What changed in this filing

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Item 1. Business

2022-03-30 compared with 2021-03-30 · 105 added, 131 removed, 187 unchanged (56% of the section changed)

RH (collectively, “we,” “us,” or the “Company”) is a leading luxury retailer in the home furnishings market.

RH (collectively, “we,” “us,” or the “Company”) is a curator of design, taste and style in the luxury lifestyle market.

Our curated and fully integrated assortments are presented consistently across our sales channels in sophisticated and unique lifestyle settings.

We offer dominant merchandise assortments across a number of categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, and child and teen furnishings.

We position our Galleries as showrooms for our brand, while our websites and Source Books act as virtual extensions of our physical spaces.

Our retail business is fully integrated across our multiple channels of distribution, consisting of our retail locations, websites and Source Books.

We have an integrated RH Hospitality experience in ten of our Design Gallery locations, which includes Restaurants and wine bars.

As of January 30, 2021, we operated a total of 68 RH Galleries consisting of 24 Design Galleries, 38 legacy Galleries, 2 RH Modern Galleries and 4 RH Baby & Child Galleries throughout the United States and Canada, and 14 Waterworks Showrooms throughout the United States and in the U.K.

As of January 30, 2021, we operated 38 outlet stores throughout the United States and Canada.

In fiscal 2020, we entered into equity method investments in connection with real estate development initiatives in Aspen, Colorado.

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 Gallery, RH Guesthouse, RH Bath House & Spa, RH Restaurants and our first RH Residences.

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

The COVID-19 outbreak caused disruption to our business operations as we temporarily closed all of our retail locations and Restaurants in the first fiscal quarter of 2020.

Our response to the pandemic evolved quickly as our business trends substantially improved during the second through fourth fiscal quarters of 2020 as a result of both the reopening of most of our retail locations and also strong consumer demand for our products.

As of March 24, 2021 we had reopened all of our Galleries and Outlets, and nine out of ten of our Restaurants although many of our Restaurants are continuing to conduct business under occupancy limitations or other operational restrictions.

We position our Galleries as showrooms for our brand, while our websites and Source Books act as virtual and print extensions of our physical spaces.

We operate our retail locations throughout the United States, Canada, and the U.K., and have an integrated RH Hospitality experience in 13 of our Design Gallery locations, which includes Restaurants and Wine Bars.

We have experienced a significant improvement in our business during fiscal 2021 despite the ongoing challenges presented by the COVID-19 pandemic and the disruption it has caused in our business operations beginning in the first quarter of fiscal 2020 and throughout fiscal 2021.

Our performance demonstrates both the desirability of our exclusive products and our ability to overcome supply chain challenges, including port delays, which impacted our ability to convert business demand into revenues at normal historical rates.

We have continued to navigate changes in operational restrictions based upon changes in local conditions and regulations, and as pandemic-related restrictions continue to be lifted in fiscal 2022 we may see consumer spending patterns shift away from spending on the home and home-related categories, such as home furnishings, and consumers return to pre-COVID consumption trends, such as spending on travel and leisure, and other activities.

For more information, refer to Item 1A—Risk Factors—The COVID-19 pandemic poses significant and widespread risks to our business as well as to the business environment and the markets in which we operate and Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview.

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Product Elevation .

Our goal is to establish RH as the undisputed design and quality leader of the luxury home furnishings sector.

We have multiple growth initiatives and innovations that will further elevate the design and quality of every product category as we climb the luxury mountain and continue to differentiate our products in the market, including the introduction of RH Couture Upholstery and RH Bespoke, over the next several years.

Assortment Expansion .

We are expanding our assortment and introducing new concepts to increase market share and brand awareness.

This will include the launch of RH Contemporary in 2021, a new collection that bridges the gap between RH Interiors and RH Modern, while elevating our brand and expanding our market, and RH Color in the next several years.

We have built the most comprehensive and compelling collection of luxury home furnishings under one brand in the world.

Our products are presented across multiple collections, categories and channels that we control, and their desirability and exclusivity has enabled us to achieve industry-leading revenues and margins.

Our customers know our brand concepts as RH Interiors, RH Modern, RH Beach House, RH Ski House, RH Outdoor, RH Baby & Child, RH TEEN and Waterworks.

Our strategy to elevate the design and quality of our product will continue as we introduce RH Contemporary in 2022.

We also have plans to introduce RH Couture Upholstery, RH Bespoke Furniture and RH Color over the next several years.

Gallery Transformation .

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In addition, we plan to incorporate hospitality into most of the new Design Galleries that we open in the future, which 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 will help drive incremental sales of home furnishings in these Galleries.

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.

FORM 10-K | 1

Global Expansion .

We believe that our luxury brand positioning and unique aesthetic has strong international appeal, and that pursuit of global expansion will provide RH access to a substantial long-term market opportunity to build a $20 to $25 billion global brand over time.

As such, we are actively pursuing expanding the RH brand globally with the objective of launching international locations in Europe beginning in 2022.

We have secured a number of locations in various markets in the United Kingdom and continental Europe in which we expect to introduce our first Galleries outside of the U.S.

Brand Elevation .

Our vision is to move the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of products, places, services and spaces that elevate and establish the RH brand as a global thought leader, taste and place maker.

Our ecosystem, with its immersive experiences, exposes existing and new customers to our evolving authority in design, architecture and hospitality while acting as a next-generation brand elevation and marketing strategy.

We are evolving the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of Products, Places, Services and Spaces designed to elevate and render our product more valuable while establishing the RH brand as a thought leader, taste and place maker.

We believe our seamlessly integrated ecosystem of immersive experiences inspires customers to dream, design, dine, travel and live in a world thoughtfully curated by RH, creating an impression and connection unlike any other brand in the world.

Our hospitality efforts will continue to elevate the RH brand as we extend beyond the four walls of our Galleries into RH Guesthouses, where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion North American hotel industry.

Additionally, we are creating bespoke experiences like RH Yountville, an integration of Food, Wine, Art & Design in the Napa Valley, RH1 & RH2, our private jets, and RH3, our luxury yacht that is available for charter in the Caribbean and Mediterranean, where the wealthy and affluent visit and vacation.

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

Digital Reimagination .

We are reimagining our website into the World of RH, a digital portal presenting our products, places, services and spaces.

This will enable existing and new customers to experience the immersive and multi-dimensional World of RH, inclusive of Our Products:

Interiors, Modern, Contemporary, Color, Beach House, Ski House, Baby & Child, TEEN and Waterworks;

Galleries, Guesthouses, Restaurants and Residences;

Our Services:

Interior Design, Architecture and Landscape Architecture;

and Our Spaces:

Plane and Yacht Design and Charter.

Business Optimization .

We continue to evolve our operating platform to elevate the customer experience and enhance decision-making.

These efforts include initiatives such as (i) RH In-Your-Home, a reimagined home delivery experience that sets a new standard for “white glove” delivery and extends the Gallery into the customer’s home, (ii) the opening of a new LA-based distribution center, which will allow us to reduce delivery times by seven to ten days for both outdoor furniture and special order upholstery in most major markets, and (iii) an internal digital transformation that will leapfrog the way we work and drive significant productivity in the product development process, which will begin with the reimagination of the Center of Innovation and Product Leadership.

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

Internally our multi-year effort began with the reimagination of our Center of Innovation & Product Leadership to incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation.

Externally our strategy is designed to come to life digitally as we launch The World of RH, an online portal where customers can explore and be inspired by the depth and dimension of our brand.

The World of RH will include rich, immersive content with simplified navigation and search functionality, all designed to enhance the shopping experience and render our product and brand more valuable.

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.

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 a substantial long-term market opportunity to build a $20 to $25 billion global brand over time.

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 of RH.

As such, we are actively pursuing the expansion of the RH brand globally with the objective of launching international locations in Europe, beginning in 2022 with the opening of RH England, The Gallery at the Historic Aynhoe Park.

We have secured a number of locations in various markets in the United Kingdom and continental Europe for future Design Galleries and are in lease or purchase negotiations for additional locations.

Products and Product Development

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Key aspects of our product development platform are:

Organization —We have established a collaborative, cross-functional organization centered on product leadership and coordinated across our product development, sourcing, merchandising, inventory and creative teams.

Organization —We have established a collaborative, cross-functional organization leading our product development, sourcing, merchandising, inventory and creative teams.

Our product teams are focused on maximizing the sales potential of each product category across all channels, which eliminates channel conflicts and functional redundancies.

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We collaborate with our global network of specialty vendors and manufacturers to produce artisanal pieces of high quality and value on a large scale, including both distinctive original designs and reinterpretations of antiques.

Facility —We have built the RH Center of Innovation & Product Leadership , a facility which supports the entire product development process from product ideation to presentation for all channels.

As a result of our proprietary organization, process and facility, our typical product lead times are 3 – 9 months, which enhances our ability to introduce more new products with each collection.

Facility —We have built the RH Center of Innovation & Product Leadership , a facility that supports the entire product development process from product ideation to presentation across all channels.

Our proprietary organization, process and facility enhance our ability to introduce more new products with each collection.

In addition, our product development platform, sourcing capabilities and significant scale enable us to reduce our product costs.

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Sales Channels

We distribute our products through a fully integrated sales platform comprised of our retail locations, including RH Galleries and Waterworks Showrooms, websites, Source Books, Trade and Contract and Outlets.

We believe the level of integration among all of our channels and our approach to the market distinguishes us from other retailers.

Our channels complement each other and our customers’ buying decisions are influenced by their experiences across more than one of our sales channels.

We encourage our customers to shop across our channels and have aligned our business and internal organization to be channel agnostic.

Our integrated distribution and product delivery network serves all of our channels.

We believe the key advantage of our multiple sales channels is our ability to leverage the unique attributes of each channel in our approach to the market.

We distribute our products through a fully integrated sales platform comprising our retail locations, including RH Galleries and Waterworks Showrooms, in addition to our websites, Source Books, Trade and Contract, and Outlets.

We believe the level of integration among all of our channels and our approach to the market distinguish us from other retailers.

We encourage our customers to shop across our channels, which complement one another, and have aligned our business and internal organization to be channel agnostic.

Retail Locations

As of January 30, 2021, our retail locations are comprised of RH Galleries and Waterworks Showrooms:

As of January 29, 2022, our retail locations comprise RH Galleries and Waterworks Showrooms:

AVERAGE LEASED SELLING

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Leased selling square footage 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.

Our Galleries are located in upscale malls and street locations, as well as in iconic locations.

We believe situating our Galleries in desirable locations is critical to the success of our business.

New sites are identified based on a variety of factors, such as (i) the availability of suitable new site locations based on several store specific factors including geographic location, demographics, and proximity to affluent consumers, (ii) the ability to negotiate favorable economic terms, as well as (iii) the satisfactory and timely completion of real estate development including procurement of permits and completion of construction.

We pursue a market-based sales strategy, whereby we assess each market’s overall sales potential and how best to approach the market across all of our channels.

We customize square footage, as well as catalog circulation, to maximize each market’s sales potential and increase our return on invested capital.

(2) Thirteen of our Design Galleries include an integrated RH Hospitality experience.

Our Galleries reinforce our luxury brand aesthetic and are highly differentiated from other home furnishings retailers.

We have revolutionized the customer experience by showcasing products in a sophisticated lifestyle setting, consistent with the imagery and product presentation featured on our websites and in our catalogs.

Products in our Galleries are presented in fully appointed rooms, emphasizing collections over individual pieces.

This presentation encourages a higher average order value as our customers are inspired to consider purchasing a full collection of products to replicate the design aesthetic experienced in our Galleries.

This presentation inspires our customers to consider purchasing a full collection of products to replicate the design aesthetic experienced in our Galleries.

In addition, our associates use iPads and other devices to allow customers to shop our entire merchandise assortment while in a retail location.

As of January 30, 2021, ten of our RH Design Galleries included an integrated RH Hospitality experience, which includes Restaurants and wine bars.

We believe this has created a unique new retail experience that cannot be replicated online, and that the addition of hospitality is helping to drive incremental sales of home furnishings in these Galleries.

We believe situating our Galleries in desirable locations, such as iconic buildings and luxury retail malls, is critical to the success of our business.

New sites are identified based on a variety of store-specific factors – including unique architecture, geographic location, demographics, and proximity to affluent consumers – in addition to our ability to negotiate favorable economic terms and to procure permits and complete construction in a timely manner.

We pursue a market-based sales strategy, whereby we assess each market’s overall sales potential and how best to approach the market across all of our channels.

We customize square footage, as well as Source Book circulation, to maximize each market’s sales potential and increase our return on invested capital.

We believe our integrated RH hospitality experience, which includes Restaurants and Wine Bars, 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.

We plan to incorporate hospitality into most of the new Galleries that we open in the future.

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FORM 10-K | 3

First, we have developed prototype Design Galleries that are innovative and flexible blueprints which enable us to more quickly place our disruptive product assortment and immersive retail experience into the market.

The new model is a standard we will continue to utilize and is based on key learnings from more recent Design Gallery openings.

The prototype has approximately 40,000 leased selling square feet, inclusive of our integrated hospitality experience, and presents our assortments across our businesses and contains interior design offices and presentation rooms where design professionals can work with clients on their projects.

This new model is more capital efficient and accelerates the development process.

First, we have developed prototype Design Galleries that are innovative and flexible blueprints that enable us to more quickly place our disruptive product assortment and immersive retail experience into the market.

The prototype model is a standard we will continue to utilize and innovate based on key learnings from more recent Design Gallery openings.

The prototype has approximately 40,000 leased selling square feet, inclusive of our integrated hospitality experience, presents our assortments across our businesses and contains interior design offices and presentation rooms where design professionals can work with clients on their projects.

The prototype model is capital efficient and accelerates the development process.

Our most recently opened Design Galleries in Dallas, Texas, Oak Brook, Illinois and Jacksonville, Florida are prototype Design Galleries, and an upcoming prototype location includes Palo Alto, California, which is expected to open in the second half of fiscal 2022.

We anticipate the prototype Design Galleries will represent the format of most of our upcoming Design Galleries in North America.

Our most recently opened Design Galleries in Charlotte and Marin are prototype Design Galleries, and upcoming prototype locations include Jacksonville, Florida, Dallas, Texas and Oak Brook, Illinois, which are expected to open in fiscal 2021.

Second, we will continue to develop and open larger Bespoke Design Galleries in the top metropolitan markets, similar to those we opened in New York and Chicago.

These iconic locations are highly profitable statements for our brand, and we believe they create a long-term competitive advantage that will be difficult to duplicate.

We expect to open our Bespoke Design Gallery in San Francisco, California in fiscal 2021.

We will be opening our Bespoke Design Gallery, RH San Francisco, The Gallery at the Historic Bethlehem Steel Building, in spring 2022 and expect to open additional Bespoke locations in the coming years.

Third, we will continue to open indigenous Bespoke Galleries in the best second-home markets where the wealthy and affluent visit and vacation.

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Examples of current indigenous Bespoke Galleries include our location in Yountville, California, as well as our Gallery under development in Aspen, Colorado.

We believe our multi-tier market approach to transforming our real estate will enable us to open five to seven new Galleries per year over time but the cadence of our new Gallery development has been slowed by the COVID-19 pandemic.

The cadence of our Gallery openings depends upon a number of factors.

We plan to expand our product sales to additional international markets and have signed leases for Design Galleries in several locations outside of North America, including the United Kingdom, France and Germany.

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RH Design Galleries:

Dallas Design Gallery

Oak Brook Design Gallery

Jacksonville Design Gallery

Marin Design Gallery

Charlotte Design Gallery

Minneapolis Design Gallery

Columbus Design Gallery

RH Modern Galleries:

Dallas RH Modern Gallery (relocation)

RH Baby & Child Galleries:

Portland RH Baby & Child Gallery

Dallas RH Baby & Child Gallery

Dallas RH Modern Gallery

RH Baby & Child and TEEN Galleries:

Santa Monica Baby & Child and TEEN Gallery

RH Legacy Galleries:

Tysons legacy Gallery (relocation)

Dallas legacy Gallery

Oak Brook legacy Gallery

Raleigh legacy Gallery

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Louis legacy Gallery (relocation)

San Diego legacy Gallery (relocation)

Minneapolis legacy Gallery

Columbus legacy Gallery

Durham legacy Gallery

San Antonio legacy Gallery (relocation)

Dallas legacy Gallery (relocation)

Waterworks Showrooms:

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Leased selling square footage includes approximately 4,800 square feet as of fiscal 2020 related to an owned retail location and approximately 37,700 square feet as of fiscal 2019 related to two owned retail locations.

FORM 10-K | 5

(2) Total leased square footage includes approximately 5,400 square feet as of fiscal 2020 related to an owned retail location and 48,700 square feet as of fiscal 2019 related to two owned retail locations.

Leased selling square footage includes approximately 4,800 square feet as of both fiscal 2021 and fiscal 2020 related to an owned retail location.

(2) Total leased square footage includes approximately 5,400 square feet as of both fiscal 2021 and fiscal 2020 related to an owned retail location.

(3) Weighted-average leased square footage and leased 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.

FORM 10-K | 5

The following list shows the number of retail locations in each U.S.

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We sell Waterworks products online through www.waterworks.com.

Our websites allow our customers to experience the unique lifestyle settings reflected in our catalogs and throughout our Galleries and Showrooms, and to shop all of our current product assortment.

Our websites allow our customers to experience the unique lifestyle settings reflected in our Source Books and throughout our Galleries and Showrooms, and to shop all of our current product assortment.

We update our websites regularly to reflect new products, product availability and occasional special offers.

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Additionally, customers can select color swatches and view merchandise displayed with different color and fabric options.

6 | FORM 10-K

We produce a series of catalogs, which we refer to as Source Books, to showcase our merchandise assortment.

Our Source Books include RH Interiors, RH Modern, RH Outdoor, RH Baby & Child and TEEN, RH Beach House, RH Ski House and RH Rugs, and we expect to launch RH Contemporary in fiscal 2021.

Our Source Books include RH Interiors, RH Modern, RH Outdoor, RH Baby & Child and TEEN, RH Beach House, RH Ski House and RH Rugs.

Additionally, we plan to launch the RH Contemporary Source Book in fiscal 2022.

Our Source Books are one of our primary branding and advertising vehicles.

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All creative work on our Source Books is coordinated in-house in our RH Center of Innovation & Product Leadership , providing us greater control over the brand image presented to our customers, while also reducing our Source Book production costs.

6 | FORM 10-K

Our Source Book mailings serve as a key driver of sales through both our retail locations and websites.

Our customers respond to the Source Books across all of our channels, with sales trends closely correlating to the assortments that we emphasize and feature prominently in our Source Books, websites and Galleries.

Our Source Books, in concert with our websites, are a cost-effective means to test new products, and allow us to launch categories in a disciplined, expeditious and cost-effective manner.

We continue to evaluate and optimize our Source Book strategy based on our experience.

We maintain a database of customer information, including customer information from our RH Members Program, which includes sales patterns, detailed purchasing information and certain demographic information, as well as mailing and email addresses.

We maintain a database of customer information, including information from our RH Members Program.

Our customer database includes sales patterns, detailed purchasing information and certain demographic information, as well as mailing and email addresses.

We mail our Source Books to addresses within this database and to addresses provided to us by third parties.

The database supports our ability to analyze our customers’ buying behaviors across sales channels and facilitates the development of targeted marketing strategies and is maintained in accordance with our privacy policy disclosed on our website.

The database, which is maintained in accordance with our privacy policy disclosed on our website, supports our ability to analyze our customers’ buying behaviors across sales channels, facilitates the development of targeted marketing strategies, and supports prospecting new customers.

We segment our customer files based on multiple variables, and we tailor our Source Book mailings and emails in response to the purchasing patterns and product needs of our customers.

We focus on continually improving the segmentation of customer files and the expansion of our customer database.

Our Source Books, in concert with our websites, are a cost-effective means to test new products, and allow us to launch categories in a disciplined, expeditious and cost-effective manner.

We continue to improve the segmentation of customer files and the expansion of our customer database.

Trade and Contract

In addition to our core channels, we continue to expand into B2B channels, including Trade and Contract.

In the Trade channel, we work directly with residential interior designers and decorators purchasing products for their clients’ residential projects.

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Our Galleries, websites and Source Books are the primary branding and advertising vehicles for the RH brands.

In addition, we employ a variety of marketing and advertising vehicles to drive customer traffic across all our channels, strengthen and reinforce our brand image and acquire new customers.

In addition, we employ a variety of marketing and advertising techniques to drive customer traffic across all our channels, strengthen and reinforce our brand image and acquire new customers.

These include targeted Source Book circulation, email communications, promotional mailings, print advertisements, and public relations activities and events.

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We leverage our marketing and advertising expenses across all our channels as we seek to optimize the efficiency of our investment.

FORM 10-K | 7

The highly differentiated design aesthetic and environment of our Galleries drives customer traffic not only to our physical spaces but also to our websites.

Our Source Books and targeted emails further reinforce the RH brand image and drive sales across all of our sales channels.

We also participate in a wide range of other marketing, promotional and public relations activities to promote our brands.

We also participate in a wide range of other marketing, promotional and public relations activities.

These campaigns include media coverage in design, lifestyle, culture/society and specialty publications, as well as in-Gallery events related to new Gallery openings and product launches.

In addition, we engage in print advertising in brand-relevant publications such as Architectural Digest, Elle Décor, Town and Country, T:

In addition, we engage in print advertising in brand-relevant publications such as Architectural Digest, Elle Décor, Luxe Interiors + Designs, T:

The New York Times Style Magazine, WSJ.

Magazine and others.

Magazine, Business of Home and others.

We believe that these efforts drive increased brand awareness, leading to higher sales over time.

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The RH Members Program reimagines and simplifies the shopping experience.

For an annual fee, the RH Members Program provides a set discount every day across all RH brands, excluding RH Hospitality and Waterworks, in addition to other benefits including complimentary interior design services through the RH Interior Design program and eligibility for preferred financing plans on the RH Credit Card, among other benefits.

The RH Members Program allows our customers to shop for what they want, when they want, and receive the greatest value, which has resulted in orders and sales being more evenly distributed throughout the year as opposed to the peaks and valleys of orders and sales we experienced under the prior promotional model.

For the year ended January 30, 2021, our members drove approximately 97% of sales in our core RH business, and we had approximately 434,000 members at year end.

During fiscal 2021, our members drove approximately 97% of sales in our core RH business, and we had approximately 459,000 members at year end.

Our core RH business reflects the product categories that the membership discount can be applied to, and, as a result, sales generated via Outlet, Contract, Hospitality or Waterworks are excluded.

We believe our membership model enhances the customer experience, renders our brand more valuable, improves operational execution and reduces costs.

FORM 10-K | 7

Our sourcing strategy focuses on identifying and using vendors that can provide the quality materials and fine craftsmanship that our customers expect of our brand.

To ensure that our high standards of quality and timely delivery of merchandise are met, we work closely with vendors and manufacturers.

We work closely with vendors and manufacturers to ensure that our high standards of quality and timely delivery of merchandise are met.

We seek to ensure the consistent quality of our manufacturers’ products by selectively inspecting pre-production samples, conducting periodic site visits to certain of our vendors’ production facilities and selectively inspecting inbound shipments at our distribution facilities.

In fiscal 2021, we sourced approximately 75% of our purchase dollar volume from approximately 29 vendors.

In fiscal 2020, one vendor accounted for approximately 11% of our purchase dollar volume.

Based on total dollar volume of purchases for fiscal 2020, approximately 72% of our products were sourced from Asia, with 35% sourced from China, 15% from the United States and the remainder from other countries and regions.

In fiscal 2021, one vendor accounted for 11% of our purchase dollar volume.

Based on total dollar volume of purchases for fiscal 2021, 69% of our products were sourced from Asia, with 34% sourced from China, 15% from the United States and the remainder from other countries and regions.

In addition, we perform limited manufacturing activities in the United States.

We have a limited number of long-term merchandise supply contracts, but we believe that we generally have strong relationships with our product vendors.

Although we transact business primarily on an order-by-order basis, we typically work with most of our vendors over extended periods of time, and many vendors are making long-term capacity investments to serve our increasing demands.

Over the last several years, we engaged in a sourcing initiative to develop closer relationships with our vendors in order to achieve better efficiencies and further improve our product development process.

Through this process, we have eliminated the use of most third-party purchasing agents in favor of a model in which we directly manage our vendors.

We have achieved significant cost savings and other efficiencies from this initiative.

Although we transact business primarily on an order-by-order basis, we typically work with most of our vendors over extended periods of time, and many vendors continue to make long-term capacity investments to serve our increasing demands.

We develop close relationships with our vendors in order to achieve significant cost savings and improve our product development process by eliminating the use of most third-party purchasing agents in favor of a model in which we directly manage our vendors.

Distribution and Delivery

We manage the distribution and delivery of our products through our distribution centers.

We currently operate two furniture fulfillment centers and one small parcel fulfillment center servicing RH products, which are located strategically in three markets throughout the United States.

We have signed a lease for a third furniture fulfillment center in the Los Angeles market, which is expected to be operational in the spring of 2021.

We currently operate three furniture fulfillment centers and one small-parcel fulfillment center servicing RH products, which are located strategically in four markets throughout the United States.

We have one fulfillment center in the United States servicing Waterworks products.

8 | FORM 10-K

In addition, we continue to develop our supply chain in the U.K.

and Europe in connection with our global expansion and plan to use third-party providers to serve our customers.

We operate portions of our home delivery services in 22 key markets to leverage operating costs and improve our customers’ delivery experience, while reducing returns and damage to our products.

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We believe we have dramatically enhanced the customer experience while reducing return rates, damages and deliveries per order by enhancing the quality of our delivery providers through metric-based accountability standards.

Through our distribution center network redesign, reverse logistics and outlet redesign, and the reconceptualization of home delivery, we have improved our supply chain and fulfillment capabilities, and have built a scalable infrastructure to support our future growth.

We believe our enhanced supply chain and fulfillment operations allow us to manage customer orders and distribute merchandise to our customers in an efficient and cost-effective manner.

We also believe that these upgrades have improved customer satisfaction by reducing delivery times, reducing damage to merchandise, and improving our customer’s overall buying experience.

We believe our supply chain and fulfillment operations allow us to manage customer orders and distribute merchandise to our customers in an efficient and cost-effective manner.

The home furnishings sector is highly competitive.

We believe that we compete primarily on the basis of the design, style and quality of our products and the luxury positioning of our brand, including our customer service.

We believe that we compete primarily on the basis of the design, style and quality of our products, the breadth of our assortment of high-quality merchandise and the luxury positioning of our brand.

We believe that customers respond favorably to the style and presentation of our products and that we offer consumers a substantial assortment of curated merchandise selections as part of a lifestyle experience.

We are continuing to elevate our product and create separation between our brand and that of many of our competitors.

We believe that we compete effectively on the basis of our luxury brand, the breadth of our assortment of high-quality merchandise and the pricing of our products.

We continue to elevate our product assortment and create separation between our brand and that of many of our competitors.

We compete with the interior design trade and specialty stores, as well as antique dealers and other merchants that provide unique items and custom-designed product offerings at higher price points, by providing a broader product assortment at an exceptional value based both upon the price and quality of our products.

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However, many smaller specialty retailers may lack the financial resources, infrastructure, scale and national brand identity necessary to compete effectively with us.

We believe we are effectively positioned to gain market share from both of these segments and drive growth.

Human Capital

As of January 30, 2021, we had approximately 5,000 employees, of which approximately 500 were part-time employees.

As of that date, approximately 2,200 of our employees were based in our retail locations and outlets.

We believe we are positioned to gain market share from both of these segments and drive growth.

8 | FORM 10-K

At RH, we believe deeply that the “right” people are our greatest asset.

As of January 29, 2022, we had approximately 6,500 associates, of which approximately 800 were part-time associates.

As of that date, approximately 2,300 of our associates were based in our retail locations and outlets.

None of our employees are represented by a union, and we have had no labor-related work stoppages.

We believe that relations with our employees are good.

The success of our business depends upon our ability to retain continued service of certain key personnel, particularly our Chairman and Chief Executive Officer, Gary Friedman, and to attract, retain and motivate qualified leaders throughout our Company, as well as qualified associates across all parts of our organization, including Galleries, Restaurants, distribution centers, home delivery centers and customer care centers.

We believe that relations with our associates are good.

Our goal is to have the most qualified person in every position throughout our organization.

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RH is an equal opportunity employer, and we believe in meritocratic hiring.

We strongly believe our performance is enhanced by a workforce comprised of individuals with diverse backgrounds, skills and experience that align with the needs of our business.

FORM 10-K | 9

Our culture is driven by our Chairman and CEO and the senior leadership team, who instill a company-wide commitment to our values of People, Quality, Service and Innovation.

We strongly believe our performance is enhanced by a workforce comprising individuals with diverse backgrounds, skills and experience that align with the needs of our business.

We are committed to operating our environments with the highest safety standards to ensure the health and well-being of our guests and team members.

Our culture is driven by our Chairman and Chief Executive Officer and the senior leadership team, who instill a company-wide commitment to our values of People, Quality, Service and Innovation.

We believe our distinct corporate culture allows us to attract highly talented individuals who are passionate, driven and who share our vision.

We expect our values to be maintained throughout our business, including our supply chain.

We require our vendors to adhere to our Vendor Code of Conduct, which can be found on the Investor Relations section of our website, which is located at ir.rh.com under “Governance / Environmental, Social & Governance.”

In April 2020, we announced organizational changes and expense reductions in response to business conditions resulting from the COVID-19 pandemic, including the temporary furlough of team members, the termination of certain jobs, and temporary salary reductions for the substantial majority of leadership positions across the Company.

While we have subsequently discontinued the furlough and salary reductions measures, our workforce continues to be impacted by the COVID-19 pandemic.

At various times since the beginning of the pandemic, substantially all of our leadership team, including those in our corporate office in Corte Madera, California, have been subject to state and local shelter-in-place requirements, which have varied over time and resulted in most of our associates being required to work remotely.

We are committed to operating our environments with the highest safety standards to ensure the health and well-being of our guests and team members.

As of March 24, 2021, we had reopened all of our Galleries and Outlets, and nine out of ten of our Restaurants, with adjusted hours and CDC-recommended safety measures in place.

We perform health checks for all associates entering our locations each day, and require all customers and associates to wear masks and adhere to all CDC guidelines for cleaning and social distancing protocols.

We require our vendors to adhere to our Vendor Code of Conduct, which can be found on the Investor Relations section of our website, located at ir.rh.com under “Governance / Environmental, Social & Governance.”

Intellectual Property

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Each of our trademark registrations is perpetually renewable provided that we use or continue to use the trademarks in commerce in the particular geographic market and for the goods or services covered by the registration.

In addition, we own many domain names, including “rh.com,” “restorationhardware.com,” “rhmodern.com,” “rhbabyandchild.com,” “rhteen.com,” “rhbeachouse.com,” “rhskihouse.com,” “waterworks.com” and others that include our trademarks.

In addition, we own many domain names, including “rh.com,” “restorationhardware.com,” “rhmodern.com,” “rhbabyandchild.com,” “rhteen.com,” “rhbeachouse.rh.com,” “rhskihouse.rh.com,” “waterworks.com” and others that include our trademarks.

These domain names are perpetually renewable.

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Fluctuation in Quarterly Results

Our quarterly results vary depending upon a variety of factors, including changes in our product offerings and the introduction of new merchandise assortments and categories, the opening of new retail location, shifts in the timing of various events quarter over quarter including holidays and other events such as retail location and outlet closures, the timing of Source Book releases, promotional events and the timing and extent of our realization of the costs and benefits of our numerous strategic initiatives, among other things.

Our quarterly results vary depending upon a variety of factors, including changes in our product offerings and the introduction of new merchandise assortments and categories, changes in retail locations, the timing of Source Book releases, and the extent of our realization of the costs and benefits of our numerous strategic initiatives, among other things.

For example, we have historically experienced some seasonality in our business trends as our sales are typically higher in the second fiscal quarter, which correlates to a peak selling season for outdoor items including outdoor furniture.

As a result of these factors, our working capital requirements and demands may fluctuate during the year.

For example, we experienced significant fluctuations in our revenue growth over the last several years including within the quarters during fiscal 2020, which were affected by a variety of factors related to the overall operating environment including the impact of the pandemic on various parts of our operations.

In addition, we have historically experienced some seasonality in our business trends as our sales are typically higher in the second fiscal quarter, which correlates to a peak selling season for outdoor items including outdoor furniture.

Unique factors in any given quarter may affect period-to-period comparisons between the quarters being compared, and the results for any quarter are not necessarily indicative of the results that we may achieve for a full fiscal year.

Unique factors in any given quarter may affect period-to-period comparisons, and the results for any quarter are not necessarily indicative of the results that we may achieve for a full fiscal year.

Corporate Information

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We believe we are in material compliance with laws applicable to our business.

During fiscal 2020, various regulations and policies aimed at reducing the transmission of COVID-19, including the requirement to close our retail and hospitality locations, had a material impact on our results of operations, and these or other similar regulations and policies could affect our business in future periods.

Where You Can Find More Information

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The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, who file electronically with the SEC.

The address of that website is http://www.sec.gov .

The address of that website is www.sec.gov .

We maintain public internet sites at www.rh.com and www.restorationhardware.com and make available, free of charge, through these sites our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers, as well as any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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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 1. Business