SEGMENT REPORTING

6 Months Ended

Aug. 02, 2025

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 15—SEGMENT REPORTING

We define reportable and operating segments on the same basis that we use to evaluate our performance internally by the chief operating decision maker (“CODM”), which we have determined is our Chief Executive Officer. We have three operating segments: RH Segment, Waterworks and Real Estate. The RH Segment and Waterworks operating segments (the “retail operating segments”) include all sales channels accessed by our customers, including sales through retail locations and outlets, including hospitality, websites, Sourcebooks, and the Trade and Contract channels. The Real Estate segment represents operations associated with certain of our equity method investments and consolidated VIEs that have operations, which are not directly related to the activities of the retail operating segments.

The retail operating segments are strategic business units that offer products for the home furnishings customer. While RH Segment and Waterworks have a shared senior leadership team and customer base, we have determined that their results cannot be aggregated as they do not share similar economic characteristics, as well as due to other quantitative factors.

Segment Information

The CODM uses segment adjusted operating income to evaluate segment profitability for the retail operating segments and to allocate resources and analyze variances of actual performance to our forecasts when making decisions. Operating income is defined as net income before interest expense—net, other (income) expense—net, income tax expense and our share of equity method investments (income) loss—net. Segment adjusted operating income excludes (i) certain asset impairments, (ii) product recall, (iii) severance costs associated with a reorganization, (iv) non-cash compensation amortization related to an option grant made to Mr. Friedman in October 2020 and (v) legal settlements. These items are excluded from segment adjusted operating income in order to provide better transparency of segment operating results. Accordingly, these items are not presented by segment because they are excluded from the segment profitability measure that the CODM and our senior leadership team review.

Segment net revenues, which represent our disaggregated net revenues in accordance with Accounting Standards Codification 606, significant segment expenses and segment adjusted operating income, by reportable segment, were as follows:

	THREE MONTHS ENDED												SIX MONTHS ENDED
	AUGUST 2,						AUGUST 3,						AUGUST 2,						AUGUST 3,
	2025						2024						2025						2024
	RH SEGMENT		WATERWORKS		TOTAL(1)		RH SEGMENT		WATERWORKS		TOTAL(1)		RH SEGMENT		WATERWORKS		TOTAL(1)		RH SEGMENT		WATERWORKS		TOTAL(1)
	(in thousands)
Net revenues	$	846,717	$	52,434	$	899,151	$	780,925	$	48,730	$	829,655	$	1,611,715	$	101,388	$	1,713,103	$	1,457,991	$	98,624	$	1,556,615
Cost of goods sold		465,811		24,081		489,892		432,301		22,597		454,898		901,015		47,496		948,511		819,559		46,261		865,820
Advertising expense		14,365		1,003		15,368		43,397		945		44,342		63,088		1,658		64,746		77,730		1,712		79,442
Other segment expenses(2)		237,791		20,481		258,272		214,700		18,727		233,427		467,407		40,058		507,465		428,744		38,386		467,130
Segment adjusted operating income(1)		128,750		6,869		135,619		90,527		6,461		96,988		180,205		12,176		192,381		131,958		12,265		144,223
Asset impairments						3,597						—						3,597						—
Product recall						1,913						—						1,913						—
Reorganization related costs						1,233						—						1,233						—
Non-cash compensation						—						861						851						2,808
Legal settlements—net						—						—						—						(9,375)
Operating income						128,876						96,127						184,787						150,790
Interest expense—net						57,358						59,262						113,961						116,034
Other (income) expense—net						(574)						(663)						(4,227)						502
Income before taxes and equity method investments					$	72,092					$	37,528					$	75,053					$	34,254

(1) All intercompany transactions are immaterial and have been eliminated.

(2) Other segment expenses primarily include compensation and occupancy costs classified as selling, general and administrative expenses, and other general and administrative expenses.

In the three months ended August 2, 2025 and August 3, 2024, the Real Estate segment share of equity method investments loss, which is the measure of segment profitability reviewed by the CODM to evaluate performance internally for the Real Estate segment, was $1.7 million and $3.9 million, respectively. In the six months ended August 2, 2025 and August 3, 2024, the Real Estate segment share of equity method investment operations was income of $6.5 million and loss of $6.7 million, respectively. The share of loss from equity method investments for the Waterworks segment was immaterial in all fiscal periods presented.

Depreciation and amortization for our segments was as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	AUGUST 2,		AUGUST 3,		AUGUST 2,		AUGUST 3,
	2025		2024		2025		2024
	(in thousands)
RH Segment	$	32,879	$	30,618	$	66,740	$	60,001
Waterworks		1,750		1,639		3,125		3,083
Real Estate(1)		—		—		—		—
Total depreciation and amortization	$	34,629	$	32,257	$	69,865	$	63,084

(1) There is no depreciation and amortization for the Real Estate segment since all assets represent construction in progress.

Balance sheet information for our segments consisted of the following:

	AUGUST 2,								FEBRUARY 1,
	2025								2025
	RH SEGMENT		WATERWORKS		REAL ESTATE		TOTAL		RH SEGMENT		WATERWORKS		REAL ESTATE		TOTAL
	(in thousands)
Goodwill(1)	$	143,774	$	—	$	—	$	143,774	$	140,943	$	—	$	—	$	140,943
Tradenames, trademarks and other intangible assets(2)		62,656		17,000		—		79,656		59,118		17,000		—		76,118
Equity method investments(3)		—		3,995		117,604		121,599		—		3,276		123,633		126,909
Total assets		4,379,846		162,800		154,375		4,697,021		4,228,829		165,442		160,418		4,554,689

(1) The Waterworks reporting unit goodwill of $51 million recognized upon acquisition in fiscal 2016 was fully impaired as of fiscal 2018.

(2) The Waterworks reporting unit tradename is presented net of an impairment charge of $35 million recognized in prior fiscal years.

(3) The Waterworks segment balance represents membership interests in two European entities, one entity in which we hold a 50 percent membership interest and another entity in which we increased our membership interest from approximately 25 percent as of February 1, 2025 to approximately 28 percent as of August 2, 2025. We are not the primary beneficiary of either of these VIEs.

We are domiciled in the United States and primarily operate our retail locations and outlets in the United States. As of August 2, 2025, we operated the following number of retail locations and outlets outside the United States:

	COUNT
Canada	5
United Kingdom	3
Germany	2
Belgium	1
Spain	1
Total(1)	12

(1) Geographic revenues generated outside of the United States did not exceed 10% of total consolidated net revenues in either fiscal period presented.