VARIABLE INTEREST ENTITIES

6 Months Ended

Aug. 02, 2025

VARIABLE INTEREST ENTITIES

VARIABLE INTEREST ENTITIES

NOTE 6—VARIABLE INTEREST ENTITIES

Consolidated Variable Interest Entities and Noncontrolling Interests

In fiscal 2022, we formed eight privately-held limited liability companies (each, a “Member LLC” and collectively, the “Member LLCs” or the “consolidated variable interest entities”) for real estate development activities related to our Gallery transformation and global expansion strategies.

In fiscal 2024, one Member LLC became a wholly-owned subsidiary and is no longer a VIE.

As of August 2, 2025 and February 1, 2025, of the remaining seven Member LLCs, we hold a 50 percent membership interest in six of the Member LLCs, and the remaining noncontrolling interest of 50 percent in each Member LLC is held by the same development partner. In one Member LLC, we hold approximately 75 percent membership interest with the remaining noncontrolling interest of approximately 25 percent held by the same development partner.

The carrying amounts and classification of the VIEs’ assets and liabilities included in the condensed consolidated balance sheets were as follows:

	AUGUST 2,		FEBRUARY 1,
	2025		2025
	(in thousands)
ASSETS
Cash and cash equivalents	$	1,695	$	2,177
Prepaid expense and other current assets		1,068		980
Total current assets		2,763		3,157
Property and equipment—net(1)		281,794		259,057
Other non-current assets		7		6
Total assets	$	284,564	$	262,220
LIABILITIES
Accounts payable and accrued expenses	$	6,852	$	4,867
Other current liabilities		344		333
Total current liabilities		7,196		5,200
Real estate loan—net(2)		15,360		15,524
Other non-current liabilities		996		929
Total liabilities	$	23,552	$	21,653

(1) Includes $69 million and $54 million of construction in progress as of August 2, 2025 and February 1, 2025, respectively.

(2) On September 9, 2022, a Member LLC as the borrower executed a Promissory Note (the “Promissory Note”) with a third-party bank in an aggregate principal amount equal to $16 million with a maturity date of September 9, 2032. The Promissory Note bears interest at a fixed rate per annum equal to 5.37% until September 15, 2027, on which date the interest rate will reset based on the five-year treasury rate plus 2.00%, subject to a total interest rate floor of 3.00%. The Promissory Note is secured by the assets of the Member LLC and the creditor does not have recourse against RH’s general assets.

Equity Method Investments

Equity method investments primarily represent our membership interests in three privately-held limited liability companies in Aspen, Colorado (each, an “Aspen LLC” and collectively, the “Aspen LLCs”) that were formed for the purpose of acquiring, developing, operating and selling certain real estate projects in Aspen, Colorado. Additionally, Waterworks has membership interests in two European entities that are equity method investments.

In March 2025, the Aspen LLC in which we hold a 70 percent interest sold its sole real estate property. Subsequent to the property sale, we received $15 million from the Aspen LLC, which consisted of $2.9 million for the repayment of its outstanding promissory note to us, including accrued interest, and a capital distribution of $13 million. The capital distribution of $13 million represented a return of our contributed capital of $7.9 million and a return on investment of $4.6 million, which are included within cash flows from investing activities and cash flows from operating activities, respectively, on the condensed consolidated statements of cash flows. Following this capital distribution, the remaining net assets in this Aspen LLC are immaterial.

Other than as described above, we did not receive any distributions or have any undistributed earnings of equity method investments during the three or six months ended August 2, 2025 and August 3, 2024.

Our maximum exposure to loss is the carrying value of each of the equity method investments as of August 2, 2025.