What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-29 compared with 2022-03-30 · 97 added, 87 removed, 205 unchanged (47% of the section changed)

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.

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

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.

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

Our curated and fully integrated assortments are presented consistently across our sales channels, including our retail locations, websites and Source Books.

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

Our retail business is fully integrated across our multiple channels of distribution.

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

We operate our retail locations throughout the United States, Canada, and the U.K., and have an integrated RH Hospitality experience in 14 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.

In addition, we opened our first RH Guesthouse in New York in September 2022, a first-of-its-kind hospitality experience for travelers seeking privacy and luxury.

The property features six guest rooms, three guest suites and a private residence, as well as The Dining Room & Terrace.

Macroeconomic Factors

There are a number of macroeconomic factors and uncertainties affecting the overall business climate as well as our business, including increased inflation, rising interest and mortgage rates, and uncertainties in the global financial markets related to the foregoing as well as, among other things, the war in Ukraine and recent failures of several financial institutions, including Silicon Valley Bank and others.

These and other macroeconomic factors may have a number of adverse effects on economic conditions and markets in which we operate, including the housing market, with the potential for an economic recession and a sustained downturn in the housing market.

Factors such as a slowdown in the housing market or negative trends in stock market prices could have a negative impact on demand for our products.

We believe that these macroeconomic factors have contributed to the slowdown in demand that we have experienced in our business over the last several fiscal quarters.

Our decisions regarding the sources and uses of capital will continue to reflect and adapt to changes in market conditions and our business, including further developments with respect to macroeconomic factors.

For more information, refer to Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview.

Key Value-Driving Strategies

In order to drive growth across our business, we are focused on the following long-term key strategies and business initiatives:

In order to achieve our long-term strategies of Product Elevation, Platform Expansion and Cash Generation as well as drive growth across our business, we are focused on the following key strategies and business initiatives:

Product Elevation .

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

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

Our products are presented across multiple collections, categories and channels that we control, and 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.

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

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

Over the next few years, we plan to introduce RH Couture, RH Bespoke and RH Color.

Gallery Transformation .

Our product is elevated and rendered more valuable by our architecturally inspiring Galleries.

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

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 that is sized to the potential of each market and the size of our assortment.

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 most of the new Design Galleries that we open in the future, which further elevates and renders our product and brand more valuable.

5 unchanged sentences

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

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

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.

3 unchanged sentences

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.

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.

Launched in the spring of 2022, The World of RH includes 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 expect to continue to elevate the customer experience on The World of RH with further enhancements to content, navigation and search functionality.

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

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.

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 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 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.

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

We have secured a number of locations in various markets in the U.K.

and continental Europe for future Design Galleries and are currently in lease or purchase negotiations for additional locations.

Products and Product Development

29 unchanged sentences

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.

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

(2) We have an integrated RH Hospitality experience in fourteen of our Design Galleries.

We also have RH Hospitality in our one RH Guesthouse.

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

3 unchanged sentences

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

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

We believe situating our Galleries in desirable locations, such as iconic buildings and luxury retail shopping centers, 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.

5 unchanged sentences

FORM 10-K | 3

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.

First, we have architected Design Galleries to be innovative and flexible formats that will enable us to more quickly place our disruptive product assortment and immersive retail experience into the market.

We will continue to utilize these designs and innovate based on key learnings from more recent Design Gallery openings.

Our most common Design Galleries have approximately 30,000 to 40,000 leased selling square feet, inclusive of our integrated hospitality experience, and present our product assortments across our businesses and contain interior design offices and presentation rooms where design professionals work with clients on their projects.

These designs are capital efficient and accelerate the development process.

Examples of these upcoming Galleries include Palo Alto, California and Cleveland, Ohio.

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 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.

These Galleries are tailored to reflect the local culture and are sized to the potential of each market.

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

We opened our Bespoke Design Gallery, RH San Francisco, The Gallery at the Historic Bethlehem Steel Building, in May 2022 and expect to open additional Bespoke locations in the coming years, including RH England, The Gallery at the Historic Aynho Park, RH New Jersey, The Gallery at the Historic Alnwick Hall and other locations in the U.S.

Third, we will continue to open Bespoke Galleries in the best second-home markets where Galleries are tailored to reflect the local culture and are sized to the potential of each market.

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

Fourth, we have developed alternative Design Gallery formats with varying sizes that are suited to many smaller and mid-sized North American markets, and we are testing this approach as we open new Galleries in different new locations.

Finally, we believe there is an opportunity to address new markets locally by opening new Design Studios in neighborhoods, towns and small cities where the wealthy and affluent live, visit and vacation.

We have several existing locations that validate this strategy in East Hampton, Yountville, Los Gatos, Pasadena and our former San Francisco Gallery in the Design District, where we have approximately 2,000 to 5,000 square feet and are able to generate substantial annual revenues.

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.

We plan to expand our product sales to additional international markets and have signed agreements for Design Galleries in several locations outside of North America, including the U.K., France, Germany, Spain, Italy and Belgium.

4 | FORM 10-K

2 unchanged sentences

SELLING SQUARE

(in thousands)

(square footage in thousands)

Beginning of period

RH Design Galleries:

San Francisco Design Gallery

Dallas Design Gallery

1 unchanged sentence

Jacksonville Design Gallery

Marin Design Gallery

Charlotte Design Gallery

RH Modern Galleries:

3 unchanged sentences

RH Legacy Galleries:

Tysons legacy Gallery (relocation)

San Francisco legacy Gallery

Troy legacy Gallery (relocation)

Dallas legacy Gallery

Oak Brook legacy Gallery

Raleigh legacy Gallery

Charlotte legacy Gallery

Corte Madera legacy Gallery

Westport legacy Gallery

Louis legacy Gallery (relocation)

Waterworks Showrooms:

New York 59th Street Showroom

Tysons legacy Gallery (relocation)

End of period

4 unchanged sentences

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.

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.

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

(2) Total leased square footage includes approximately 5,400 square feet as of fiscal 2021 related to one 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.

In addition to the retail locations, in fiscal 2022 we opened our RH Guesthouse with approximately 13,800 leased selling square footage.

FORM 10-K | 5

9 unchanged sentences

In many cases, we continue to operate a retail location until our lease has expired in order to effect the closure in a cost-efficient manner.

Our primary RH websites, www.rh.com , www.rhmodern.com, www.rhbabyandchild.com and www.rhteen.com , provide our customers with the ability to chat with a designer and purchase our merchandise online.

Our primary RH websites, www.rh.com , www.rhmodern.com, www.rhbabyandchild.com and www.rhteen.com , provide our customers with the ability to purchase our merchandise online.

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

6 unchanged sentences

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.

Additionally, we launched the RH Contemporary Source Book in fiscal 2022.

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

24 unchanged sentences

Marketing and Advertising

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

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

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.

We use our customer database to tailor our programs and increase the efficiency of our marketing and promotion initiatives.

We use our customer database to tailor our programs and increase the efficiency of our marketing and promotional initiatives.

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

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.

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

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, Luxe Interiors + Designs, T:

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

The New York Times Style Magazine, WSJ.

Magazine, Business of Home and others.

Magazine, Business of Home, Luxe Interiors + Designs, C Magazine and others.

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

1 unchanged sentence

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 Cards.

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

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.

9 unchanged sentences

Based on total dollar volume of purchases for fiscal 2022, 71% of our products were sourced from Asia, with 29% sourced from China, 12% 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 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.

Although we transact business primarily on an order-by-order basis, we typically work with many 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 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

2 unchanged sentences

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

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 21 key markets to leverage operating costs and improve our customers’ delivery experience, while reducing returns and damage to our products.

3 unchanged sentences

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.

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.

In addition, we have one third-party distribution center in Europe and continue to develop our supply chain strategy in connection with our global expansion.

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, and we continue to identify opportunities to improve the delivery of our products.

The home furnishings sector is highly competitive.

2 unchanged sentences

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.

We also compete with national and regional home furnishing retailers and department stores, in addition to mail order catalogs and online retailers focused on home furnishings, by offering what we believe is superior quality, highly distinctive design styles and a sophisticated lifestyle presentation in our product offering.

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 products at higher price points.

We also compete with a number of other home furnishing retailers, including national and regional businesses as well as new market participants.

We will face new competitors as we expand our business globally.

In addition, we compete with mail order catalogs and online retailers focused on home furnishings.

8 | FORM 10-K

We compete b y offering what we believe is superior quality, highly distinctive design styles and a sophisticated lifestyle presentation in our product offering.

We also believe that our success depends in substantial part on our ability to originate and define product trends, as well as to timely anticipate, gauge and react to changing consumer demands.

Many of our competitors seek to compete with us by offering products that are similar to our merchandise at lower price points.

Certain of our competitors are larger and have greater financial, marketing and other resources than us.

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 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 associates 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, both in the United States and internationally.

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

As we are headquartered in the San Francisco Bay Area, a highly dynamic and competitive market for talent, we seek to provide competitive compensation for our people in order to attract and retain the best available talent.

We do not discriminate against any applicant or associate and have a policy outlining these principles.

This policy governs all aspects of employment, including recruitment, hiring, training, promotion, compensation, discipline, job assignments, benefits, transfer and discharge.

We maintain a diverse workforce.

We are a vision-led organization with a strong culture, led by our Chairman and Chief Executive Officer, Gary Friedman, in partnership with our senior leadership team.

Together, they instill a company-wide commitment to our Vision, Values and Beliefs.

Our Values – People, Quality, Service, and Innovation – are brought to life by our associates across the organization.

Our success and future growth depends largely upon the continued service of our leadership team, as well as our talented associates across all parts of our organization.

Our business success also depends on our ability to attract, hire and retain qualified individuals.

We endeavor to reward individual and team contribution, demonstrated by the delivery of long-term, sustainable results.

Our compensation programs are designed to align the interests of our officers and associates with our Vision, Values and objectives, as well as our business strategy.

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

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.

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

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

We have a policy that prohibits us from discriminating against any applicant or associate and this policy governs all aspects of employment, including recruitment, hiring, training, promotion, compensation, discipline, job assignments, benefits, transfer and discharge.

We believe that our commitment to diversity is demonstrated by the composition of our workforce.

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, located at ir.rh.com under “Governance / Environmental, Social & Governance.”

Certain headcount data is set forth in the following table:

(approximate)

Total associates (1)

Retail and Outlet associates

Hospitality associates

Part-time associates

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

Environmental, Social and Governance

Our environmental , social and certain other governance efforts are implemented through our environmental, social and governance (“ESG”) programs, which are designed to align our approach to ESG issues with the interests of our people, customers and shareholders and their respective ESG concerns.

FORM 10-K | 9

Intellectual Property

The “RH,” “Restoration Hardware,” “RH Interiors,” “RH Modern,” “RH Outdoor,” “RH Baby & Child,” “RH TEEN,” “RH Beach House,” “RH Ski House,” “RH Rugs” and “Waterworks,” and “Waterworks Studio” trademarks, among others, are registered or are the subject of pending trademark applications with the United States Patent and Trademark Office and with the trademark registries of several foreign countries.

The “RH,” “Restoration Hardware,” “RH Interiors,” “RH Contemporary,” “RH Modern,” “RH Outdoor,” “RH Baby & Child,” “RH TEEN,” “RH Beach House,” “RH Ski House,” “RH Guesthouse,” “RH Rugs,” “The World of RH” and “Waterworks,” trademarks, among others, are registered or are the subject of pending trademark applications with the United States Patent and Trademark Office and with the trademark registries of several foreign countries.

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.rh.com,” “rhskihouse.rh.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.com,” “rhskihouse.com,” “rhguesthouse.com,” “waterworks.com” and others that include our trademarks.

These domain names are perpetually renewable.

1 unchanged sentence

These design patents are valid for 15 years from their date of issuance.

We own copyrights, including copyright registrations or pending applications, for our website and for several of our Source Books.

We believe that our trademarks, design patents, and copyrights have significant value and we vigorously protect them against infringement.

We own copyrights, including copyright registrations or pending applications, for our website and our Source Books.

We believe that our trademarks, domain names, design patents, and copyrights have significant value and we vigorously protect them against infringement.

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, 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.

5 unchanged sentences

filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to change its name to “RH,” effective January 1, 2017.

FORM 10-K | 9

Regulation and Legislation

14 unchanged sentences

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