Leases (Tables)

9 Months Ended

Oct. 28, 2023

Leases

Summary of Lease Costs-Net

	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,		OCTOBER 28,		OCTOBER 29,
	2023		2022		2023		2022
	(in thousands)
Operating lease cost(1)	$	31,159	$	25,153	$	84,913	$	75,190
Finance lease costs
Amortization of leased assets(1)		13,724		13,964		41,069		38,334
Interest on lease liabilities(2)		8,640		8,564		25,920		23,526
Variable lease costs(3)		5,463		5,681		17,628		22,015
Sublease income(4)		(1,400)		(1,085)		(4,366)		(3,298)
Total lease costs—net	$	57,586	$	52,277	$	165,164	$	155,767

(1) Operating lease costs and amortization of finance lease right-of-use assets are included in cost of goods sold or selling, general and administrative expenses on the condensed consolidated statements of income (loss) based on our accounting policy. Refer to Note 3—Significant Accounting Policies in our 2022 Form 10-K.

(2) Included in interest expense—net on the condensed consolidated statements of income (loss).

(3) Represents variable lease payments under operating and finance lease agreements, primarily associated with contingent rent based on a percentage of retail sales over contractual levels of $3.2 million and $3.4 million for the three months ended October 28, 2023 and October 29, 2022, respectively, and $11 million and $15 million for the nine months ended October 28, 2023 and October 29, 2022, respectively, as well as charges associated with common area maintenance of $2.2 million and $2.3 million for the three months ended October 28, 2023 and October 29, 2022, respectively, and $6.8 million and $6.9 million for the nine months ended October 28, 2023 and October 29, 2022 respectively. Other variable costs, which include single lease cost related to variable lease payments based on an index or rate that were not included in the measurement of the initial lease liability and right-of-use asset, were not material in any period presented.

(4) Included in selling, general and administrative expenses on the condensed consolidated statements of income (loss).

Summary of Lease Right-of-use Assets and Lease Liabilities

		OCTOBER 28,		JANUARY 28,
		2023		2023
		(in thousands)
	Balance Sheet Classification
Assets
Operating leases	Operating lease right-of-use assets	$	616,571	$	527,246
Finance leases(1)(2)(3)	Property and equipment—net		1,037,441		1,078,979
Total lease right-of-use assets		$	1,654,012	$	1,606,225
Liabilities
Current(4)
Operating leases	Operating lease liabilities	$	89,492	$	80,384
Finance leases	Other current liabilities		18,151		17,007
Total lease liabilities—current			107,643		97,391
Non-current
Operating leases	Non-current operating lease liabilities		570,073		505,809
Finance leases	Non-current finance lease liabilities		642,726		653,050
Total lease liabilities—non-current			1,212,799		1,158,859
Total lease liabilities		$	1,320,442	$	1,256,250

(1) Includes capitalized amounts related to our completed construction activities to design and build leased assets, which are reclassified from other non-current assets upon lease commencement.

(2) Recorded net of accumulated amortization of $263 million and $224 million as of October 28, 2023 and January 28, 2023, respectively.

(3) Includes $38 million and $39 million as of October 28, 2023 and January 28, 2023, respectively, related to an RH Design Gallery lease with a landlord that is an affiliate of the managing member of the Aspen LLCs (refer to Note 5—Variable Interest Entities).

(4) Current portion of lease liabilities represents the reduction of the related lease liability over the next 12 months.

Summary of Maturities of Lease Liabilities

The maturities of lease liabilities are as follows as of October 28, 2023:

	OPERATING		FINANCE
FISCAL YEAR	LEASES		LEASES		TOTAL
	(in thousands)
Remainder of fiscal 2023	$	28,849	$	12,559	$	41,408
2024		118,065		50,342		168,407
2025		112,241		51,757		163,998
2026		105,853		52,524		158,377
2027		98,820		53,665		152,485
2028		65,310		52,727		118,037
Thereafter		310,293		914,073		1,224,366
Total lease payments(1)(2)		839,431		1,187,647		2,027,078
Less—imputed interest(3)		(179,866)		(526,770)		(706,636)
Present value of lease liabilities	$	659,565	$	660,877	$	1,320,442

(1) Total lease payments include future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability. Total lease payments exclude $694 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of October 28, 2023, of which $8.0 million, $27 million, $42 million, $39 million, $41 million and $41 million will be paid in the remainder of fiscal 2023, fiscal 2024, fiscal 2025, fiscal 2026, fiscal 2027 and fiscal 2028, respectively, and $496 million will be paid subsequent to fiscal 2028.

(2) Excludes an immaterial amount of future commitments under short-term lease agreements.

(3) Calculated using the discount rate for each lease at lease commencement.

Summary of Supplemental Information Related to Leases

	NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,
	2023		2022
Weighted-average remaining lease term (years)
Operating leases		8.7		8.5
Finance leases		21.3		22.1
Weighted-average discount rate
Operating leases		5.02%		4.04%
Finance leases		5.33%		5.32%

Summary of Other Information Related to Leases

	NINE MONTHS ENDED
	OCTOBER 28,		OCTOBER 29,
	2023		2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(82,975)	$	(75,570)
Operating cash flows from finance leases		(26,049)		(23,526)
Financing cash flows from finance leases—net(1)		(9,551)		(6,798)
Total cash outflows from leases	$	(118,575)	$	(105,894)
Lease right-of-use assets obtained in exchange for lease obligations—net of lease terminations (non-cash)
Operating leases	$	138,180	$	42,883
Finance leases		1,301		108,547

(1) Represents the principal portion of lease payments, partially offset by tenant allowances received under finance leases subsequent to lease commencement of $2.4 million and $4.2 million for the nine months ended October 28, 2023 and October 29, 2022, respectively.