LEASES (Tables)

3 Months Ended

May 04, 2024

LEASES

Summary of lease costs-net

Lease costs—net consist of the following:

	THREE MONTHS ENDED
	MAY 4,		APRIL 29,
	2024		2023
	(in thousands)
Operating lease cost(1)	$	32,881	$	26,300
Finance lease costs
Amortization of leased assets(1)		12,405		13,704
Interest on lease liabilities(2)		7,407		8,486
Variable lease costs(3)		6,643		6,168
Sublease income(4)		(1,154)		(1,546)
Total lease costs—net	$	58,182	$	53,112

(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.

(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 $3.9 million for both the three months ended May 4, 2024 and April 29, 2023, as well as charges associated with common area maintenance of $2.7 million and $2.3 million for the three months ended May 4, 2024 and April 29, 2023, 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 either 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

		MAY 4,		FEBRUARY 3,
		2024		2024
		(in thousands)
	Balance Sheet Classification
Assets
Operating leases	Operating lease right-of-use assets	$	605,664	$	625,801
Finance leases(1)(2)(3)	Property and equipment—net		825,191		836,814
Total lease right-of-use assets		$	1,430,855	$	1,462,615
Liabilities
Current(4)
Operating leases	Operating lease liabilities	$	85,875	$	85,523
Finance leases	Other current liabilities		15,209		14,668
Total lease liabilities—current			101,084		100,191
Non-current
Operating leases	Non-current operating lease liabilities		555,651		576,166
Finance leases	Non-current finance lease liabilities		562,804		566,829
Total lease liabilities—non-current			1,118,455		1,142,995
Total lease liabilities		$	1,219,539	$	1,243,186

(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 $281 million and $268 million as of May 4, 2024 and February 3, 2024, respectively.

(3) Includes $37 million as of both May 4, 2024 and February 3, 2024 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 May 4, 2024:

	OPERATING		FINANCE
FISCAL YEAR	LEASES		LEASES		TOTAL
	(in thousands)
Remainder of fiscal 2024	$	84,491	$	31,390	$	115,881
2025		119,557		48,203		167,760
2026		111,737		48,971		160,708
2027		104,148		49,777		153,925
2028		70,137		48,812		118,949
2029		57,387		48,488		105,875
Thereafter		272,752		679,451		952,203
Total lease payments(1)(2)		820,209		955,092		1,775,301
Less—imputed interest(3)		(178,683)		(377,079)		(555,762)
Present value of lease liabilities	$	641,526	$	578,013	$	1,219,539

(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 $681 million of legally binding payments under the non-cancellable term for leases signed but not yet commenced under our accounting policy as of May 4, 2024, of which $21 million, $41 million, $38 million, $40 million, $41 million and $41 million will be paid in the remainder of fiscal 2024, fiscal 2025, fiscal 2026, fiscal 2027, fiscal 2028 and fiscal 2029, respectively, and $459 million will be paid subsequent to fiscal 2029.

(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

	THREE MONTHS ENDED
	MAY 4,		APRIL 29,
	2024		2023
Weighted-average remaining lease term (years)
Operating leases		8.5		8.2
Finance leases		19.4		21.7
Weighted-average discount rate
Operating leases		5.2%		4.2%
Finance leases		5.1%		5.3%

Summary of other information related to leases

	THREE MONTHS ENDED
	MAY 4,		APRIL 29,
	2024		2023
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(31,920)	$	(27,612)
Operating cash flows from finance leases		(7,407)		(8,615)
Financing cash flows from finance leases		(4,496)		(3,877)
Total cash outflows from leases	$	(43,823)	$	(40,104)
Non-cash transactions:
Lease right-of-use assets obtained in exchange for lease obligations—net of lease terminations
Operating leases	$	3,915	$	20,861
Finance leases		2,446		—