RH

Previous wording

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 inItem 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.

Current wording

The discussion of our financial condition and changes in our results of operations, liquidity and capital resources is presented in this section for the three and six months ended August 1, 2026, and a comparison to the three and six months ended August 2, 2025. The discussion related to cash flows for the six months ended August 2, 2025, has been omitted from this Quarterly Report on Form 10-Q, but is included inItem 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations on our Form 10-Q for the quarter ended August 2, 2025, filed with the Securities and Exchange Commission (“SEC”) on September 11, 2025.

Previous wording

Basis of Presentation and Results of Operations. 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.

Current wording

Basis of Presentation and Results of Operations. This section provides our 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 operational decision-making and as a means to evaluate period-to-period comparisons.

Previous wording

Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. 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 titledRisk Factors in our 2025 Form 10-K andManagement’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. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.

Current wording

Forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. 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 titledRisk Factors in our 2025 Form 10-K andManagement’s Discussion and Analysis of Financial Condition and Results of Operations in Part I of this Quarterly Report, in our Quarterly Report on Form 10-Q for the quarterly period ended May 2, 2026 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. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties.

Previous wording

We are 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 Sourcebooks. 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 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 we have an integrated RH Hospitality experience in 26 of our Design Gallery locations, which includes restaurants and wine bars.

Current wording

We are 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 Sourcebooks. 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 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 we have an integrated RH Hospitality experience in 27 of our Design Gallery locations, which includes restaurants and wine bars.

Previous wording

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. 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.

Current wording

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. 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 at which time we filed for refunds for tariffs previously paid in an aggregate amount of $69 million, of which $67 million was received 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.

Previous wording

Product Elevation. 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 we believe their desirability and exclusivity have enabled us to achieve strong revenues and margins. Our customers know our brand concepts as RH Interiors, RH Modern, 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. 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.

Current wording

Product Elevation. 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 we believe their desirability and exclusivity have enabled us to achieve strong revenues and margins. Our customers know our brand concepts as RH Interiors, RH Modern, 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. Beginning with the mailing of our RH Interiors Sourcebook in the fall of 2023 and through additional product launches and Sourcebook mailings since then, including most recently the launch of RH Estates in 2026, we have introduced the most prolific collection of new products in our history.

Previous wording

Global Expansion. 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. 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.

Current wording

Global Expansion. 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. In April 2026, we opened RH Milan, The Gallery on Corso Venezia, and in June 2026, we opened RH London, The Gallery in Mayfair. In addition, we plan to open RH Sydney, The Gallery in Double Bay, in Australia in the coming years.

Previous wording

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. 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 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.

Current wording

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. 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 revenues that we 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.

Previous wording

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

Current wording

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

Previous wording

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. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by senior leadership in its financial and operational decision-making. The non-GAAP financial measures used by us in this Quarterly Report on Form 10-Q may be different from the non-GAAP financial measures, including similarly titled measures, used by other companies.

Current wording

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”). 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. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by senior leadership in its financial and operational decision-making. The non-GAAP financial measures used by us in this Quarterly Report on Form 10-Q may be different from the non-GAAP financial measures, including similarly titled measures, used by other companies.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

EBITDA and Adjusted EBITDA. 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.

Current wording

EBITDA and Adjusted EBITDA. 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 interest expense—net, income tax expense 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.

Previous wording

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

Current wording

Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA

Previous wording

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 during the construction period.

Current wording

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.

Previous wording

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 toprincipal 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.

Current wording

In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $6.2 million in the six months ended August 2, 2025, which are reflected as a reduction toprincipal 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 six months ended August 1, 2026.

Previous wording

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.

Current wording

Consolidated gross profit increased $36 million, or 8.7%, to $445 million in the three months ended August 1, 2026 compared to $409 million in the three months ended August 2, 2025. As a percentage of net revenues, consolidated gross margin increased 270 basis points to 48.2% of net revenues in the three months ended August 1, 2026 from 45.5% of net revenues in the three months ended August 2, 2025.

Previous wording

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.

Current wording

RH Segment gross profit increased $30 million, or 8.0%, to $411 million in the three months ended August 1, 2026 compared to $381 million in the three months ended August 2, 2025. As a percentage of net revenues, RH Segment gross margin increased 240 basis points to 47.4% of net revenues in the three months ended August 1, 2026 from 45.0% of net revenues in the three months ended August 2, 2025. The increase in RH Segment gross margin was primarily attributable to tariff refunds recognized incost of goods sold of $51 million, or 590 basis points, partially offset by decreased product margins in the RH core business as well as higher occupancy costs as a result of new Gallery openings.

Previous wording

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.

Current wording

Excluding the $14 million and $2.7 million of such costs noted above for the three months ended August 1, 2026 and August 2, 2025, respectively, RH Segment selling, general and administrative expenses would have increased 430 basis points to 34.6% from 30.3% of net revenues for the three months ended August 1, 2026 and August 2, 2025, respectively.

Previous wording

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.

Current wording

The increase in our effective tax rate for the three months ended August 1, 2026 compared to the three months ended August 2, 2025 is primarily attributable to reporting lower net income, as well as the impact of higher net excess tax benefits from stock-based compensation in the current period as compared to the prior period.

Previous wording

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.

Current wording

RH Segment net revenues increased $7.8 million, or 0.5%, to $1,619 million in the six months ended August 1, 2026 compared to $1,612 million in the six months ended August 2, 2025, primarily due to an increase in hospitality revenue driven by new Gallery openings, which was partially offset by lower revenue in our core and Contract businesses.

Previous wording

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.

Current wording

RH Segment selling, general and administrative expenses increased $51 million, or 9.5%, to $589 million in the six months ended August 1, 2026 compared to $538 million in the six months ended August 2, 2025. RH Segment selling, general and administrative expenses were 36.4% and 33.4% of net revenues in the six months ended August 1, 2026 and August 2, 2025, respectively. The increase in selling, general and administrative expenses as a percentage of net revenues was driven by increases in compensation, pre-opening and other corporate costs, primarily related to new Gallery openings, as well as higher advertising costs, primarily due to the launch of RH Estates in the second quarter of fiscal 2026. RH Segment selling, general and administrative expenses also included $14 million of expense related to the variable interest entities restructuring. These increases were partially offset by a favorable legal settlement associated with credit card interchange fees of $32 million.

Previous wording

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.

Current wording

RH Segment selling, general and administrative expenses for the six months ended August 2, 2025 was negatively impacted by $1.2 million of reorganization related costs, $1.0 million of asset impairments, $0.9 million of non-cash compensation related to an option grant made to Mr. Friedman in October 2020 and $0.5 million related to a product recall.

Previous wording

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. We have pursued in the past, and may pursue in the future, additional strategies to generate capital to pursue opportunities and investments, including through the strategic sale of existing assets, utilization of our credit facilities, entry into various credit agreements and other new debt financing arrangements that present attractive terms. 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.

Current wording

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. We have pursued in the past, and expect to continue to pursue, additional strategies to generate capital to pursue opportunities and investments, including through the strategic sale of existing assets, utilization of our credit facilities, entry into various credit agreements and other new debt financing arrangements that present attractive terms. We expect to continue to use such additional sources of debt and other financing in future periods, as well as asset sales, as a source of additional capital to fund our various investments or to refinance existing indebtedness.

Previous wording

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 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. 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. Our current level of indebtedness, and any additional indebtedness that we may incur, exposes us to certain risks with regards to interest rate increases and fluctuations. Our ability to make interest payments or to refinance any of our indebtedness to manage such interest rates may be limited or negatively affected by credit market conditions, macroeconomic trends and other risks.

Current wording

To the extent we choose to secure additional sources of liquidity through incremental debt and other 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. Sales of real estate assets, including potential sale leaseback arrangements, may be dependent on market conditions. 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. 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. Our current level of indebtedness, and any additional indebtedness that we may incur, exposes us to certain risks with regards to interest rate increases and fluctuations. Our ability to make interest payments or to refinance any of our indebtedness to manage such interest rates may be limited or negatively affected by credit market conditions, macroeconomic trends and other risks.

Previous wording

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 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. Nevertheless, we may elect to pursue additional capital expenditures beyond those that are anticipated during any given fiscal period inasmuch as our strategy is to be opportunistic with respect to our investments and we may choose to pursue certain capital transactions based on the availability and timing of unique opportunities. There are a number of macroeconomic factors and uncertainties affecting the overall business climate as well as our business, including increased inflation and higher interest rates and we may make adjustments to our allocation of capital in fiscal 2026 or beyond in response to these changing or other circumstances. We may also invest in other uses of our liquidity such as share repurchases, acquisitions and growth initiatives, including through joint ventures and real estate investments.

Current wording

We have invested significant capital expenditures related to construction activities to design and build landlord-owned leased assets in developing and opening new Design Galleries. We have completed some of the more significant projects regarding our new locations within the last several years, including our recent openings in Paris, Milan and London. We have incurred increased capital expenditures and other capital related to developing and opening these and other new locations due to a variety of factors, including significant increases in construction costs since the pandemic. We may still experience further cost and capital increases related to construction activities beyond our current expectations as we continue to open additional Design Galleries and other locations, which may require us to undertake upgrades to historical buildings or construct new buildings. Our adjusted capital expenditures include capital expenditures from investing activities and cash outflows of capital related to construction activities to design and build landlord-owned leased assets, net of tenant allowances received during the construction period. During the six months ended August 1, 2026, adjusted capital expenditures were $163 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. Nevertheless, we may elect to pursue additional capital expenditures and construction activities beyond those that are anticipated during any given fiscal period inasmuch as our strategy is to be opportunistic with respect to our investments and we may choose to pursue certain capital transactions and other projects requiring capital based on the availability and timing of unique opportunities. There are a number of macroeconomic factors and uncertainties affecting the overall business climate as well as our business, including increased inflation and construction costs as well as higher interest rates, and we may make adjustments to our allocation of capital in fiscal 2026 or beyond in response to these changing or other circumstances. We may also invest in other uses of our liquidity such as share repurchases, acquisitions and growth initiatives, including through joint ventures and real estate investments.

Previous wording

Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us. As we develop new Galleries, as well as other potential strategic initiatives in the future like our integrated hospitality experience, we are exploring other models for our real estate activities, which include different terms and conditions for real estate transactions. These transactions may involve longer lease terms or further purchases of, or joint ventures or other forms of equity ownership in, real estate interests associated with new sites and buildings that we wish to develop for new Gallery locations or other aspects of our business. These approaches might require different levels of capital investment on our part than a traditional store lease with a landlord. We have also begun executing changes in our real estate strategy to transition some projects from a leasing model to a development model, where we buy and develop real estate for our Design Galleries either directly or through joint ventures and other structures with the ultimate objective of (i) recouping a majority of the investment through a sale-leaseback arrangement and (ii) resulting in lower capital investment and lower rent. For example, we have entered into arrangements with a third-party development partner to develop real estate for future RH Design Galleries. In the event that such capital and other expenditures require us to pursue additional funding sources, we can provide no assurance that we will be successful in securing additional funding on attractive terms or at all. 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.

Current wording

Certain lease arrangements require the landlord to fund a portion of the construction related costs through payments directly to us. As we develop new Galleries, as well as other potential strategic initiatives in the future like our integrated hospitality experience, we continue to explore other models for our real estate activities, which include different terms and conditions for real estate transactions. These transactions may involve longer lease terms or further purchases of real estate interests associated with new sites and buildings that we wish to develop for new Gallery locations or other aspects of our business. These approaches might require different levels of capital investment on our part than a traditional store lease with a landlord. In the event these or other capital expenditures require us to pursue additional funding sources, or to enter into future sale leasebacks or real estate divestiture transactions, we can provide no assurance that we will be successful in securing additional funding, or sale or lease of such real estate assets, on attractive terms or at all. 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.

Previous wording

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.

Current wording

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 6—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 $15 million remaining 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 the properties that are now owned by us, 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, thereby resulting in proceeds to us under our distribution rights in the Aspen LLCs.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

For the six months ended August 1, 2026, net cash provided by operating activities was $198 million and consisted of net income of $47 million and an increase in non-cash items of $190 million, partially offset by a change in working capital and other activities of $39 million. The use of cash from working capital was primarily driven by an increase in landlord assets under construction, net of tenant allowances, of $78 million, a decrease in operating lease liabilities of $55 million, a decrease in other current and non-current liabilities of $27 million, an increase in accounts receivable of $16 million and an increase in prepaid expense and other assets of $11 million. These uses of cash from working capital were partially offset by an increase in deferred revenue and customer deposits of $64 million, a decrease in merchandise inventory of $44 million and an increase in accounts payable and accrued expenses of $39 million.

Previous wording

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.

Current wording

For the six months ended August 1, 2026, net cash used in investing activities was $43 million and was comprised of investments in retail stores, information technology and systems infrastructure of $85 million. These cash outflows were partially offset by cash received from a distribution of return of equity method investments of $42 million.

Previous wording

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.

Current wording

For the six months ended August 1, 2026, net cash used in financing activities was $70 million, primarily due to payments under real estate loans of $32 million, net payments under the asset based credit facility of $20 million, payments under term loans of $13 million and payments under finance lease agreements of $10 million. These uses of cash were partially offset by proceeds from the exercise of stock options of $4.0 million.

Previous wording

Non-cash transactions consist of non-cash additions of property and equipment and landlord assets under construction included inaccounts payable and accrued expenses at period-end.

Current wording

Non-cash transactions consist of additions of property and equipment and landlord assets under construction included inaccounts payable and accrued expenses at period-end.

Previous wording

Refer to Note 8—Credit Facilitiesin 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.

Current wording

Refer to Note 9—Credit Facilities and Real Estate Loanin 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.

Previous wording

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

Current wording

Refer to Note 9—Credit Facilities and Real Estate Loanin our condensed consolidated financial statements for further information on our Term Loan.

Previous wording

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

Current wording

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.