What changed in this filing

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Item 1A. Risk Factors

2026-04-01 compared with 2025-04-02 · 148 added, 137 removed, 468 unchanged (38% of the section changed)

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If these initiatives are not successful, they may have a negative impact on our results of operations.

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 and RH Madrid in June 2024.

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, as well as other innovations such as our private jets, RH1 and RH2, and our luxury yacht, RH3.

We are also 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, businesses and product lines.

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) 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, RH Madrid in June 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, and also expanded our platform with the opening of our first freestanding 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 .

In particular, any new businesses we enter or expansion of our existing business into new markets, both domestically and internationally, may expose us to additional operational risks, such as risks related to political, social and economic instability and disruptions, government import and export controls, economic sanctions, embargoes or trade restrictions, the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures, risk to theft of proprietary information and/or intellectual property, currency fluctuation, supply chain and product sourcing, new regulatory regimes applicable to our products and increased compliance costs, including costs associated with compliance and disclosure, operational requirements and costs related to operating in new jurisdictions, difficulties in staffing and managing multi-national operations, including our locations and employees, limitations on our ability to enforce legal rights and remedies, potentially adverse tax consequences, and access to, or control of, networks and confidential information due to local government controls and vulnerability of local networks to cyber risks.

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If we are unable to successfully manage the risks associated with expanding our business internationally or adequately manage operational risks of our existing international operations, there could be a material adverse effect on our growth in global markets, our reputation and prospects, our consolidated results of operations, financial position and cash flows.

As of February 1, 2025, we have an integrated RH Hospitality experience in 21 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.

As of January 31, 2026, we have an integrated RH Hospitality experience in 25 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.

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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 conditions and government policies, are not within our control.

Some factors affecting our business, including macroeconomic conditions, 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.

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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 quarter are not necessarily indicative of the results that we may achieve for a full fiscal year.

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.

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We previously identified a material weakness in our internal controls over financial reporting and related weakness in our disclosure controls and procedures.

Although these weaknesses have been remediated, any failure to establish and maintain effective disclosure controls and procedures and internal controls over financial reporting could result in material misstatements in our financial statements and failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition or results of operations.

We are subject to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, which requires us to maintain internal control over financial reporting and to report any material weaknesses in such internal control.

In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting.

Maintaining effective disclosure controls and procedures and effective internal controls over financial reporting are necessary for us to produce reliable financial statements and disclosure reports.

Our disclosure controls and procedures and internal controls over financial reporting have in the past been subject to deficiencies and material weaknesses, and we cannot assure you that additional material weaknesses will not arise in the future.

Our reporting obligations as a public company place significant requirements on our senior leadership team and we are required to devote substantial operational and financial resources and systems in order to meet those obligations and will continue to do so for the foreseeable future.

In addition, we have experienced changes in personnel who are involved in our financial reporting.

Changes in personnel, systems or procedures, as well as other events, may have an adverse impact on our internal controls and our disclosure controls and procedures.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within a company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls.

Therefore, our internal control over financial reporting and disclosure controls and procedures may not prevent or detect misstatements because of their inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud.

There can be no assurance that our reporting infrastructure and personnel involved in financial reporting and disclosure controls and procedures have in the past complied, or will continue in the future to comply, with all of our applicable reporting obligations.

If we fail to timely achieve and maintain the adequacy of our internal control over financial reporting and effective disclosure controls and procedures, we may not be able to produce reliable financial or SEC reports.

Our failure to maintain the adequacy and effectiveness of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial and other reporting obligations.

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

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

Our business depends on consumer demand for our products and we target consumers of high-end home furnishings.

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These factors may make it difficult for us to accurately predict our operating and financial results for future periods, and we believe these factors could have a material adverse effect on our business and results of operations in future periods.

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If we fail to successfully and timely deliver merchandise to our customers and manage our supply chain commensurate with demand, our results of operations may be adversely affected.

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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 orders 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.

If we are unable to accurately predict and track demand for our products, we may be required to mark down the price of certain products in order to sell excess 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.

We have experienced periods in which some of our vendors were not able to meet customer demand for certain products resulting in significant backorders 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 and have excess inventory as a result, we may be required to mark down the price of certain products in order to sell such 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 and the high-end home furnishings market fluctuates.

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Merchandise purchased from our vendors that is defective or otherwise does not meet our product quality standards could damage our reputation and brand image and harm our business, and we may not have adequate remedies against our vendors for such merchandise.

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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.

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Any failure to maintain a strong brand image could have a material adverse effect on our sales and results of operations.

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As a luxury brand, we rely on a number of initiatives to sustain our image and to promote our products in the marketplace.

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Expenditures on our Sourcebook strategy have historically represented a substantial portion of our expense in advertising and promoting our business.

We are adjusting 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.

We have in 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.

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Competition in the home furnishings sector may adversely affect our future financial performance.

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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 antique dealers and other merchants that provide unique items and custom-designed products.

We also compete with the interior design trade and specialty stores, as well as antiques 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.

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We are subject to risks associated with our dependence on foreign manufacturing and imports for our merchandise.

Based on total dollar volume of purchases for fiscal 2024, 72% of our products were sourced from Asia, including 35% from Vietnam, 23% from China and the remainder predominantly from Indonesia and India, 18% from North America, including 10% from the U.S., as well as 10% from Europe and other countries.

In addition, some of the merchandise we purchase from vendors in the U.S.

also depends, in whole or in part, on vendors located outside the U.S.

Based on total dollar volume of purchases for fiscal 2025, 69% of our products were sourced from Asia, including 39% from Vietnam, 13% from China and the remainder predominantly from Indonesia and India, 21% from North America, including 13% from the United States, as well as 10% from Europe and other countries.

In addition, some of the merchandise we purchase from vendors in the United States also depends, in whole or in part, on vendors located outside the 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.

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FORM 10-K | 15

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 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 regulatory uncertainty exists regarding international trade relations and trade policy.

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 Kingdom, Canada and Europe, whether actual, pending or threatened, may have a negative impact on our results of operations.

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 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.

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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, including the U.S.

presidential election, have resulted in substantial regulatory uncertainty regarding international trade and trade policy.

For example, President Trump and members of the U.S.

Recent events and geopolitical developments have resulted in substantial regulatory uncertainty regarding international trade and trade policy, which has led to market volatility.

For example, the U.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.

The Trump administration has also 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.

has imposed or proposed the imposition of new tariffs on products imported into the U.S.

from a number of countries, including China, Mexico, Canada and other countries and could propose additional tariffs or increases to those already in place.

A significant subset of our products sourced from China has been affected by increased tariffs imposed in 2018, 2019 and 2025 and may be subject to further increased tariffs.

We rely upon vendors outside of the U.S.

for the substantial majority of our products.

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., which could in turn require us to increase our prices and, in the event consumer demand declines as a result, negatively impact our results of operations.

Although a comprehensive border tax has not 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 United States has imposed or proposed the imposition of new tariffs on products imported into the United States from a number of countries, including but not limited to China, Mexico, Canada and other countries, and may continue to modify, expand or increase such tariffs in the future.

The review of the United States-Mexico-Canada Agreement (USMCA) in 2026 by the parties to the agreement may also result in changes to U.S., Canada and Mexico trade, tariffs, and preferential treatment between the three countries.

A significant subset of our products sourced from Asia 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 United States for the substantial majority of our products.

As 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 United States, which could in turn require us to increase our prices and, in the event consumer demand declines as a result, negatively affect 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.

or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition and results of operations.

Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the 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.

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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.

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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 from the Xinjiang Uyghur Autonomous Region which may induce greater supply chain compliance costs and delays to us and to our vendors.

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.

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Our sales may fall in response to any price increases, and our vendors may not be able to support the level of pricing concessions that we seek.

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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.

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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.;

trade restrictions, including without limitation trade sanctions and the loss of “most favored nation” trading status by our foreign trading partners with the 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.

freight cost increases;

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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, 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.

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.

Any failure by our vendors outside the 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.

Our growth strategy and performance depend on our ability to purchase quality merchandise in sufficient quantities at competitive prices, including products that are produced by artisans and specialty vendors.

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Therefore, we may be dependent on particular vendors that produce popular items, and any vendor could discontinue selling to us at any time.

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 such vendors.

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 our 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.

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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.

FORM 10-K | 17

Furthermore, our growth strategy includes expanding our product assortment, and our performance depends on our ability to purchase our merchandise in sufficient quantities at competitive prices.

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Any difficulties that we experience in our ability to obtain products in sufficient quality and quantity from our vendors could have a material adverse effect on our business.

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Our results may be adversely affected by fluctuations in raw materials, energy and transportation costs and currency exchange rates.

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Most leases for our retail locations provide for a minimum rent, typically including escalating rent amounts, plus a percentage rent based upon sales after certain minimum thresholds are achieved, as well as common area maintenance charges, real property insurance and real estate taxes.

We are currently pursuing several other models for the transformation of our real estate beyond a traditional leasing approach, including a real estate development model, a joint venture model and a capital light model.

While these alternative models are designed to achieve superior financial returns to traditional real estate lease structures for a retail business, some of these new ways of operating will expose us to a range of different risks.

Various 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) our real estate development model where we expect either to do a sale-leaseback transaction 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) various joint venture approaches, where we share the upside of the development with third parties such as the developer/landlord and (3) our “capital light” leasing deals, where a substantial portion of the capital requirement would be funded by the landlord.

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We have in the past, and may in the future, pursue other models for the transformation of our real estate beyond a traditional leasing approach, including real estate development or joint venture models, or lease models where a substantial portion of the capital requirement 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, they may also expose us to a broader range of risks.

For example, our real estate development model may create risks related to our ability to execute a successful sale-leaseback transaction.

Similarly, joint venture arrangements, where we share development upside with third parties such as developers or landlords, may result in greater-than-anticipated capital funding requirements or lower financial returns than if we pursued our own real estate development 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 location to develop the first RH Ecosystem inclusive of an RH bespoke Design Gallery, RH Guesthouse, RH Bath House & Spa, RH Restaurants and our first RH Residences.

We are currently constructing our RH Guesthouse in Aspen.

We also plan to develop an ecosystem in Aspen, inclusive of an RH bespoke Design Gallery, Guesthouse and restaurants, which we are currently constructing.

We plan to operate the RH branded businesses and be a real estate investor and partner for the remaining properties.

In fiscal 2022, we entered into additional real estate joint venture transactions with entities affiliated with our Aspen Development Partner with respect to various properties that we expect will ultimately be developed and may in numerous instances be leased in whole or in part by RH now or in the future for new RH Galleries or other RH business concepts.

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These new approaches might cause us to pursue complicated real estate transactions and may require additional capital investment and could present different risks related to the ownership and development of real estate compared to those risks associated with a traditional store lease with a landlord.

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Our inability to enter into new leases or renew existing leases on terms acceptable to us or be released from our obligations under leases or other obligations for locations that we close could materially adversely affect our business and results of operations.

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A number of factors that affect our ability to successfully open new Galleries within the time frames or cost parameters that we initially target or optimize our store footprint are beyond our control, and these factors may harm our ability to execute our strategy to transform our real estate, which may negatively affect our results of operations.

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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 Offices in some new markets.

We also expect to continue to open smaller Interior Design Studios 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.

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We have experienced delays in opening some new Galleries and may experience further delays in the future.

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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 impact our overall return on investment and profit goals for some locations.

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 affect 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.

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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 fulfillment 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 fulfillment 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.

If we are unable to successfully optimize and operate our distribution 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 distribution 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 fulfillment centers, furniture home delivery centers and other aspects of our supply chain and customer delivery network.

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 distribution 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 fulfillment centers, furniture home delivery centers and outlets.

For example, we have consolidated our fulfillment center network and reconfigured our furniture home delivery centers in order to streamline our operations.

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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 distribution centers, furniture home delivery centers and outlets.

For example, we have consolidated our distribution 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 fulfillment centers often run at capacity.

If we fail to accurately anticipate the future capacity requirements of our fulfillment centers, we may experience delays and difficulties in fulfilling orders and delivering merchandise to customers in a timely manner.

Furthermore, in the past, during periods of significant customer growth and demand, our distribution centers often run at capacity.

If we fail to accurately anticipate the future capacity requirements of our distribution 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.

FORM 10-K | 21

We currently rely upon independent third-party transportation providers for the majority of our product shipments, which subjects us to certain risks.

We currently rely upon independent third-party transportation providers for product shipments from our vendors to our fulfillment centers, home delivery centers and retail locations and to our customers outside of certain areas.

We currently rely upon independent third-party transportation providers for product shipments from our vendors to our distribution 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.

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We have also incurred indebtedness to finance other strategic initiatives, including our share repurchase programs, and we may continue to incur indebtedness to support such initiatives in the future.

FORM 10-K | 21

On October 20, 2021, Restoration Hardware Inc.

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Any of the foregoing factors could have a material adverse effect on our business, financial condition, results of operations, or ability to meet our payment obligations.

22 | FORM 10-K

Our ABL Credit Agreement and Term Debt contain various restrictive covenants, including, among others, limitations on the ability to incur liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate with or into another person, sell assets, pay dividends or make other distributions, or enter into transactions with affiliates.

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In addition, we also received tenant allowances under finance leases subsequent to lease commencement of $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, but the exact scope of our capital plans in future fiscal years, including fiscal 2025, 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, and the way that our business performs.

We expect to continue to incur significant capital expenditures in respect of new Galleries and other initiatives in fiscal 2026, but the exact scope of our capital plans in future fiscal years, including fiscal 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 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.

22 | FORM 10-K

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 flow of our business, we may in the future elect to incur further debt in addition to the $2.5 billion of Term Debt that we borrowed.

Although we have previously been successful in reducing indebtedness due in part to strong cash flows from 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 $2,500 million of Term Debt that we 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.

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If we are not able to arrange financing to repay our debt obligations, or to extend the maturities of existing debt, otherwise refinance our obligations or raise funds as needed, we may experience a material adverse effect on our business and operations.

FORM 10-K | 23

Our business is dependent on certain key personnel;

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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 operation and financial condition.

These changes could also increase the volatility of our stock price.

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Changes in our organizational structure may also have an impact on retention of personnel.

FORM 10-K | 23

Inasmuch as our success depends in part upon our ability to attract, motivate and retain a sufficient number of store and other employees who understand and appreciate our corporate culture and customers, turnover in the retail industry and food and beverage industry is generally high.

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Any material interruptions or failures in our systems or the products or systems of our third-party vendors or other third parties that we share data with may have a material adverse effect on our business or results of operations.

24 | FORM 10-K

Over the last several years, there has been a substantial increase in the scope of reported cybersecurity threats and attacks.

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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, 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.

Any failure to address vulnerabilities or breaches in a timely and comprehensive 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.

Furthermore, our operations are also dependent on the information technology systems and cybersecurity measures of third parties, including our vendors, who may also experience cybersecurity attacks.

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The California Privacy Rights Act, which became effective January 1, 2023, amends and expands the CCPA, including by expanding consumer’s rights in their personal information and creating a new governmental agency to interpret and enforce the statute.

Foreign laws and regulations relating to privacy, data protection, information security, and consumer protection often are more restrictive than those in the U.S.

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.

24 | FORM 10-K

Foreign laws and regulations relating to privacy, data protection, information security, and consumer protection often are more restrictive than those in the 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 United States.

In the European Union, the General Data Protection Regulation (“GDPR”) governs data practices and privacy.

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Any actual or perceived inability to comply with applicable privacy or data protection laws, regulations, or other obligations could result in significant cost and liability, litigation or governmental investigations, damage our reputation and adversely affect our business.

FORM 10-K | 25

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.

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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., the U.K, the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

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 United States, the 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.

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In addition, insurance coverage may be insufficient or may not cover certain cybersecurity losses and liability.

FORM 10-K | 25

We face product-related liability risks and certain of our products may be subject to recalls or other actions by regulatory authorities, and any such recalls or similar actions could have a material adverse effect on our business and reputation.

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If we experience negative publicity, regardless of any factual basis, customer complaints or litigation alleging illness or injury related to our products, or if there are allegations of failure to comply with applicable regulations, our brand reputation would be harmed.

26 | FORM 10-K

We maintain a product safety and compliance program to help ensure our products are safe, legal and made consistently in compliance with our values.

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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.

There can be no assurance that we will have the benefit of adequate insurance or payments from third parties, including our product vendors, 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.

Legislators and regulators in the U.S., Canada, the United Kingdom and within the European Union, where our products are sold, continue to adopt new product laws and regulations.

We do not currently have insurance coverage for product recalls, and there can be no assurance that we will have the benefit of adequate payments from third parties, including our product 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 reimbursement from third parties, including our product partners.

Legislators and regulators in the 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.

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From time to time, we and/or members of our senior leadership team are involved in legal and regulatory proceedings, including litigation, claims, investigations and regulatory and other proceedings related to a range of matters in connection with the conduct of our business, including (i) privacy and data security, (ii) our labor and employment practices, including laws related to discrimination, wages and benefits, ERISA and disability claims, (iii) intellectual property issues with respect to copyright, trademarks, patents and trade dress, (iv) international and domestic trade and business practices, including import laws, unfair competition and unfair business practices, (v) consumer class action claims relating to our consumer practices, including the collection of zip code or other information from customers, (vi) product safety and compliance, including products liability, product recalls and personal injury, (vii) advertising and promotion of products and services, including class actions and regulatory actions related to advertising, (viii) compliance with securities laws, including class actions related to allegations of securities fraud, (ix) taxation, (x) contractual disputes, and (xi) health and safety regulations.

26 | FORM 10-K

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.

and in other jurisdictions where we operate such as, among others, the Equal Employment Opportunity Commission, the CPSC, the Federal Trade Commission, U.S.

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 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.

FORM 10-K | 27

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.

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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 for 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.

We maintain insurance that 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.

Third parties have in the past asserted, and may in the future assert, intellectual property claims against us, particularly as we expand our business to include new products and product categories, and expand in new geographic markets, where intellectual property laws and rights differ.

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In the event that we are unable to assert and maintain intellectual property protection with respect to our products and services, the value of our brand could be diminished, and our competitive position could suffer.

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

FORM 10-K | 27

Compliance with laws, including laws relating to our business activities outside of the 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.

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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.

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 increased compliance costs).

28 | FORM 10-K

Changes to laws or regulations in the 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).

and foreign laws and regulations that are applicable to our operations are complex and may increase the costs of regulatory compliance, limit or restrict the products or services we sell, or subject our business to the possibility of regulatory actions or proceedings.

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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 in the future, there can be no assurance that we will be able to find suitable businesses to purchase, acquire such businesses on acceptable terms, or realize the benefits of any acquisition we pursue or that any of the businesses which we acquire will meet our objectives.

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 after the acquisition.

The success of any completed acquisition will depend on our ability to effectively manage the business or assets after the acquisition.

28 | FORM 10-K

Our total assets include intangible assets with an indefinite life, goodwill, tradename, trademarks, and other intellectual property, and substantial amounts of long-lived assets, principally property and equipment and lease right-of-use assets.

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For example, in the third quarter of fiscal 2024, we recognized long-lived asset impairment charges of $19 million for our two Design Galleries in Germany due to the asset carrying value of each location exceeding the estimated fair market value of the long-lived assets over their respective remaining lease terms, both of which end in 2027 (refer to “Impairment” within Note 3— Significant Accounting Policies in our consolidated financial statements within Part II of this Annual Report).

Any failure to establish and maintain effective disclosure controls and procedures and internal controls over financial reporting could result in material misstatements in our financial statements and failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition or results of operations.

In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting.

Maintaining effective disclosure controls and procedures and effective internal controls over financial reporting is necessary for us to produce reliable financial statements and disclosure reports.

In addition, we have experienced changes in personnel who are involved in our financial reporting.

Changes in personnel, systems or procedures, as well as other events, may have an adverse impact on our internal controls and our disclosure controls and procedures.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls.

FORM 10-K | 29

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In addition, the market price of our common stock may fluctuate significantly in response to a number of other factors, including those described elsewhere in this “Risk Factors” section, as well as the following:

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

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

quarterly variations in our results of operations compared to market expectations;

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negative publicity, including short seller reports;

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

natural or man-made disasters or other similar events, including global health emergencies;

issuances or expected issuances of capital stock;

global economic, legal and regulatory changes unrelated to our performance.

global economic, geopolitical, legal and regulatory changes unrelated to our performance.

In the future, we may issue our securities in connection with financings or acquisitions.

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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 are 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.

While the Delaware courts have determined that such choice of forum provisions is 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.

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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 and the remaining amount outstanding and available under our share repurchase program is $201 million.

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.

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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 impact our share repurchase program and other capital allocation activities.

Changes in our business operations and financial results, regulatory and other legal developments, including potential changes in tax laws, could also affect our share repurchase program and other capital allocation activities.

The terms of our outstanding indebtedness may delay or hinder an otherwise beneficial takeover attempt of our Company.

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General Risks

Changes to accounting rules or regulations may adversely affect our results of operations.

New accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future.

It is difficult to predict the impact of future changes to accounting principles or current accounting practice and the exact impact of such changes may not be what we anticipate.

A change in accounting rules or regulations may even affect our reporting of transactions completed before the change is effective and future changes to accounting rules or regulations or the questioning of current accounting practices may adversely affect our results of operations.

For example, we adopted Accounting Standards Update 2020-06— Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity in fiscal 2022, the adoption of which materially impacted our consolidated financial statements since we no longer separately present in equity an embedded conversion feature of our convertible senior notes and are required to determine our net income per share under the if-converted method.

For information regarding recently issued accounting pronouncements, refer to “Recently Issued Accounting Standards” within Note 3— Significant Accounting Policies in our consolidated financial statements within Part II of this Annual Report.

FORM 10-K | 33

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

Expectations of us 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.

We expect that interest in these matters may influence perceptions of our Company, 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.

and differ in our new geographic markets, which could result in greater expectations of us and cause us to undertake costly initiatives to satisfy such new criteria.

In addition, the ESG factors by which companies’ corporate responsibility practices are assessed may change in the United States and differ in our new geographic markets, which could result in differing 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 risk damage to our brand and reputation 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 impact our results of operations.

We could experience reputational harm 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 affect our results of operations.

Any failure in our decision-making or related investments in this regard could affect consumer perceptions as to our brand.

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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.

If we fail to satisfy the expectations of investors and other key stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected.

Any such adverse perceptions could negatively affect our reputation and, in turn, our business or results of operations.

FORM 10-K | 33

Labor organizing and other activities could negatively impact us.

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In addition, to the extent that we become more directly involved in additional aspects of the construction work at our Gallery locations, we could be subject to additional pressure from organized labor such as union organizing efforts.

Changes to accounting rules or regulations may adversely affect our results of operations.

New accounting rules or regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future.

It is difficult to predict the impact of future changes to accounting principles or current accounting practice and the exact impact of such changes may not be what we anticipate.

Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets, including net operating loss carryforwards, may result in volatility of our results of operations.

We are subject to income taxes in the U.S.

and certain foreign jurisdictions.

We are subject to income taxes in the 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.

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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.

34 | FORM 10-K

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

Our operations are subject to risks of natural or man-made disasters, acts of war, terrorism, 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 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.

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 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 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, or other hostilities, or threats thereof, in the U.S.

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.

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, or other hostilities, or threats thereof, in the 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, 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 pandemic had a widespread impact on our customers and on our merchandise supply chain as well as the overall business climate in the U.S.

and globally.

34 | FORM 10-K

The pandemic had a widespread impact on our customers and on our merchandise supply chain as well as the overall business climate in the United States and globally.

Future large-scale crises, whether involving public health or other issues, may result in similar adverse effects or additional challenges that we may not be able to anticipate, including changes in consumer behavior, the pace of economic activity, or other similar issues which could negatively affect our business, results of operations or financial condition.

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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-K

Item 1A. Risk Factors