of operations for the three and six months ended August 2, 2025 and August 3, 2024.

(2) Represents inventory impairment of $2.6 million and property and equipment impairment of $1.0 million, primarily related to Galleries under construction.

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FINANCIAL INFORMATION

(1) Refer to discussion “Three Months Ended November 1, 2025 Compared to Three Months Ended November 2, 2024” and “Nine Months Ended November 1, 2025 Compared to Nine Months Ended November 2, 2024” below for a discussion of our results of operations for the three and nine months ended November 1, 2025 and November 2, 2024.

(2) The adjustment in the nine months ended November 1, 2025 includes inventory impairment of $2.6 million and property and equipment impairment of $1.0 million, primarily related to Galleries under construction.

The adjustment in the three and nine months ended November 2, 2024 includes $19 million of long-lived asset impairment for our two Design Galleries in Germany (refer to “Long-Lived Asset Impairment” within Note 8— Leases ), as well as impairment of pre-acquisition costs related to an unsuccessful joint venture arrangement of $1.0 million.

(3) Represents costs and inventory charges associated with a product recall initiated in the second quarter of fiscal 2025.

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Friedman in October 2020.

(6) Represents favorable contract termination settlement of $3.8 million, partially offset by costs related to the early termination.

(7) Represents favorable legal settlements received of $10 million, partially offset by costs incurred in connection with one of the matters.

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Adjusted Net Income .

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THREE MONTHS ENDED

SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Non-cash compensation (1)

Contract termination settlement—net (1)

Legal settlements—net (1)

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(2) We exclude the GAAP tax provision and apply a non-GAAP tax provision based upon (i) adjusted pre-tax net income, (ii) the projected annual adjusted tax rate and (iii) the exclusion of material discrete tax items that are unusual or infrequent.

The adjustments for the three months ended August 2, 2025 and August 3, 2024 are based on adjusted tax rates of 26.7% and 12.8%, respectively.

The adjustments for the six months ended August 2, 2025 and August 3, 2024 are based on adjusted tax rates of 26.9% and 5.6%, respectively.

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The adjustments for the three months ended November 1, 2025 and November 2, 2024 are based on adjusted tax rates of 24.0% and 23.2%, respectively.

The adjustments for the nine months ended November 1, 2025 and November 2, 2024 are based on adjusted tax rates of 25.9% and 17.9%, respectively.

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EBITDA and Adjusted EBITDA .

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THREE MONTHS ENDED

SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Other (income) expense—net (3)

Contract termination settlement—net (3)

Legal settlements—net (3)

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Reconciliation of Adjusted Capital Expenditures

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(in thousands)

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Adjusted capital expenditures

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FINANCIAL INFORMATION

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In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $6.2 million in the six months ended August 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.

We did not receive any such tenant allowances in the six months ended August 3, 2024.

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $15 million in the nine months ended November 1, 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.

We did not receive any such tenant allowances in the nine months ended November 2, 2024.

Retail Metrics

Our retail location square footage metrics and activity were as follows:

SIX MONTHS ENDED

NINE MONTHS ENDED

SELLING SQUARE

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Excludes backrooms at retail locations used for storage, office space, food preparation, kitchen space or similar purpose, as well as exterior sales space located outside a retail location, such as courtyards, gardens and rooftops.

Includes approximately 89,000 square feet related to three owned retail locations as of both August 2, 2025 and August 3, 2024,

(2) Includes approximately 142,000 square feet related to three owned retail locations as of both August 2, 2025 and August 3, 2024.

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Includes approximately 89,000 square feet related to three owned retail locations as of both November 1, 2025 and November 2, 2024.

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(2) Includes approximately 142,000 square feet related to three owned retail locations as of both November 1, 2025 and November 2, 2024.

Weighted-average square footage and selling square footage are calculated based on the number of days a retail location was opened during the period divided by the total number of days in the period, and were as follows:

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SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Weighted-average selling square footage

Three Months Ended August 2, 2025 Compared to Three Months Ended August 3, 2024

Three Months Ended November 1, 2025 Compared to Three Months Ended November 2, 2024

THREE MONTHS ENDED

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Operating income

(1) The results for the Real Estate segment were immaterial in the three months ended August 2, 2025 and August 3, 2024, thus, such results are presented within the RH Segment each period.

(1) The results for the Real Estate segment were immaterial in the three months ended November 1, 2025 and November 2, 2024, thus, such results are presented within the RH Segment each period.

Refer to Note 15— Segment Reporting in the condensed consolidated financial statements.

Additionally, all intercompany transactions are immaterial and have been eliminated.

(2) RH Segment net revenues include outlet revenues of $72 million and $64 million for the three months ended August 2, 2025 and August 3, 2024, respectively.

Consolidated net revenues increased $69 million, or 8.4%, to $899 million in the three months ended August 2, 2025 compared to $830 million in the three months ended August 3, 2024.

(2) RH Segment net revenues include outlet revenues of $75 million and $64 million for the three months ended November 1, 2025 and November 2, 2024, respectively.

Consolidated net revenues increased $72 million, or 8.9%, to $884 million in the three months ended November 1, 2025 compared to $812 million in the three months ended November 2, 2024.

RH Segment net revenues

RH Segment net revenues increased $66 million, or 8.4%, to $847 million in the three months ended August 2, 2025 compared to $781 million in the three months ended August 3, 2024.

RH Segment net revenues increased $68 million, or 8.8%, to $836 million in the three months ended November 1, 2025 compared to $768 million in the three months ended November 2, 2024.

The below discussion highlights the primary factors that impacted RH Segment net revenues, which are listed in order of magnitude.

RH Segment net revenues for the three months ended August 2, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion.

RH Segment net revenues for the three months ended November 1, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion.

In addition, hospitality revenue increased as a result of new Gallery openings and we had higher outlet revenue.

Waterworks net revenues

Waterworks net revenues increased $3.7 million, or 7.6%, to $52 million in the three months ended August 2, 2025 compared to $49 million in the three months ended August 3, 2024.

Consolidated gross profit increased $35 million, or 9.2%, to $409 million in the three months ended August 2, 2025 compared to $375 million in the three months ended August 3, 2024.

As a percentage of net revenues, consolidated gross margin increased 30 basis points to 45.5% of net revenues in the three months ended August 2, 2025 from 45.2% of net revenues in the three months ended August 3, 2024.

Waterworks net revenues increased $4.3 million, or 9.9%, to $48 million in the three months ended November 1, 2025 compared to $44 million in the three months ended November 2, 2024.

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FINANCIAL INFORMATION

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Consolidated gross profit increased $28 million, or 7.9%, to $390 million in the three months ended November 1, 2025 compared to $361 million in the three months ended November 2, 2024.

As a percentage of net revenues, consolidated gross margin decreased 40 basis points to 44.1% of net revenues in the three months ended November 1, 2025 from 44.5% of net revenues in the three months ended November 2, 2024.

RH Segment gross profit

RH Segment gross profit increased $32 million, or 9.3%, to $381 million in the three months ended August 2, 2025 compared to $349 million in the three months ended August 3, 2024.

As a percentage of net revenues, RH Segment gross margin increased 40 basis points to 45.0% of net revenues in the three months ended August 2, 2025 from 44.6% of net revenues in the three months ended August 3, 2024.

The increase in RH Segment gross margin was primarily attributable to increased margins in the RH core business year over year as well as leverage in shipping costs and occupancy costs.

RH Segment gross margin in the three months ended August 2, 2025 was negatively impacted by $2.6 million of asset impairments and $1.4 million in costs related to a product recall.

Excluding the $4.0 million of such costs, RH Segment gross margin would have been 50 basis points higher at 45.5% of net revenues for the three months ended August 2, 2025.

RH Segment gross profit increased $25 million, or 7.3%, to $364 million in the three months ended November 1, 2025 compared to $339 million in the three months ended November 2, 2024.

As a percentage of net revenues, RH Segment gross margin decreased 60 basis points to 43.5% of net revenues in the three months ended November 1, 2025 from 44.1% of net revenues in the three months ended November 2, 2024.

The decrease in RH Segment gross margin was primarily attributable to decreased margins in the RH core business year over year as well as deleverage in occupancy costs, partially offset by leverage in shipping costs.

Waterworks gross profit

Waterworks gross profit increased $2.2 million, or 8.5%, to $28 million in the three months ended August 2, 2025 compared to $26 million in the three months ended August 3, 2024.

As a percentage of net revenues, Waterworks gross margin increased 50 basis points to 54.1% of net revenues in the three months ended August 2, 2025 from 53.6% of net revenues in the three months ended August 3, 2024.

Waterworks gross profit increased $3.7 million, or 16.5%, to $26 million in the three months ended November 1, 2025 compared to $22 million in the three months ended November 2, 2024.

As a percentage of net revenues, Waterworks gross margin increased 310 basis points to 54.4% of net revenues in the three months ended November 1, 2025 from 51.3% of net revenues in the three months ended November 2, 2024.

Selling, general and administrative expenses

Consolidated selling, general and administrative expenses increased $1.8 million, or 0.6%, to $280 million in the three months ended August 2, 2025 compared to $279 million in the three months ended August 3, 2024.

Consolidated selling, general and administrative expenses increased $24 million, or 9.2%, to $284 million in the three months ended November 1, 2025 compared to $260 million in the three months ended November 2, 2024.

RH Segment selling, general and administrative expenses

RH Segment selling, general and administrative expenses was $259 million in both the three months ended August 2, 2025 and August 3, 2024.

RH Segment selling, general and administrative expenses were 30.6% and 33.2% of net revenues for the three months ended August 2, 2025 and August 3, 2024, respectively.

The decrease in selling, general and administrative expenses as a percentage of net revenues was primarily driven by a decrease in advertising costs due to the timing of the 2025 RH Interiors Sourcebook circulation as well as reduction in our 2025 RH Modern Sourcebook costs.

In addition, leverage in our occupancy costs year over year also contributed to the decrease.

This decrease was partially offset by an increase in compensation costs, as well as pre-opening costs and other corporate costs.

RH Segment selling, general and administrative expenses for the three months ended August 2, 2025 was negatively impacted by $1.2 million of reorganization related costs, $1.0 million of asset impairments and $0.5 million related to a product recall.

RH Segment selling, general and administrative expenses for the three months ended August 3, 2024 included non-cash compensation of $0.9 million related to an option grant made to Mr.

RH Segment selling, general and administrative expenses increased $23 million, or 9.4%, to $263 million the three months ended November 1, 2025 compared to $241 million in the three months ended November 2, 2024.

RH Segment selling, general and administrative expenses were 31.5% and 31.3% of net revenues for the three months ended November 1, 2025 and November 2, 2024, respectively.

The increase in selling, general and administrative expenses as a percentage of net revenues was primarily driven by an increase in advertising costs due to the timing of the 2025 RH Interiors Sourcebook circulation, as well as higher compensation, pre-opening and other corporate costs.

This increase was partially offset by leverage in our occupancy costs year over year.

RH Segment selling, general and administrative expenses for the three months ended November 1, 2025 included a favorable net contract termination settlement of $3.4 million.

RH Segment selling, general and administrative expenses for the three months ended November 2, 2024 included asset impairments of $19 million related to certain of our Galleries and $1.0 million related to pre-acquisition costs for an unsuccessful joint venture arrangement, as well as amortization of non-cash compensation of $0.9 million related to an option grant made to Mr.

Friedman in October 2020.

Excluding the $2.7 million and $0.9 million of such costs, RH Segment selling, general and administrative expenses would have decreased 270 basis points to 30.3% from 33.0% of net revenues for the three months ended August 2, 2025 and August 3, 2024, respectively.

Excluding the $3.4 million and $20 million of such costs, RH Segment selling, general and administrative expenses would have increased 330 basis points to 31.9% from 28.6% of net revenues for the three months ended November 1, 2025 and November 2, 2024, respectively.

Waterworks selling, general and administrative expenses

Waterworks selling, general and administrative expenses increased $1.8 million, or 9.2%, to $21 million in the three months ended August 2, 2025 compared to $20 million in the three months ended August 3, 2024.

Waterworks selling, general and administrative expenses were 41.0% and 40.4% of net revenues for the three months ended August 2, 2025 and August 3, 2024, respectively.

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Waterworks selling, general and administrative expenses increased $1.4 million, or 7.1%, to $21 million in the three months ended November 1, 2025 compared to $19 million in the three months ended November 2, 2024.

Waterworks selling, general and administrative expenses were 43.1% and 44.2% of net revenues for the three months ended November 1, 2025 and November 2, 2024, respectively.

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Interest expense—net

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Foreign exchange from remeasurement of intercompany loans (2)

Other (income) expense—net

Other expense—net

(1) Represents net foreign exchange gains and losses related to exchange rate changes affecting foreign currency denominated transactions, primarily between the U.S.

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Effective tax rate

The increase in our effective tax rate for the three months ended August 2, 2025 compared to the three months ended August 3, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.

Share of equity method investments loss—net

Our share of equity method investments loss was $1.4 million and $4.9 million in the three months ended August 2, 2025 and August 3, 2024, respectively.

The increase in our effective tax rate for the three months ended November 1, 2025 compared to the three months ended November 2, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.

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Six Months Ended August 2, 2025 Compared to Six Months Ended August 3, 2024

SIX MONTHS ENDED

Nine Months Ended November 1, 2025 Compared to Nine Months Ended November 2, 2024

NINE MONTHS ENDED

(in thousands)

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Operating income

(1) The results for the Real Estate segment were immaterial in both the six months ended August 2, 2025 and August 3, 2024, thus, such results are presented within the RH Segment in each period.

(1) The results for the Real Estate segment were immaterial in both the nine months ended November 1, 2025 and November 2, 2024, thus, such results are presented within the RH Segment in each period.

Refer to Note 15— Segment Reporting in the condensed consolidated financial statements.

(2) RH Segment net revenues include outlet revenues of $139 million and $126 million for the six months ended August 2, 2025 and August 3, 2024, respectively.

Consolidated net revenues increased $156 million, or 10.1%, to $1,713 million in the six months ended August 2, 2025 compared to $1,557 million in the six months ended August 3, 2024.

Additionally, all intercompany transactions are immaterial and have been eliminated.

(2) RH Segment net revenues include outlet revenues of $214 million and $189 million for the nine months ended November 1, 2025 and November 2, 2024, respectively.

Consolidated net revenues increased $229 million, or 9.7%, to $2,597 million in the nine months ended November 1, 2025 compared to $2,368 million in the nine months ended November 2, 2024.

RH Segment net revenues

RH Segment net revenues increased $154 million, or 10.5%, to $1,612 million in the six months ended August 2, 2025 compared to $1,458 million in the six months ended August 3, 2024.

RH Segment net revenues increased $221 million, or 9.9%, to $2,448 million in the nine months ended November 1, 2025 compared to $2,226 million in the nine months ended November 2, 2024.

The below discussion highlights several significant factors that impacted RH Segment net revenues, which are listed in order of magnitude.

RH Segment net revenues for the six months ended August 2, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion.

RH Segment net revenues for the nine months ended November 1, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion.

In addition, hospitality revenue increased as a result of new Gallery openings and we had higher outlet revenue.

Waterworks net revenues

Waterworks net revenues increased $2.8 million, or 2.8%, to $101 million in the six months ended August 2, 2025 compared to $99 million in the six months ended August 3, 2024.

Consolidated gross profit increased $74 million, or 10.7%, to $765 million in the six months ended August 2, 2025 compared to $691 million in the six months ended August 3, 2024.

As a percentage of net revenues, consolidated gross margin increased 20 basis points to 44.6% of net revenues in the six months ended August 2, 2025 from 44.4% of net revenues in the six months ended August 3, 2024.

Waterworks net revenues increased $7.1 million, or 5.0%, to $149 million in the nine months ended November 1, 2025 compared to $142 million in the nine months ended November 2, 2024.

Consolidated gross profit increased $102 million, or 9.7%, to $1,154 million in the nine months ended November 1, 2025 compared to $1,052 million in the nine months ended November 2, 2024.

As a percentage of net revenues, consolidated gross margin increased 10 basis points to 44.5% of net revenues in the nine months ended November 1, 2025 from 44.4% of net revenues in the nine months ended November 2, 2024.

RH Segment gross profit

RH Segment gross profit increased $72 million, or 11.3%, to $711 million in the six months ended August 2, 2025 from $638 million in the six months ended August 3, 2024.

As a percentage of net revenues, RH Segment gross margin increased 30 basis points to 44.1% of net revenues in the six months ended August 2, 2025 from 43.8% of net revenues in the six months ended August 3, 2024.

The increase in RH Segment gross margin was primarily attributable to leverage in occupancy costs and shipping costs as well as increased margins in the RH core business year over year.

This increase in gross margin was partially offset by an increase in other product costs.

RH Segment gross profit for the six months ended August 2, 2025 was negatively impacted by $2.6 million of asset impairments and $1.4 million of costs related to a product recall.

Excluding the $4.0 million of such costs, RH Segment gross margin would have been 20 basis points higher at 44.3% of net revenues for the six months ended August 2, 2025.

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RH Segment gross profit increased $97 million, or 9.9%, to $1,074 million in the nine months ended November 1, 2025 from $977 million in the nine months ended November 2, 2024.

As a percentage of net revenues, RH Segment gross margin was 43.9% of net revenues in both the nine months ended November 1, 2025 and November 2, 2024.

The increase in RH Segment gross profit was primarily attributable to leverage in shipping costs, partially offset by decreased margins in the RH core business year over year.

RH Segment gross profit for the nine months ended November 1, 2025 was negatively impacted by $2.6 million of asset impairments and $1.4 million of costs related to a product recall.

Excluding the $4.0 million of such costs, RH Segment gross margin would have been 20 basis points higher at 44.1% of net revenues for the nine months ended November 1, 2025.

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Waterworks gross profit

Waterworks gross profit increased $1.5 million, or 2.9%, to $54 million in the six months ended August 2, 2025 compared to $52 million in the six months ended August 3, 2024.

As a percentage of net revenues, Waterworks gross margin increased 10 basis points to 53.2% of net revenues in the six months ended August 2, 2025 from 53.1% of net revenues in the six months ended August 3, 2024.

Waterworks gross profit increased $5.2 million, or 7.0%, to $80 million in the nine months ended November 1, 2025 compared to $75 million in the nine months ended November 2, 2024.

As a percentage of net revenues, Waterworks gross margin increased 100 basis points to 53.5% of net revenues in the nine months ended November 1, 2025 from 52.5% of net revenues in the nine months ended November 2, 2024.

Selling, general and administrative expenses

Consolidated selling, general and administrative expenses increased $40 million, or 7.4%, to $580 million in the six months ended August 2, 2025 compared to $540 million in the six months ended August 3, 2024.

Consolidated selling, general and administrative expenses increased $64 million, or 8.0%, to $864 million in the nine months ended November 1, 2025 compared to $800 million in the nine months ended November 2, 2024.

RH Segment selling, general and administrative expenses

RH Segment selling, general and administrative expenses increased $35 million, or 7.0%, to $538 million in the six months ended August 2, 2025 compared to $503 million in the six months ended August 3, 2024.

RH Segment selling, general and administrative expenses were 33.4% and 34.5% of net revenues for the six months ended August 2, 2025 and August 3, 2024, respectively.

The decrease in selling, general and administrative expenses as a percentage of net revenues was primarily driven by a decrease in advertising costs due to reduced Sourcebook circulation, as well as leverage in occupancy and corporate costs year over year.

This decrease was partially offset by an increase in compensation costs.

RH Segment selling, general and administrative expenses for the six months ended August 2, 2025 was negatively impacted by $1.2 million of reorganization related costs, $1.0 million of asset impairments, $0.9 million of non-cash compensation related to an option grant made to Mr.

Friedman in October 2020 and $0.5 million related to a product recall.

RH Segment selling, general and administrative expenses for the six months ended August 3, 2024 included favorable net legal settlements of $6.2 million and non-cash compensation of $2.8 million related to Mr.

Friedman’s 2020 option grant.

Excluding the $3.6 million and $9.0 million of such costs, RH Segment selling, general and administrative expenses would have decreased 160 basis points to 33.1% from 34.7% of net revenues for the six months ended August 2, 2025 and August 3, 2024, respectively.

RH Segment selling, general and administrative expenses increased $58 million, or 7.7%, to $801 million in the nine months ended November 1, 2025 compared to $744 million in the nine months ended November 2, 2024.

RH Segment selling, general and administrative expenses as a percentage of net revenues decreased to 32.7% for the nine months ended November 1, 2025 from 33.4% for the nine months ended November 2, 2024, primarily driven by asset impairments of $19 million related to certain of our Galleries, $1.0 million related to pre-acquisition costs for an unsuccessful joint venture arrangement, non-cash compensation of $3.7 million related to an option grant made to Mr.

Friedman in October 2020, as well as favorable net legal settlements of $6.2 million recognized during the nine months ended November 2, 2024.

RH Segment selling, general and administrative expenses for the nine months ended November 1, 2025 was negatively impacted by $1.2 million of reorganization related costs, $1.0 million of asset impairments, $0.9 million of non-cash compensation related to an option grant made to Mr.

Friedman in October 2020 and $0.5 million related to a product recall, as well as a favorable net contract termination settlement of $3.4 million.

Excluding the $0.2 million and $17 million of such costs noted above for the nine months ended November 1, 2025 and November 2, 2024, respectively, RH Segment selling, general and administrative expenses would have increased 20 basis points to 32.8% from 32.6% of net revenues, respectively.

This increase in selling, general and administrative expenses as a percentage of net revenues was primarily driven by an increase in compensation and other corporate costs, partially offset by leverage in occupancy and advertising costs year over year.

Waterworks selling, general and administrative expenses

Waterworks selling, general and administrative expenses increased $4.8 million, or 13.1%, to $42 million in the six months ended August 2, 2025 compared to $37 million in the six months ended August 3, 2024.

Waterworks selling, general and administrative expenses were 41.1% and 37.4% of net revenues for the six months ended August 2, 2025 and August 3, 2024, respectively.

Waterworks selling, general and administrative expenses in the six months ended August 3, 2024 included $3.2 million related to a favorable legal settlement.

Excluding the $3.2 million of such costs, Waterworks selling, general and administrative expenses would have been 330 basis points higher at 40.7% of net revenues for the six months ended August 3, 2024.

Waterworks selling, general and administrative expenses increased $6.2 million, or 11.0%, to $62 million in the nine months ended November 1, 2025 compared to $56 million in the nine months ended November 2, 2024.

Waterworks selling, general and administrative expenses were 41.8% and 39.5% of net revenues for the nine months ended November 1, 2025 and November 2, 2024, respectively.

Waterworks selling, general and administrative expenses in the nine months ended November 2, 2024 include $3.2 million related to a favorable legal settlement.

Excluding the $3.2 million of such costs, Waterworks selling, general and administrative expenses would have been 220 basis points higher at 41.7% of net revenues for the nine months ended November 2, 2024.

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FINANCIAL INFORMATION

Interest expense—net

Interest expense—net consisted of the following:

SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Other interest expense

Interest income

Capitalized interest for capital projects

Interest income

Interest expense—net

FINANCIAL INFORMATION

2025 SECOND QUARTER FORM 10-Q | 43

Other (income) expense—net

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

SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Income tax expense

SIX MONTHS ENDED

NINE MONTHS ENDED

(dollars in thousands)

1 unchanged sentence

Effective tax rate

The increase in our effective tax rate for the six months ended August 2, 2025 compared to the six months ended August 3, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.

The increase in our effective tax rate for the nine months ended November 1, 2025 compared to the nine months ended November 2, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.

Share of equity method investments (income) loss—net

Our share of equity method investments income of $6.9 million in the six months ended August 2, 2025 was primarily attributable to an Aspen LLC distribution in the first quarter of fiscal 2025 of $7.9 million (refer to Note 6— Variable Interest Entities in the condensed consolidated financial statements).

Our share of equity method investments loss in the six months ended August 3, 2024 was $7.3 million.

44 | 2025 SECOND QUARTER FORM 10-Q

Our share of equity method investments income of $6.7 million in the nine months ended November 1, 2025 was primarily attributable to an Aspen LLC distribution in the first quarter of fiscal 2025 of $7.9 million (refer to Note 6— Variable Interest Entities in the condensed consolidated financial statements).

Our share of equity method investments loss in the nine months ended November 2, 2024 was $8.7 million.

FINANCIAL INFORMATION

2025 THIRD QUARTER FORM 10-Q | 45

Liquidity and Capital Resources

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(1) Amounts exclude discounts upon original issuance and third party offering and debt issuance costs.

(2) Net debt as of August 2, 2025 and February 1, 2025 excludes non-recourse real estate loans of $18 million as of both periods.

(2) Net debt as of November 1, 2025 and February 1, 2025 excludes non-recourse real estate loans of $18 million as of both periods.

These loans are secured by specific real estate assets and the associated creditors do not have recourse against RH’s general assets.

(3) The amount available for borrowing under the revolving line of credit under the ABL Credit Agreement is presented net of $47 million and $45 million in outstanding letters of credit as of August 2, 2025 and February 1, 2025, respectively.

(3) The amount available for borrowing under the revolving line of credit under the ABL Credit Agreement is presented net of $48 million and $45 million in outstanding letters of credit as of November 1, 2025 and February 1, 2025, respectively.

The primary cash needs of our business have historically been for merchandise inventories, payroll, rent for our retail and outlet locations, capital expenditures associated with opening new locations and related real estate investments, updating existing locations, as well as the development of our infrastructure and information technology, and Sourcebooks.

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We expect to continue to use additional sources of debt financing in future periods as a source of additional capital to fund our various investments .

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FINANCIAL INFORMATION

2025 SECOND QUARTER FORM 10-Q | 45

To the extent we choose to secure additional sources of liquidity through incremental debt financing, there can be no assurances that we will be able to raise such financing on favorable terms, if at all, or that future financing requirements will not require us to raise money through an equity financing or by other means that could be dilutive to holders of our capital stock.

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We are required to make quarterly principal payments of $1.3 million with respect to Term Loan B-2.

FINANCIAL INFORMATION

2025 THIRD QUARTER FORM 10-Q | 47

We have invested significant capital expenditures in developing and opening new Design 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.

Our adjusted capital expenditures include 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.

During the six months ended August 2, 2025, adjusted capital expenditures were $156 million in aggregate, net of cash received related to landlord tenant allowances of $4.1 million.

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $6.2 million during the six months ended August 2, 2025.

During the nine months ended November 1, 2025, adjusted capital expenditures were $223 million in aggregate, net of cash received related to landlord tenant allowances of $4.1 million.

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $15 million during the nine months ended November 1, 2025.

We anticipate our adjusted capital expenditures to be $275 million to $325 million in fiscal 2025, primarily related to our growth and expansion, including construction of new Design Galleries and infrastructure investments.

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We may also invest in other uses of our liquidity such as share repurchases, acquisitions and growth initiatives, including through joint ventures and real estate investments.

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FINANCIAL INFORMATION

Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us.

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Cash flows from operating, investing, and financing activities were as follows:

SIX MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Cash and cash equivalents at end of period

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FINANCIAL INFORMATION

Net Cash Provided by Operating Activities

Operating activities consist primarily of net income adjusted for non-cash items, including depreciation and amortization, impairments, stock-based compensation and the effect of changes in working capital and other activities.

For the six months ended August 2, 2025, net cash provided by operating activities was $224 million and consisted of net income of $60 million and an increase in non-cash items of $169 million, partially offset by a change in working capital and other activities of $4.3 million.

The use of cash from working capital was primarily driven by a decrease in operating lease liabilities of $50 million, an increase in landlord assets under construction, net of tenant allowances, of $46 million, a decrease in accounts payable and accrued expenses of $22 million, an increase in prepaid expense and other assets of $13 million and a decrease in other current and non-current liabilities of $2.9 million.

These uses of cash from working capital were partially offset by a decrease in merchandise inventory of $74 million, an increase in deferred revenue and customer deposits of $55 million and a decrease in accounts receivable of $2.4 million.

For the nine months ended November 1, 2025, net cash provided by operating activities was $356 million and consisted of net income of $96 million and an increase in non-cash items of $261 million, partially offset by a change in working capital and other activities of $0.7 million.

The use of cash from working capital was primarily driven by a decrease in operating lease liabilities of $79 million, an increase in landlord assets under construction, net of tenant allowances, of $65 million, a decrease in accounts payable and accrued expenses of $30 million, an increase in prepaid expense and other assets of $22 million and a net decrease in other current and non-current liabilities of $13 million.

These uses of cash from working capital were partially offset by a decrease in merchandise inventory of $155 million and an increase in deferred revenue and customer deposits of $52 million.

Net Cash Used in Investing Activities

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Investing activities also include our strategic investments.

For the six months ended August 2, 2025, net cash used in investing activities was $134 million and was comprised of investments in retail stores, information technology and systems infrastructure of $110 million, a business acquisition of $32 million and an acquisition of an intangible asset of $3.0 million.

These cash outflows were partially offset by cash received from a distribution of return of equity method investments of $7.9 million and receipt of a promissory note repaid by our equity method investee of $1.8 million.

FINANCIAL INFORMATION

2025 SECOND QUARTER FORM 10-Q | 47

For the nine months ended November 1, 2025, net cash used in investing activities was $182 million and was comprised of investments in retail stores, information technology and systems infrastructure of $158 million, a business acquisition of $32 million and an acquisition of an intangible asset of $3.2 million.

These cash outflows were partially offset by cash received from a distribution of return of equity method investments of $7.9 million, proceeds from insurance recoveries of $2.3 million and receipt of a promissory note repaid by our equity method investee of $1.8 million.

Net Cash Used in Financing Activities

Financing activities consist primarily of borrowings and repayments related to convertible senior notes and other financing arrangements, and cash used in connection with such financing activities include investments in our share repurchase program, repayment of indebtedness, including principal payments under finance lease agreements and other equity related transactions.

For the six months ended August 2, 2025, net cash used in financing activities was $87 million, primarily due to net repayments under the asset based credit facility of $65 million, payments under term loans of $13 million, net payments under finance lease agreements of $8.0 million and debt issuance costs of $2.8 million associated with the ABL Credit Agreement amendment.

For the nine months ended November 1, 2025, net cash used in financing activities was $163 million, primarily due to net repayments under the asset based credit facility of $135 million, payments under term loans of $19 million, net payments under finance lease agreements of $7.8 million and debt issuance costs of $3.0 million associated with the ABL Credit Agreement amendment.

These cash outflows were partially offset by proceeds from the exercise of stock options of $2.2 million.

Non-Cash Transactions

Non-cash transactions consist of non-cash additions of property and equipment and landlord assets under construction and reclassification of assets from landlord assets under construction to finance lease right-of-use assets, as well as excise tax from share repurchases, included in accounts payable and accrued expenses at period-end.

Non-cash transactions consist of non-cash additions of property and equipment and landlord assets under construction and reclassification of assets from landlord assets under construction to finance lease right-of-use assets included in accounts payable and accrued expenses at period-end.

Cash Requirements from Contractual Obligations

We lease nearly all of our retail and outlet locations, corporate headquarters, distribution centers and home delivery center locations, as well as other storage and office space.

Refer to Note 8— Leases in the condensed consolidated financial statements for further information on our lease arrangements, including the maturities of our operating and finance lease liabilities.

Refer to Note 8— Leases in the condensed consolidated financial statements for further information on our lease arrangements, including the maturities of our lease liabilities.

Most lease arrangements provide us with the option to renew the leases at defined terms.

The table presenting the maturities of our lease liabilities included in Note 8— Leases in the condensed consolidated financial statements includes future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability.

Amounts presented therein do not include future lease payments under leases that have not commenced or estimated contingent rent due under operating and finance leases.

Amounts presented therein do not include future lease payments under leases that have not commenced or estimated contingent rent due under leases.

FINANCIAL INFORMATION

2025 THIRD QUARTER FORM 10-Q | 49

Asset Based Credit Facility

Refer to Note 9— Credit Facilities in the condensed consolidated financial statements for further information on our asset based credit facility, including the amount available for borrowing under the revolving line of credit, net of outstanding letters of credit.

Refer to Note 9— Credit Facilities in the condensed consolidated financial statements for further information on our Term Loan.

Refer to Note 9— Credit Facilities and Convertible Senior Notes in the condensed consolidated financial statements for further information on our asset based credit facility, including the amount available for borrowing under the revolving line of credit, net of outstanding letters of credit.

Refer to Note 9— Credit Facilities and Convertible Senior Notes in the condensed consolidated financial statements for further information on our Term Loan.

Real Estate Loans

Refer to Note 6— Variable Interest Entities in the condensed consolidated financial statements for further information on the real estate loan held as part of our joint ventures with a third-party development partner.

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FINANCIAL INFORMATION

Share Repurchase Program

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On June 2, 2022, the Board of Directors authorized an additional $2,000 million for the purchase of shares of our outstanding common stock, which increased the total authorized size of the share repurchase program to $2,450 million (the “Share Repurchase Program”).

We did not repurchase any shares of our common stock under the Share Repurchase Program during the six months ended August 2, 2025.

As of August 2, 2025, $201 million remains available for future share repurchases under the Share Repurchase Program.

We did not repurchase any shares of our common stock under the Share Repurchase Program during the nine months ended November 1, 2025.

As of November 1, 2025, $201 million remains available for future share repurchases under the Share Repurchase Program.

We regularly review share repurchase activity and consider various factors in determining whether and when to execute investments in connection with our share repurchase program, including, among others, current cash needs, capacity for leverage, cost of borrowings, results of operations and the market price of our common stock.

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Actual results may differ from these estimates under different assumptions and conditions and such differences could be material to the condensed consolidated financial statements.

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FINANCIAL INFORMATION

Our senior leadership team evaluates the development and selection of our critical accounting policies and estimates and believes that certain of our significant accounting policies involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position and are therefore discussed as critical:

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Refer to Note 2— Recently Issued Accounting Standards in the condensed consolidated financial statements within Part I of this Quarterly Report on Form 10-Q.

FINANCIAL INFORMATION

2025 SECOND QUARTER FORM 10-Q | 49

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis