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Item 2. Management’s Discussion and Analysis

2026-06-11 compared with 2025-12-11 · 181 added, 281 removed, 281 unchanged (62% of the section changed)

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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 2025 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 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.

Our MD&A is organized as follows:

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 months ended May 2, 2026, and a comparison to the three months ended May 3, 2025.

The discussion related to cash flows for the three months ended May 3, 2025, has been omitted from this Quarterly Report on Form 10-Q, but is included in Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations on our Form 10-Q for the quarter ended May 3, 2025, filed with the Securities and Exchange Commission (“SEC”) on June 12, 2025.

MD&A is a supplement to our 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.

Our MD&A includes these primary sections:

This section provides a general description of our business, including our key value-driving strategies and an overview of certain known trends and uncertainties.

Basis of Presentation and Results of Operations .

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.

FINANCIAL INFORMATION

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

Liquidity and Capital Resources .

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Critical Accounting Policies and Estimates .

This section provides the accounting policies and estimates that involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position, including the significant estimates and judgments used in the preparation of the condensed consolidated financial statements.

This section discusses the accounting policies and estimates that involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position, including the significant estimates and judgments used in the preparation of our condensed consolidated financial statements.

FINANCIAL INFORMATION

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

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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 periods ended May 3, 2025 and August 2, 2025 and in our 2024 Form 10-K.

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the section titled Risk Factors in our 2025 Form 10-K and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I of this Quarterly Report and in our 2025 Form 10-K.

All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements.

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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, 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.

32 | 2025 THIRD QUARTER FORM 10-Q

We operate our retail locations throughout the United States, Canada and Europe, and we have an integrated RH Hospitality experience in 26 of our Design Gallery locations, which includes restaurants and wine bars.

We believe these new collections reflect a level of design and quality inaccessible in our current market, and a value proposition that we believe will be disruptive across multiple markets.

FINANCIAL INFORMATION

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

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

North America

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Modern Gallery

Baby & Child and TEEN Gallery

Interior Design Office

Baby & Child Gallery

Interior Design Studio

Total RH retail 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 continue to increase the costs of securing products from our vendors.

Since the majority of our product assortment is imported from vendors outside the United States, we also face uncertainty and risks related to tariffs and other trade policies, which may increase the costs of securing products from our vendors.

Tariffs and other non-tariff trade practices and policies may adversely affect our business in other ways beyond increased costs for our products.

We have taken steps to move our supply chain away from countries with higher tariff rates in favor of other jurisdictions, but these countermeasures may prove to be ineffective and the ability to predict tariff rates in different countries may be difficult as policies may change on short notice.

Uncertainty about trade policy, tariff rates and other changes in practices affecting international trade might have an adverse effect on our business and results of operation and we may face challenges in implementing the optimal responses to changing trade conditions.

In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S.

While our expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain.

For example, on February 20, 2026, the U.S.

Supreme Court issued a ruling striking down certain tariffs previously imposed under the IEEPA.

Following the U.S.

Supreme Court’s decision, the U.S.

presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs.

In April 2026, the IEEPA refund process was launched, and we began to receive refunds in the second quarter of fiscal 2026.

There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels and whether further additional tariffs or other retaliatory actions may be imposed, modified or suspended.

Uncertainty about trade policy, tariff rates and other changes in practices affecting international trade might have an adverse effect on our business and results of operations, and we may face challenges in implementing the optimal responses to changing trade conditions.

In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the United States and other countries in which we operate.

While our expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements are uncertain.

We also believe we have positioned the business to take advantage of any favorable progression in macroeconomic conditions.

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FINANCIAL INFORMATION

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Strategic Initiatives

We are in the process of implementing a number of significant business initiatives that have had, and will continue to have, an impact on our results of operations.

As a result, we have experienced in the past, and may experience in the future, significant period-to-period variability in our financial performance and results of operations.

While we anticipate that these initiatives will support the growth of our business, costs and timing issues associated with pursuing these initiatives can negatively affect our growth rates in the short term and may amplify fluctuations in our growth rates from quarter to quarter.

Delays in the rate of opening new Galleries and pursuit of our international expansion have resulted in delays in the corresponding increase in net revenues that we ordinarily experience as new Design Galleries are introduced.

In addition, we anticipate that our net revenues, adjusted net income and other performance metrics will remain variable as our business model continues to emphasize high growth and numerous, concurrent and evolving business initiatives.

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For more information, refer to the sections entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors in our 2025 Form 10-K.

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Our strategy is to continue to elevate the design and quality of our product.

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

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, which will continue with the 2026 launch of RH Estates, featuring RH Bespoke furniture and RH Couture upholstery.

Gallery Transformation .

Our products are elevated and rendered more valuable by our architecturally inspiring Galleries.

We believe our strategy to open new Design Galleries in every major market in North America will unlock the value of our vast assortment, generating an expected annual revenue opportunity for our business of $5 to $6 billion.

We believe we can significantly increase our sales by transforming our real estate platform from our existing legacy retail footprint to a portfolio of Design Galleries sized to the potential of each market and the size of our assortment.

In addition, we plan to incorporate hospitality into many of the new Design Galleries that we open in the future, which further elevates and renders our product and brand more valuable.

We believe our strategy to open new Design Galleries in every major market in the United States and Canada will unlock the value of our vast assortment, generating an expected total annual revenue opportunity of $5 to $6 billion.

We believe we can increase our sales by continuing to transform our real estate platform from our existing legacy retail footprint to a portfolio of Design Galleries sized to the potential of each market and the size of our assortment.

In addition, we plan to incorporate hospitality into many of the new Design Galleries that we open in the future, which we believe further elevates and renders our product and brand more valuable.

We believe hospitality has created a unique new retail experience that cannot be replicated online and that the addition of hospitality drives incremental sales of home furnishings in these Galleries.

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We entered this industry with the opening of the RH Guesthouse New York in September 2022 and are in the process of constructing our second RH Guesthouse in Aspen.

In June 2023, we opened RH England, The Gallery at the Historic Aynho Park, a 400-year-old landmark estate representing the most inspiring and immersive physical expression of the brand to date.

In June 2023, we opened RH England, The Gallery at the Historic Aynho Park, a 400-year-old landmark estate representing one of the most inspiring and immersive physical expressions of the brand.

RH England marked the beginning of our global expansion beyond North America.

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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

Global Expansion .

We believe that our luxury brand positioning and unique aesthetic have strong international appeal and that pursuit of global expansion will provide RH with a substantial opportunity to build over time a projected $20 to $25 billion global brand in terms of annual revenues.

Our view is that the competitive environment globally is more fragmented and primed for disruption than the North American market, and there is no direct competitor of scale that possesses the product, operational platform and brand strength of RH.

We believe that our luxury brand positioning and unique aesthetic have strong international appeal and that global expansion will provide RH with a substantial opportunity to build a projected $20 to $25 billion global brand in terms of annual revenues.

Our view is that the competitive global environment is more fragmented and primed for disruption than the North American market, and there is no direct competitor of scale that possesses the product, operational platform and brand strength of RH.

As such, we are actively pursuing the expansion of the RH brand globally, which began with the opening of RH England, RH Munich and RH Düsseldorf in 2023, followed by the opening of RH Brussels and RH Madrid in 2024.

In September 2025, we opened RH Paris, The Gallery on the Champs-Élysées, located just off the Avenue Montaigne, which stands at the global epicenter of fashion and luxury.

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.

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

We are also under construction in London and Milan in inspiring spaces that will celebrate the heritage of the historic structures and will integrate full expressions of our hospitality experiences.

In April 2026, we opened RH Milan, The Gallery on Corso Venezia, and expect to open RH London, The Gallery in Mayfair in June 2026.

In addition, we plan to open RH Sydney, The Gallery in Double Bay, in Australia in the coming years.

FINANCIAL INFORMATION

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Digital Reimagination .

Our strategy is to digitally reimagine the RH brand and business model both internally and externally.

Internally, our multiyear effort began with the reimagination of our Center of Innovation to incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation.

Internally, our multiyear effort began with the reimagination of our RH Center of Innovation to incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation.

Externally, our strategy comes to life digitally through The World of RH, an online portal where customers can explore and be inspired by the depth and dimension of our brand.

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We believe an opportunity exists to create similar strategic separation online as we have with our Galleries offline, reconceptualizing what a website can and should be.

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

We have made meaningful investments to elevate and differentiate our online experience in 2025, and we expect to continue investing in these initiatives in 2026.

Strategic Initiatives

As a result of the number of current business initiatives we are pursuing, we have experienced in the past, and may experience in the future, significant period-to-period variability in our financial performance and results of operations.

Delays in the rate of opening new Galleries and pursuit of our international expansion have resulted in delays in the corresponding increase in revenues that we experience as new Design Galleries are introduced.

In addition, we anticipate that our net revenues, adjusted net income (loss) and other performance metrics will remain variable as our business model continues to emphasize high growth and numerous, concurrent and evolving business initiatives.

Basis of Presentation and Results of Operations

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

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

THREE MONTHS ENDED

NINE MONTHS ENDED

(dollars in thousands)

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Total other expenses

Income before taxes and equity method investments

Income tax expense

Income before equity method investments

Share of equity method investments (income) loss—net

Income (loss) before income taxes and equity method investments

Income tax expense (benefit)

Loss before equity method investments

Share of equity method investments net (income) loss

Net income (loss)

FINANCIAL INFORMATION

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How We Assess the Performance of Our Business

Demand is an operating metric that we use in reference to the dollar value of orders placed (orders convert to net revenue upon a customer obtaining control of the merchandise) and excludes exchanges, shipping fees and cancellations.

Demand represents the demand generated from all of our businesses including RH Interiors, RH Modern, RH Contemporary, RH Outdoor, RH Baby & Child, RH TEEN, RH Contract, Membership, Dmitriy & Co, Joseph Jeup and Waterworks, as well as sales from RH Hospitality and RH Outlet.

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Non-GAAP Financial Measures

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income, adjusted net income, EBITDA, adjusted EBITDA, and adjusted capital expenditures (collectively, “non-GAAP financial measures”).

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income, adjusted net income (loss), EBITDA, adjusted EBITDA, and adjusted capital expenditures (collectively, “non-GAAP financial measures”).

We compute these measures by adjusting the applicable GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments.

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We define adjusted operating income as consolidated operating income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance .

Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income

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

THREE MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

Net income (loss)

Interest expense—net (1)

Other (income) expense—net (1)

Income tax expense (1)

Share of equity method investments (income) loss—net (1)

Income tax expense (benefit) (1)

Share of equity method investments net (income) loss (1)

Operating income

Asset impairments (2)

Product recall (3)

Reorganization related costs (4)

Legal settlement—net (2)

Non-cash compensation (3)

Contract termination settlement—net (6)

Legal settlements—net (7)

Adjusted operating income

36 | 2025 THIRD QUARTER FORM 10-Q

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.

(4) Represents severance costs and related payroll taxes associated with a reorganization.

(1) Refer to discussion “Three Months Ended May 2, 2026 Compared to Three Months Ended May 3, 2025” below for a discussion of our results of operations for the three months ended May 2, 2026 and May 3, 2025.

(2) Represents a favorable legal settlement associated with credit card interchange fees, partially offset by legal costs incurred in connection with the matter.

(3) Represents the amortization of the non-cash compensation charge related to an option grant made to Mr.

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.

Adjusted Net Income .

Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP.

We define adjusted net income as consolidated net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income to Adjusted Net Income

Friedman in October 2020, which stock-based compensation for this award was fully recognized as of the first quarter of fiscal 2025.

FINANCIAL INFORMATION

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Adjusted Net Income (Loss) .

Adjusted net income (loss) is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP.

We define adjusted net income (loss) as consolidated net income (loss), adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance.

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

THREE MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

Net income (loss)

Adjustments pre-tax:

Asset impairments (1)

Product recall (1)

Reorganization related costs (1)

Legal settlement—net (1)

Non-cash compensation (1)

Contract termination settlement—net (1)

Legal settlements—net (1)

Subtotal adjusted items

Impact of income tax items (2)

Share of equity method investments (income) loss—net (1)

Adjusted net income

(1) Refer to table titled “Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income” and the related footnotes for additional information.

(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 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.

Share of equity method investments net (income) loss (1)

Adjusted net income (loss)

(1) Refer to table titled “Reconciliation of GAAP Net Income (Loss) to Operating Income and Adjusted Operating Income” and the related footnotes for additional information.

(2) We exclude the GAAP tax provision and apply a non-GAAP tax provision based upon (i) adjusted pre-tax net income (loss), (ii) the projected annual adjusted tax rate and (iii) the exclusion of material discrete tax items that are unusual or infrequent, such as the favorable legal settlement associated with credit card interchange fees in the first quarter of fiscal 2026.

The adjustments for the three months ended May 2, 2026 and May 3, 2025 are based on adjusted tax rates of 26.8% and 32.0%, respectively.

FINANCIAL INFORMATION

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2026 FIRST QUARTER FORM 10-Q | 33

EBITDA and Adjusted EBITDA .

EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP.

We define EBITDA as consolidated net income before depreciation and amortization, interest expense—net and income tax expense.

EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP.

We define EBITDA as consolidated net income (loss) before interest expense—net, income tax expense (benefit) and depreciation and amortization.

Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of non-cash compensation, as well as certain non-recurring and other items that we do not consider representative of our underlying operating performance.

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

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

THREE MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

Net income (loss)

Depreciation and amortization

Interest expense—net

Income tax expense

Non-cash compensation (1)

Income tax expense (benefit)

Legal settlement—net (1)

Stock-based compensation

Capitalized cloud computing amortization (2)

Asset impairments (3)

Product recall (3)

Reorganization related costs (3)

Share of equity method investments (income) loss—net (3)

Other (income) expense—net (1)

Contract termination settlement—net (3)

Legal settlements—net (3)

Share of equity method investments net (income) loss (1)

Adjusted EBITDA

(1) Represents non-cash compensation related to equity awards granted to employees, including the amortization of the non-cash compensation charge related to an option grant made to Mr.

Friedman in October 2020.

(1) Refer to table titled “Reconciliation of GAAP Net Income (Loss) to Operating Income and Adjusted Operating Income” and the related footnotes for additional information.

(2) Represents amortization associated with capitalized cloud computing costs.

(3) Refer to table titled “Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income” and the related footnotes for additional information.

Adjusted Capital Expenditures.

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

Reconciliation of Adjusted Capital Expenditures

NINE MONTHS ENDED

THREE MONTHS ENDED

(in thousands)

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Adjusted capital expenditures

38 | 2025 THIRD QUARTER FORM 10-Q

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $1.4 million in the three months ended May 3, 2025, which are reflected as a reduction to principal payments under finance leases—net of tenant allowances within financing activities on the condensed consolidated statements of cash flows.

No such amounts were received from landlords during the three months ended May 2, 2026.

FINANCIAL INFORMATION

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

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

NINE MONTHS ENDED

THREE MONTHS ENDED

SELLING SQUARE

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RH Design Galleries

Oklahoma City

RH Legacy Galleries

RH Outdoor Galleries

RH Outdoor Gallery

RH Baby & Child and Teen Gallery

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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 November 1, 2025 and November 2, 2024.

FINANCIAL INFORMATION

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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:

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

(2) Includes approximately 198,000 square feet as of May 2, 2026 related to four owned retail locations and approximately 142,000 square feet related to three owned retail locations as of May 3, 2025.

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

THREE MONTHS ENDED

NINE MONTHS ENDED

(in thousands)

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Weighted-average selling square footage

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

FINANCIAL INFORMATION

2026 FIRST QUARTER FORM 10-Q | 35

Three Months Ended May 2, 2026 Compared to Three Months Ended May 3, 2025

THREE MONTHS ENDED

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Operating income

(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.

(1) The results for the Real Estate segment were immaterial in the three months ended May 2, 2026 and May 3, 2025, thus, such results are presented within the RH Segment each period.

Refer to Note 14— 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 $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.

Additionally, all intercompany transactions are not material and have been eliminated.

(2) RH Segment net revenues include outlet revenues of $70 million and $67 million for the three months ended May 2, 2026 and May 3, 2025, respectively.

Consolidated net revenues decreased $14 million, or 1.7%, to $800 million in the three months ended May 2, 2026 compared to $814 million in the three months ended May 3, 2025.

RH Segment net revenues

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 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.

RH Segment net revenues decreased $13 million, or 1.7%, to $752 million in the three months ended May 2, 2026 compared to $765 million in the three months ended May 3, 2025, primarily due to lower revenue in our core and Contract businesses, partially offset by an increase in hospitality revenue primarily as a result of new Gallery openings.

Waterworks net revenues

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.

40 | 2025 THIRD QUARTER FORM 10-Q

FINANCIAL INFORMATION

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.

Waterworks net revenues decreased $0.8 million, or 1.7%, to $48 million in the three months ended May 2, 2026 compared to $49 million in the three months ended May 3, 2025.

Consolidated gross profit decreased $24 million, or 6.8%, to $331 million in the three months ended May 2, 2026 compared to $355 million in the three months ended May 3, 2025.

As a percentage of net revenues, consolidated gross margin decreased 230 basis points to 41.4% of net revenues in the three months ended May 2, 2026 from 43.7% of net revenues in the three months ended May 3, 2025.

RH Segment gross profit

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.

RH Segment gross profit decreased $24 million, or 7.2%, to $306 million in the three months ended May 2, 2026 from $330 million in the three months ended May 3, 2025.

As a percentage of net revenues, RH Segment gross margin decreased 240 basis points to 40.7% of net revenues in the three months ended May 2, 2026 from 43.1% of net revenues in the three months ended May 3, 2025.

The decrease in RH Segment gross margin was primarily attributable to higher occupancy costs as a result of new Gallery openings and decreased product margins in the RH outlet and core businesses.

Waterworks gross profit

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.

Waterworks gross profit decreased $0.3 million, or 1.2%, to $25 million in the three months ended May 2, 2026 from $26 million in the three months ended May 3, 2025.

As a percentage of net revenues, Waterworks gross margin increased 20 basis points to 52.4% of net revenues in the three months ended May 2, 2026 from 52.2% of net revenues in the three months ended May 3, 2025.

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Selling, general and administrative expenses

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.

Consolidated selling, general and administrative expenses decreased $2.4 million, or 0.8%, to $297 million in the three months ended May 2, 2026 from $299 million in the three months ended May 3, 2025.

RH Segment selling, general and administrative expenses

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.

RH Segment selling, general and administrative expenses decreased $3.8 million, or 1.4%, to $275 million in the three months ended May 2, 2026 compared to $279 million in the three months ended May 3, 2025.

RH Segment selling, general and administrative expenses were 36.6% and 36.5% of net revenues in the three months ended May 2, 2026 and May 3, 2025, respectively.

The increase in selling, general and administrative expenses as a percentage of net revenues was primarily driven by increases in compensation, as well as pre-opening and advertising costs related to new Gallery openings.

These increases were offset by a favorable legal settlement associated with credit card interchange fees of $32 million in the three months ended May 2, 2026.

RH Segment selling, general and administrative expenses for the three months ended May 3, 2025 were impacted by $0.9 million of non-cash compensation related to an option grant made to Mr.

Friedman in October 2020.

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.

Excluding the $32 million and $0.9 million of such costs noted above for the three months ended May 2, 2026 and May 3, 2025, respectively, RH Segment selling, general and administrative expenses would have increased 440 basis points to 40.8% from 36.4% of net revenues for the three months ended May 2, 2026 and May 3, 2025, respectively.

Waterworks selling, general and administrative expenses

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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Waterworks selling, general and administrative expenses increased $1.4 million, or 6.9%, to $22 million in the three months ended May 2, 2026 compared to $20 million in the three months ended May 3, 2025.

Interest expense—net

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Interest expense—net

FINANCIAL INFORMATION

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Other (income) expense—net

4 unchanged sentences

Foreign exchange from remeasurement of intercompany loans (2)

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.

dollar as compared to the euro and pound sterling.

(2) Represents remeasurement of intercompany loans with subsidiaries in Switzerland and the United Kingdom.

Income tax expense

THREE MONTHS ENDED

(dollars in thousands)

Income tax expense

Effective tax rate

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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FINANCIAL INFORMATION

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

NINE MONTHS ENDED

(in thousands)

Net revenues (2)

Cost of goods sold

Selling, general and administrative expenses

Operating income

(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.

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 $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 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 $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 $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 $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 $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 $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 $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:

NINE MONTHS ENDED

(in thousands)

Term loan interest expense

Finance lease interest expense

Asset based credit facility

Other interest expense

Capitalized interest for capital projects

Interest income

Interest expense—net

Other (income) expense—net

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

NINE MONTHS ENDED

(in thousands)

Foreign exchange from transactions (1)

Foreign exchange from remeasurement of intercompany loans (2)

Other (income) 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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(2) Represents remeasurement of intercompany loans with subsidiaries in Switzerland and the United Kingdom.

Income tax expense

NINE MONTHS ENDED

Income tax expense (benefit)

THREE MONTHS ENDED

(dollars in thousands)

Income tax expense

Income tax expense (benefit)

Effective tax rate

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 $6.7 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.

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

Share of equity method investments net (income) loss

Our share of equity method investments net loss in the three months ended May 2, 2026 was $0.4 million.

Our share of equity method investments net income of $8.2 million in the three months ended May 3, 2025 was primarily attributable to an Aspen LLC distribution of $7.9 million (refer to Note 5— Variable Interest Entities in the condensed consolidated financial statements).

FINANCIAL INFORMATION

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Liquidity and Capital Resources

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Availability under the asset based credit facility—net (3)

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

(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 $48 million and $45 million in outstanding letters of credit as of November 1, 2025 and February 1, 2025, respectively.

(1) Amounts exclude third-party offering and debt issuance costs.

(2) Excludes a non-recourse real estate loan of $16 million as of both periods, which is secured by specific real estate assets and the associated creditor does 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 $44 million and $43 million in outstanding letters of credit as of May 2, 2026 and January 31, 2026, 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.

We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies.

During fiscal 2022 and fiscal 2023, we invested $2,265 million of cash, inclusive of excise taxes paid, in the purchase of shares of our common stock pursuant to our Share Repurchase Program.

During fiscal 2023, we invested $1,253 million of cash, inclusive of excise taxes paid, in the purchase of shares of our common stock pursuant to our Share Repurchase Program.

We continuously evaluate our capital allocation strategy and may engage in future investments in connection with existing or new share repurchase programs (refer to “Share Repurchase Program” below), which may include investments in derivatives or other equity linked instruments.

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We believe our existing cash balances and operating cash flows, in conjunction with available financing arrangements, will be sufficient to repay our debt obligations as they become due, meet working capital requirements and fulfill other capital needs for more than the next 12 months.

FINANCIAL INFORMATION

2026 FIRST QUARTER FORM 10-Q | 39

While we do not anticipate that we will require additional debt financing to fund our operations, our goal is to continue to be in a position to take advantage of the many opportunities that we identify in connection with our business and operations.

1 unchanged sentence

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

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.

Any adverse developments in the U.S.

Any adverse developments in U.S.

or global credit markets could affect our ability to manage our debt obligations and our ability to access future debt.

In addition, agreements governing existing or new debt facilities may restrict our ability to operate our business in the manner we currently expect or to make required payments with respect to existing commitments, including the repayment of the principal amount of our convertible senior notes in cash, whether upon stated maturity, early conversion or otherwise of such convertible senior notes.

To the extent we need to seek waivers from any provider of debt financing, or we fail to observe the covenants or other requirements of existing or new debt facilities, any such event could have an impact on our other commitments and obligations, including triggering cross defaults or other consequences with respect to other indebtedness.

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FINANCIAL INFORMATION

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2026 FIRST QUARTER FORM 10-Q | 40

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 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.

During the three months ended May 2, 2026, adjusted capital expenditures were $78 million in aggregate.

We anticipate our adjusted capital expenditures to be $240 million to $260 million in fiscal 2026, primarily related to our growth and expansion, including construction of new Design Galleries and infrastructure investments.

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In addition, our capital needs and uses of capital may change in the future due to changes in our business or new opportunities that we may pursue.

As part of our existing capital allocation strategy, we closed a series of transactions in May 2026 with a third-party real estate developer (affiliated with the managing member of the Aspen LLCs) and its related affiliates (collectively, the “Developer”) involving a separation of a substantial majority of assets previously owned through variable interest entities, as discussed in Note 5— Variable Interest Entities in the condensed consolidated financial statements.

As a result of these transactions, we (i) received approximately $50 million in cash and $10 million in deemed non-cash capital contributions in an Aspen LLC, (ii) became the sole owner of one property previously held by an Aspen LLC that we plan to open as an RH Guesthouse, (iii) used the net cash proceeds from (i) to repay the outstanding debt on such property, and (iv) became the sole owner of four completed Gallery locations (RH England, RH Cleveland, RH Detroit and RH Indianapolis) and three other development-stage sites (involving locations in California, New Jersey and Europe).

In addition, the Developer (i) became the sole owner of the undeveloped Aspen properties from the Aspen LLCs and (ii) repaid outstanding debt associated with those properties.

There is no outstanding debt on any of the properties we acquired other than the $16 million real estate loan on one completed Gallery that was previously included in our condensed consolidated balance sheets prior to the transactions.

We believe we are now in a position to pursue near-term monetization for these properties, including through sale-leasebacks and full divestitures.

The remaining properties in the Aspen LLCs consist primarily of leased projects on a number of prime retail lease locations in Aspen that we believe can also be easily sold.

FINANCIAL INFORMATION

2026 FIRST QUARTER FORM 10-Q | 41

Cash Flow Analysis

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

NINE MONTHS ENDED

THREE MONTHS ENDED

(in thousands)

1 unchanged sentence

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Net cash used in financing activities

Net increase in cash and cash equivalents

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 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.

Operating activities consist primarily of net income (loss) 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 three months ended May 2, 2026, net cash provided by operating activities was $53 million and consisted of an increase in non-cash items of $92 million, partially offset by a change in working capital and other activities of $26 million and a net loss of $14 million.

The use of cash from working capital was primarily driven by an increase in landlord assets under construction, net of tenant allowances, of $39 million, a decrease in operating lease liabilities of $29 million, a decrease in other current and non-current liabilities of $14 million, an increase in prepaid expense and other assets of $11 million and an increase in accounts receivable of $9.0 million.

These uses of cash from working capital were partially offset by an increase in deferred revenue and customer deposits of $44 million, an increase in accounts payable and accrued expenses of $17 million and a decrease in merchandise inventory of $15 million.

Net Cash Used in Investing Activities

1 unchanged sentence

Investing activities also include our strategic investments.

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.

For the three months ended May 2, 2026, net cash used in investing activities was $39 million due to investments in retail stores, information technology and systems infrastructure.

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 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.

Financing activities consist primarily of borrowings and repayments related to credit facilities 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 three months ended May 3, 2025, net cash used in financing activities was $0.6 million primarily due to net payments under finance lease agreements of $7.0 million and payments under term loans of $6.3 million.

These uses of cash were partially offset by proceeds from net borrowings under the asset based credit facility of $10 million and proceeds from the exercise of stock options of $2.7 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 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 included in accounts payable and accrued expenses at period-end.

Non-cash transactions also include the recognition of lease right-of-use assets obtained in exchange for lease liabilities, net of lease terminations, as well as the reclassification of assets from other non-current assets to finance and operating lease right-of-use assets.

Refer to Note 7— Leases in our condensed consolidated financial statements.

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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 lease liabilities.

Refer to Note 7— Leases in our 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 leases.

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The table presenting the maturities of our lease liabilities included in Note 7— Leases in our 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, as well as immaterial short-term lease commitments.

Asset Based Credit Facility

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.

Refer to Note 8— Credit Facilities in our 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 8— Credit Facilities in our condensed consolidated financial statements for further information on our Term Loan.

Real Estate Loan

Refer to Note 5— Variable Interest Entities in our condensed consolidated financial statements for further information on the real estate loan.

Share Repurchase Program

In 2018, our Board of Directors authorized a share repurchase program through open market purchases, privately negotiated transactions or other means, including through Rule 10b-18 open market repurchases, Rule 10b5-1 trading plans or through the use of other techniques such as the acquisition of other equity linked instruments, accelerated share repurchases, including through privately negotiated arrangements in which a portion of the share repurchase program is committed in advance through a financial intermediary and/or in transactions involving hedging or derivatives.

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 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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We may undertake other repurchase programs in the future with respect to our securities.

Since January 1, 2023, share repurchases under our Share Repurchase Program are subject to a 1% excise tax imposed under the Inflation Reduction Act.

Beginning January 1, 2023, share repurchases under our Share Repurchase Program (as defined below) are subject to a 1% excise tax imposed under the Inflation Reduction Act, H.R.5376 (the “IR Act”).

As of May 2, 2026, $201 million remains available for future share repurchases under the Share Repurchase Program.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires senior leadership to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires our senior leadership to make estimates and assumptions that affect amounts reported in our condensed consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

We evaluate our accounting policies, estimates, and judgments on an on-going basis.

We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances.

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

FINANCIAL INFORMATION

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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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposures to market risk since January 31, 2026.

Refer to Part II, Item 7A— Quantitative and Qualitative Disclosures About Market Risk in our 2025 Form 10-K for a discussion on our exposures to market risk.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis