RH (NYSE: RH) posts Q3 2025 growth with stronger earnings and cash flow
Rhea-AI Filing Summary
RH reported solid growth for the quarter and year-to-date period ended November 1, 2025. Net revenues reached $883,810,000 for the quarter and $2,596,913,000 for the first nine months, both above the prior year. Quarterly net income was $36,265,000, and nine‑month net income rose to $96,012,000, lifting diluted earnings per share to $1.83 for the quarter and $4.84 year to date.
The company improved its balance sheet, moving from a stockholders’ deficit of $163,589,000 at the start of the year to positive equity of $3,346,000, helped by higher earnings and foreign currency translation gains. Cash from operating activities increased sharply to $356,175,000 for the nine months, driven in part by inventory reductions. RH also closed a $32,119,000 acquisition of the Formations and Dennis & Leen home furnishings business, adding $2,770,000 of goodwill and expanding its luxury product assortment, while maintaining substantial leverage through term loans and significant lease obligations.
Positive
- Stronger profitability: Nine‑month net income rose to $96,012,000 from $58,495,000, and diluted EPS increased to $4.84, reflecting improved operating performance.
- Cash flow surge: Net cash provided by operating activities jumped to $356,175,000 from $35,869,000, aided by a $155,251,000 reduction in merchandise inventories.
- Balance sheet improvement: Stockholders’ position moved from a deficit of $163,589,000 to positive equity of $3,346,000 as of November 1, 2025.
- Strategic acquisition: Closed a $32,119,000 purchase of the Formations and Dennis & Leen brands, adding $2,770,000 of goodwill and expanding luxury assortments.
Negative
- None.
Insights
RH delivered stronger earnings and cash flow, while modestly de‑levering and expanding its luxury portfolio.
RH showed meaningful operational progress. Net revenues increased to
Cash generation strengthened markedly. Net cash provided by operating activities rose to
Leverage and fixed obligations remain substantial. Term loan B and B‑2 principal total
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of |
| (I.R.S. Employer |
| ||
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class) | (Trading symbol) | (Name of each exchange on which registered) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ |
| Accelerated filer |
| ☐ | |
Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| |
Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of December 5, 2025,
Table of Contents
RH
INDEX TO FORM 10-Q
|
| Page | ||
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements | 3 | ||
Condensed Consolidated Balance Sheets (Unaudited) | 3 | |||
Condensed Consolidated Statements of Income (Unaudited) | 4 | |||
Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 5 | |||
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) | 6 | |||
Condensed Consolidated Statements of Cash Flows (Unaudited) | 8 | |||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 10 | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 51 | ||
Item 4. | Controls and Procedures | 52 | ||
PART II. OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | 53 | ||
Item 1A. | Risk Factors | 53 | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 54 | ||
Item 3. | Defaults Upon Senior Securities | 54 | ||
Item 4. | Mine Safety Disclosures | 54 | ||
Item 5. | Other Information | 54 | ||
Item 6. | Exhibits | 55 | ||
Signatures | 56 | |||
2 | 2025 THIRD QUARTER FORM 10-Q | TABLE OF CONTENTS |
Table of Contents
PART I
ITEM 1. FINANCIAL STATEMENTS
RH
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| NOVEMBER 1, |
| FEBRUARY 1, | ||
| 2025 | 2025 | ||||
(in thousands) | ||||||
ASSETS |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Accounts receivable—net |
| |
| | ||
Merchandise inventories |
| |
| | ||
Prepaid expense and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property and equipment—net |
| |
| | ||
Operating lease right-of-use assets | | | ||||
Goodwill |
| |
| | ||
Tradenames, trademarks and other intangible assets—net |
| |
| | ||
Deferred tax assets |
| |
| | ||
Equity method investments | | | ||||
Other non-current assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
| |||
Accounts payable and accrued expenses | $ | | $ | | ||
Deferred revenue and customer deposits | |
| | |||
Operating lease liabilities | | | ||||
Other current liabilities |
| |
| | ||
Total current liabilities |
| |
| | ||
Asset based credit facility |
| |
| | ||
Term loan B—net |
| |
| | ||
Term loan B-2—net |
| |
| | ||
Real estate loans—net | | | ||||
Non-current operating lease liabilities |
| |
| | ||
Non-current finance lease liabilities | | | ||||
Deferred tax liabilities | | | ||||
Other non-current liabilities |
| |
| | ||
Total liabilities | | | ||||
Commitments and contingencies (Note 14) |
|
| ||||
Stockholders’ equity (deficit) |
|
|
| |||
Preferred stock—$ |
| |||||
Common stock—$ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated other comprehensive income (loss) |
| |
| ( | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ equity (deficit) | | ( | ||||
Total liabilities and stockholders’ equity (deficit) | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 3 |
Table of Contents
RH
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
(in thousands, except share and per share amounts) | ||||||||||||
Net revenues | $ | | $ | | $ | | $ | | ||||
Cost of goods sold |
| | |
| | | ||||||
Gross profit |
| |
| |
| |
| | ||||
Selling, general and administrative expenses |
| | | | | |||||||
Operating income |
| |
| |
| |
| | ||||
Other expenses |
| |||||||||||
Interest expense—net | | | | | ||||||||
Other (income) expense—net | | | ( | | ||||||||
Total other expenses |
| | |
| | | ||||||
Income before taxes and equity method investments | | |
| | | |||||||
Income tax expense | | |
| | | |||||||
Income before equity method investments | | | | | ||||||||
Share of equity method investments (income) loss—net | | | ( | | ||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Weighted-average shares used in computing basic net income per share | | |
| |
| | ||||||
Basic net income per share | $ | | $ | | $ | | $ | | ||||
Weighted-average shares used in computing diluted net income per share | | |
| |
| | ||||||
Diluted net income per share | $ | | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
4 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
RH
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
(in thousands) | ||||||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Net gain (loss) from foreign currency translation | ( | ( |
| |
| | ||||||
Comprehensive income | $ | | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 5 |
Table of Contents
RH
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
THREE MONTHS ENDED | |||||||||||||||||
COMMON STOCK | |||||||||||||||||
| ACCUMULATED |
| |||||||||||||||
| ADDITIONAL |
| OTHER |
| TOTAL | ||||||||||||
| PAID-IN |
| COMPREHENSIVE |
| ACCUMULATED |
| STOCKHOLDERS' | ||||||||||
| SHARES |
| AMOUNT |
| CAPITAL |
| INCOME (LOSS) |
| DEFICIT |
| EQUITY (DEFICIT) | ||||||
(in thousands, except share amounts) | |||||||||||||||||
Balances—August 2, 2025 |
| $ | |
| $ | |
| $ | |
| $ | ( |
| $ | ( | ||
Stock-based compensation | — | — | | — | — | | |||||||||||
Vested and delivered restricted stock units | | — | ( | — | — | ( | |||||||||||
Exercise of stock options | | — | | — | — | | |||||||||||
Net income | — | — | — | — | | | |||||||||||
Net loss from foreign currency translation | — | — | — | ( | — | ( | |||||||||||
Balances—November 1, 2025 | |
| $ | |
| $ | |
| $ | |
| $ | ( |
| $ | | |
Balances—August 3, 2024 |
| $ | |
| $ | |
| $ | |
| $ | ( |
| $ | ( | ||
Stock-based compensation | — | — | | — | — | | |||||||||||
Issuance of restricted stock | | — | — | — | — | — | |||||||||||
Vested and delivered restricted stock units | | — | ( | — | — | ( | |||||||||||
Exercise of stock options | | — | | — | — | | |||||||||||
Settlement of convertible senior notes | | — | — | — | — | — | |||||||||||
Net income | — | — | — | — | | | |||||||||||
Net loss from foreign currency translation | — | — | — | ( | — | ( | |||||||||||
Balances—November 2, 2024 | |
| $ | |
| $ | |
| $ | |
| $ | ( |
| $ | ( | |
6 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
RH
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
(Unaudited)
NINE MONTHS ENDED | |||||||||||||||||
COMMON STOCK | |||||||||||||||||
| ACCUMULATED |
| |||||||||||||||
| ADDITIONAL |
| OTHER |
| TOTAL | ||||||||||||
| PAID-IN |
| COMPREHENSIVE |
| ACCUMULATED |
| STOCKHOLDERS' | ||||||||||
| SHARES |
| AMOUNT |
| CAPITAL |
| INCOME (LOSS) |
| DEFICIT |
| EQUITY (DEFICIT) | ||||||
(in thousands, except share amounts) | |||||||||||||||||
Balances—February 1, 2025 |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | ( | ||||
Stock-based compensation | — | — | — | — | |||||||||||||
Issuance of restricted stock | — | — | — | — | — | ||||||||||||
Vested and delivered restricted stock units | — | ( | — | — | ( | ||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||
Net income | — | — | — | — | |||||||||||||
Net gain from foreign currency translation | — | — | — | — | |||||||||||||
Balances—November 1, 2025 |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ||||||
Balances—February 3, 2024 |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | ( | ||||
Stock-based compensation | — | — | — | — | |||||||||||||
Issuance of restricted stock | — | — | — | — | — | ||||||||||||
Vested and delivered restricted stock units | — | ( | — | — | ( | ||||||||||||
Exercise of stock options | — | — | — | ||||||||||||||
Settlement of convertible senior notes | — | — | — | — | — | ||||||||||||
Net income | — |
| — |
| — |
| — |
|
| ||||||||
Net gain from foreign currency translation | — |
| — |
| — |
|
| — |
| ||||||||
Balances—November 2, 2024 |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( | |||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 7 |
Table of Contents
RH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| NINE MONTHS ENDED | |||||
|---|---|---|---|---|---|---|
| NOVEMBER 1, | NOVEMBER 2, | ||||
| 2025 |
| 2024 | |||
(in thousands) | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
| ||||
Depreciation and amortization |
| | | |||
Non-cash operating lease cost | | | ||||
Stock-based compensation expense |
| | | |||
Asset impairments | | | ||||
Non-cash finance lease interest expense | | | ||||
Product recall | | — | ||||
Deferred income taxes | — | | ||||
Share of equity method investments (income) loss—net | ( | | ||||
Distribution of return on equity method investment | | — | ||||
Other non-cash items |
| | | |||
Change in assets and liabilities: |
| |||||
Accounts receivable |
| | ( | |||
Merchandise inventories |
| | ( | |||
Prepaid expense and other assets |
| ( | | |||
Landlord assets under construction—net of tenant allowances |
| ( | ( | |||
Accounts payable and accrued expenses |
| ( | | |||
Deferred revenue and customer deposits |
| | | |||
Other current liabilities |
| | ( | |||
Current and non-current operating lease liabilities |
| ( | ( | |||
Other non-current obligations |
| ( | ( | |||
Net cash provided by operating activities |
| |
| | ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
| ||||
Capital expenditures |
| ( | ( | |||
Acquisition of business | ( | — | ||||
Equity method investments |
| ( | ( | |||
Acquisition of intangible asset | ( | — | ||||
Receipt of promissory note repayment from equity method investee | | — | ||||
Distribution of return of equity method investment | | — | ||||
Proceeds from insurance recoveries | | — | ||||
Net cash used in investing activities |
| ( |
| ( | ||
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 8 |
Table of Contents
RH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
| NINE MONTHS ENDED | |||||
|---|---|---|---|---|---|---|
| NOVEMBER 1, | NOVEMBER 2, | ||||
| 2025 |
| 2024 | |||
(in thousands) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
| |||
Borrowings under asset based credit facility | | | ||||
Repayments under asset based credit facility | ( | — | ||||
Repayments under term loans | ( | ( | ||||
Repayments under real estate loans | ( | ( | ||||
Repayments of convertible senior notes | — | ( | ||||
Debt issuance costs |
| ( | — | |||
Principal payments under finance lease agreements—net of tenant allowances | ( | ( | ||||
Repurchases of common stock—inclusive of excise taxes paid | — | ( | ||||
Proceeds from exercise of stock options |
| | | |||
Tax withholdings related to issuance of stock-based awards | ( | ( | ||||
Net cash provided by (used in) financing activities |
| ( |
| | ||
Effects of foreign currency exchange rate translation on cash |
| | | |||
Net increase (decrease) in cash and cash equivalents |
| |
| ( | ||
Cash and cash equivalents |
|
|
| |||
Beginning of period |
| |
| | ||
End of period | $ | | $ | | ||
Non-cash transactions |
|
| ||||
Property and equipment additions in accounts payable and accrued expenses at period-end | $ | | $ | | ||
Landlord asset additions in accounts payable and accrued expenses at period-end | | | ||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 9 |
Table of Contents
RH
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—THE COMPANY
Nature of Business
RH, a Delaware corporation, together with its subsidiaries (collectively, “we,” “us,” “our” or the “Company”), is 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.
As of November 1, 2025, we operated a total of
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared from our records and, in our senior leadership team’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary to fairly state our financial position as of November 1, 2025, and the results of operations for the three and nine months ended November 1, 2025 and November 2, 2024. Our current fiscal year, which consists of 52 weeks, ends on January 31, 2026 (“fiscal 2025”).
The condensed consolidated financial statements include our accounts and those of our wholly-owned subsidiaries, as well as the financial information of variable interest entities (“VIEs”) where we represent the primary beneficiary and have the power to direct the activities that most significantly impact the entity’s performance (refer to Note 6—Variable Interest Entities). Accordingly, all intercompany balances and transactions have been eliminated through the consolidation process.
Certain information and disclosures normally included in the notes to annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted for purposes of these interim condensed consolidated financial statements.
The preparation of the condensed consolidated financial statements, in conformity with GAAP, requires our senior leadership team to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material to the condensed consolidated financial statements.
We have assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, using information that is reasonably available to us at this time. The accounting estimates and other matters we have assessed include, but were not limited to, sales return reserve, inventory reserve, allowance for doubtful accounts, goodwill, and intangible and other long-lived assets. Our current assessment of these estimates is included in the condensed consolidated financial statements as of and for the three and nine months ended November 1, 2025. As additional information becomes available to us, our future assessment of these estimates, as well as other factors, could change and the results of any such change could materially and adversely impact the condensed consolidated financial statements in future reporting periods.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (the “2024 Form 10-K”).
The results of operations for the three and nine months ended November 1, 2025, presented herein, are not necessarily indicative of the results to be expected for the full fiscal year.
10 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
NOTE 2—RECENTLY ISSUED ACCOUNTING STANDARDS
New Accounting Standards or Updates Adopted
Joint Venture Formations: Recognition and Initial Measurement
In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05—Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”). ASU 2023-05 applies to the formation of a “joint venture” or a “corporate joint venture” and requires a joint venture to initially measure all contributions received upon its formation at fair value. The guidance does not impact accounting by the venturers. We adopted this new guidance in the first quarter of fiscal 2025 on a prospective basis. While ASU 2023-05 is not currently applicable to us because our existing arrangements in variable interest entities do not meet the definition of joint ventures in the updated standard, we will apply this guidance to any future arrangements we enter into that meet the definition of a joint venture.
New Accounting Standards or Updates Not Yet Adopted
Income Taxes: Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09—Improvements to Income Tax Disclosures (“ASU 2023-09”). This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures. The amendments of this update are related to the rate reconciliation and income taxes paid, requiring consistent categories and greater disaggregation of information in the rate reconciliation as well as income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We expect to include additional disclosures within the annual financial statements for the fiscal year ended January 31, 2026 to comply with the requirements of ASU 2023-09.
Income Statement: Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This new guidance is designed to improve financial reporting by requiring public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods, including amounts and qualitative descriptions of inventory purchases, employee compensation, depreciation and intangible asset amortization, among other requirements. In January 2025, the FASB issued ASU 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The guidance is required to be adopted on a prospective basis and early adoption is permitted. We are currently assessing the impact that adopting this ASU will have on the condensed consolidated financial statements.
Financial Instruments: Measurement of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This new guidance provides all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025. We are currently assessing the impact that adopting this ASU will have on the condensed consolidated financial statements.
Intangibles—Goodwill and Other—Internal-Use Software: Improvements to Accounting for Internal-Use Software
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). This new guidance amends guidance related to accounting for internal-use software development costs and clarifies the criteria for capitalization. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027. We are currently assessing the impact that adopting this ASU will have on the condensed consolidated financial statements.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 11 |
Table of Contents
NOTE 3—BUSINESS COMBINATION
On July 8, 2025, we acquired a home furnishings business operating under the brand names of Formations and Dennis & Leen for total consideration of $
During the nine months ended November 1, 2025, we incurred $
The following table summarizes the preliminary purchase price allocation based on the fair value of the assets acquired and liabilities assumed as of July 8, 2025:
PURCHASE | |||
PRICE | |||
ALLOCATION | |||
(in thousands) | |||
Merchandise inventories | $ | | |
Property and equipment | | ||
Operating lease right-of-use assets | | ||
Goodwill(1) | | ||
Other assets | | ||
Deferred revenue and customer deposits | ( | ||
Operating lease liabilities | ( | ||
Other liabilities | ( | ||
Total | $ | | |
| (1) | Goodwill of $ |
The fair values assigned to assets acquired and liabilities assumed are preliminary based on our best estimates and assumptions as of the reporting date and may be subject to change as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).
Results of operations of the acquired company have been included in our condensed consolidated statements of income since July 8, 2025, the acquisition date. Pro forma results of the acquired business have not been presented as the results were not considered material to our condensed consolidated financial statements for all periods presented and would not have been material had the acquisition occurred at the beginning of fiscal 2024.
12 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
NOTE 4—PREPAID EXPENSE AND OTHER ASSETS
Prepaid expense and other current assets consisted of the following:
|
| NOVEMBER 1, |
| FEBRUARY 1, | ||
| 2025 | 2025 | ||||
(in thousands) | ||||||
Value added tax (VAT) receivable | $ | | $ | | ||
Prepaid expenses | | | ||||
Vendor deposits | | | ||||
Capitalized cloud computing costs | | | ||||
Capitalized catalog costs | | | ||||
Tenant allowance receivable | | | ||||
Right of return asset for merchandise |
| |
| | ||
Federal and state tax receivable(1) | | | ||||
Promissory notes receivable, including interest(2) |
| |
| | ||
Other current assets | | | ||||
Total prepaid expense and other current assets | $ | | $ | | ||
| (1) | As of February 1, 2025, includes $ |
| (2) | Represents promissory notes, including principal and accrued interest, due from an affiliate of the managing member of the Aspen LLCs. Refer to Note 6—Variable Interest Entities. |
Other non-current assets consisted of the following:
|
| NOVEMBER 1, |
| FEBRUARY 1, | ||
| 2025 | 2025 | ||||
(in thousands) | ||||||
Landlord assets under construction—net of tenant allowances | $ | | $ | | ||
Initial direct costs prior to lease commencement | | | ||||
Capitalized cloud computing costs—net(1) | | | ||||
Federal tax receivable—non-current(2) | | — | ||||
Other deposits | | | ||||
Deferred financing fees |
| |
| | ||
Vendor deposits—non-current |
| |
| | ||
Other non-current assets |
| |
| | ||
Total other non-current assets | $ | | $ | | ||
| (1) | Presented net of accumulated amortization of $ |
| (2) | Represents a federal tax receivable from a carryback claim. |
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 13 |
Table of Contents
NOTE 5—GOODWILL, TRADENAMES, TRADEMARKS AND OTHER INTANGIBLE ASSETS
Goodwill, tradenames, trademarks and other intangible assets for the RH Segment and Waterworks consisted of the following:
|
| RH SEGMENT |
| WATERWORKS | ||||||||
| TRADENAMES, | TRADENAMES, | ||||||||||
TRADEMARKS AND | TRADEMARKS AND | |||||||||||
OTHER INTANGIBLE | OTHER INTANGIBLE | |||||||||||
| GOODWILL | ASSETS | GOODWILL(1) | ASSETS(2) | ||||||||
(in thousands) | ||||||||||||
February 1, 2025 | $ | | $ | | $ | — | $ | | ||||
Additions |
| | | — | — | |||||||
Other(3) | — | ( | — | — | ||||||||
Foreign currency translation | | — | — | — | ||||||||
November 1, 2025 | $ | | $ | | $ | — | $ | | ||||
| (1) | Waterworks reporting unit goodwill of $ |
| (2) | Presented net of an impairment charge of $ |
| (3) | Represents disposals and amortization of patents. |
There are
14 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
NOTE 6—VARIABLE INTEREST ENTITIES
Consolidated Variable Interest Entities and Noncontrolling Interests
In fiscal 2022, we formed
In fiscal 2024,
As of November 1, 2025 and February 1, 2025, of the remaining
The carrying amounts and classification of the VIEs’ assets and liabilities included in the condensed consolidated balance sheets were as follows:
|
| NOVEMBER 1, |
| FEBRUARY 1, | ||
| 2025 | 2025 | ||||
(in thousands) | ||||||
ASSETS |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Prepaid expense and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property and equipment—net(1) |
| |
| | ||
Other non-current assets | |
| | |||
Total assets | $ | | $ | | ||
LIABILITIES |
|
|
|
| ||
Accounts payable and accrued expenses | $ | | $ | | ||
Other current liabilities | | | ||||
Total current liabilities | | | ||||
Real estate loan—net(2) | | | ||||
Other non-current liabilities | |
| | |||
Total liabilities | $ | | $ | | ||
| (1) | Includes $ |
| (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 $ |
Equity Method Investments
Equity method investments primarily represent our membership interests in
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 15 |
Table of Contents
In March 2025, the Aspen LLC in which we hold a
Other than as described above, we did
Our maximum exposure to loss is the carrying value of each of the equity method investments as of November 1, 2025.
NOTE 7—ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consisted of the following:
|
| NOVEMBER 1, |
| FEBRUARY 1, | ||
| 2025 | 2025 | ||||
(in thousands) | ||||||
Accounts payable | $ | | $ | | ||
Accrued compensation |
| |
| | ||
Accrued sales and use tax |
| |
| | ||
Accrued occupancy |
| |
| | ||
Accrued freight and duty |
| |
| | ||
Accrued professional fees |
| |
| | ||
Accrued legal contingencies(1) | | | ||||
Other accrued expenses |
| |
| | ||
Total accounts payable and accrued expenses | $ | | $ | | ||
| (1) | Refer to Note 14¾Commitments and Contingencies. |
Other current liabilities consisted of the following:
|
| NOVEMBER 1, |
| FEBRUARY 1, | ||
| 2025 | 2025 | ||||
(in thousands) | ||||||
Allowance for sales returns | $ | | $ | | ||
Current portion of term loans | | | ||||
Finance lease liabilities | | | ||||
Unredeemed gift card and merchandise credit liability | | | ||||
Federal tax payable | | | ||||
Foreign tax payable | | | ||||
Other current liabilities |
| |
| | ||
Total other current liabilities | $ | | $ | | ||
16 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Supplier Finance Program
We facilitate a voluntary supply chain financing program (the “Financing Program”) with a third-party financial institution (the “Bank”) to provide participating suppliers with the opportunity to receive early payment on invoices, net of a discount charged to the supplier by the Bank. As of November 1, 2025 and February 1, 2025, we had $
Reorganization
We implemented and completed a restructuring in the fourth quarter of fiscal 2024 and in the second quarter of fiscal 2025 that included workforce and expense reductions in order to improve and simplify our organizational structure, streamline certain aspects of our business operations and better position us for further growth. The workforce reduction associated with these initiatives included the elimination of numerous leadership and other positions throughout the organization. During the nine months ended November 1, 2025, we incurred total charges relating to the reorganization of $
Contract Liabilities
We defer revenue associated with merchandise delivered via the home-delivery channel. We expect that substantially all of the deferred revenue and customer deposits as of November 1, 2025 will be recognized within the next six months as the performance obligations are satisfied. In addition, we defer revenue when cash payments are received in advance of performance for unsatisfied obligations related to our gift cards. During the three months ended November 1, 2025 and November 2, 2024, we recognized $
NOTE 8—LEASES
Lease costs—net consisted of the following:
| THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||
NOVEMBER 1, |
| NOVEMBER 2, | NOVEMBER 1, |
| NOVEMBER 2, | ||||||||
|
|
| 2025 |
| 2024 | 2025 |
| 2024 | |||||
(in thousands) | |||||||||||||
Operating lease costs(1) | $ | | $ | |
| $ | | $ | | ||||
Finance lease costs | |||||||||||||
Amortization of leased assets(1) | | | | | |||||||||
Interest on lease liabilities(2) | | | | | |||||||||
Variable lease costs(3) | | | | | |||||||||
Sublease income(4) | ( | ( | ( | ( | |||||||||
Total lease costs—net | $ | | $ | | $ | | $ | | |||||
| (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 based on our accounting policy. |
| (2) | Included in interest expense—net on the condensed consolidated statements of income. Amounts include 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 for finance leases, which were not material in either period presented. |
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 17 |
Table of Contents
| (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 $ |
| (4) | Included in selling, general and administrative expenses on the condensed consolidated statements of income. |
Lease right-of-use assets and lease liabilities consisted of the following:
NOVEMBER 1, | FEBRUARY 1, | |||||||
| 2025 |
| 2025 | |||||
(in thousands) | ||||||||
Balance Sheet Classification | ||||||||
Assets | ||||||||
Operating leases | $ | | $ | | ||||
Finance leases(1)(2)(3) | | | ||||||
Total lease right-of-use assets | $ | | $ | | ||||
Liabilities | ||||||||
Current(4) | ||||||||
Operating leases | $ | | $ | | ||||
Finance leases | | | ||||||
Total lease liabilities—current | | | ||||||
Non-current | ||||||||
Operating leases | | | ||||||
Finance leases | | | ||||||
Total lease liabilities—non-current | | | ||||||
Total lease liabilities | $ | | $ | | ||||
| (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 $ |
| (3) | Includes $ |
| (4) | Current portion of lease liabilities represents the reduction of the related lease liability over the next 12 months. |
18 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
The maturities of lease liabilities were as follows as of November 1, 2025:
OPERATING | FINANCE | ||||||||||
FISCAL YEAR |
| LEASES |
| LEASES |
| TOTAL | |||||
(in thousands) | |||||||||||
Remainder of fiscal 2025 | $ | | $ | | $ | | |||||
2026 | | | | ||||||||
2027 | | | | ||||||||
2028 | | | | ||||||||
2029 | | | | ||||||||
2030 | | | | ||||||||
Thereafter | | | | ||||||||
Total lease payments(1)(2) | | | | ||||||||
Less—imputed interest(3) | ( | ( | ( | ||||||||
Present value of lease liabilities | $ | | $ | | $ | | |||||
| (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 $ |
| (2) | Excludes an immaterial amount of future commitments under |
| (3) | Calculated using the discount rate for each lease at lease commencement. |
Supplemental information related to leases consisted of the following:
NINE MONTHS ENDED | |||||||||||
NOVEMBER 1, | NOVEMBER 2, | ||||||||||
2025 | 2024 | ||||||||||
Weighted-average remaining lease term (years) | |||||||||||
Operating leases | |||||||||||
Finance leases | |||||||||||
Weighted-average discount rate | |||||||||||
Operating leases | % | % | |||||||||
Finance leases | % | % | |||||||||
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 19 |
Table of Contents
Other information related to leases consisted of the following:
NINE MONTHS ENDED | |||||||
NOVEMBER 1, | NOVEMBER 2, | ||||||
2025 | 2024 | ||||||
(in thousands) | |||||||
Cash paid for amounts included in the measurement of lease liabilities | |||||||
Operating cash flows from operating leases | $ | ( | $ | ( | |||
Operating cash flows from finance leases | ( | ( | |||||
Financing cash flows from finance leases—net(1) | ( | ( | |||||
Total cash outflows from leases | $ | ( | $ | ( | |||
Non-cash transactions | |||||||
Lease right-of-use assets obtained in exchange for lease obligations—net of lease terminations | |||||||
Operating leases(2) | $ | | $ | | |||
Finance leases | | | |||||
Reclassification from other non-current assets to finance lease right-of-use assets | | | |||||
| (1) | Presented net of tenant allowances received subsequent to lease commencement of $ |
| (2) | Right-of-use assets obtained in exchange for new operating lease liabilities exclude the impact from acquisitions of $ |
Long-Lived Asset Impairment
During the three months ended November 2, 2024, we recognized long-lived asset impairment charges of $
NOTE 9—CREDIT FACILITIES AND CONVERTIBLE SENIOR NOTES
The outstanding balances under our credit facilities were as follows:
| NOVEMBER 1, | FEBRUARY 1, | ||||||||||||||||||
| 2025 | 2025 | ||||||||||||||||||
| UNAMORTIZED | UNAMORTIZED | ||||||||||||||||||
DEBT | NET | DEBT | NET | |||||||||||||||||
INTEREST | OUTSTANDING | ISSUANCE | CARRYING | OUTSTANDING | ISSUANCE | CARRYING | ||||||||||||||
| RATE |
| AMOUNT |
| COSTS |
| AMOUNT |
| AMOUNT |
| COSTS |
| AMOUNT | |||||||
(dollars in thousands) | ||||||||||||||||||||
Asset based credit facility(1) | $ | | $ | — | $ | | $ | | $ | — | $ | | ||||||||
Term loan B(2) | | ( | | | ( | | ||||||||||||||
Term loan B-2(3) | | ( | | | ( | | ||||||||||||||
Total credit facilities | $ | | $ | ( | $ | | $ | | $ | ( | $ | | ||||||||
| (1) | Deferred financing fees associated with the asset based credit facility as of November 1, 2025 and February 1, 2025 were $ |
20 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
| (2) | Represents the Term Loan Credit Agreement (defined below), of which outstanding amounts of $ |
| (3) | Represents the outstanding balance of the Term Loan B-2 (defined below) under the Term Loan Credit Agreement, of which outstanding amounts of $ |
Asset Based Credit Facility
On August 3, 2011, Restoration Hardware, Inc. (“RHI”), a wholly-owned subsidiary of RH, along with its Canadian subsidiary, Restoration Hardware Canada, Inc., entered into the Ninth Amended and Restated Credit Agreement (as amended prior to June 28, 2017, the “Original Credit Agreement”) by and among RHI, Restoration Hardware Canada, Inc., certain other subsidiaries of RH named therein as borrowers or guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (the “ABL Agent”).
On June 28, 2017, RHI entered into the Eleventh Amended and Restated Credit Agreement (as amended prior to July 29, 2021, the “11th A&R Credit Agreement”) by and among RHI, Restoration Hardware Canada, Inc., certain other subsidiaries of RH named therein as borrowers or guarantors, the lenders party thereto and the ABL Agent, which amended and restated the Original Credit Agreement.
On July 29, 2021, RHI entered into the Twelfth Amended and Restated Credit Agreement (as amended, the “ABL Credit Agreement”) by and among RHI, Restoration Hardware Canada, Inc., certain other subsidiaries of RH named therein as borrowers or guarantors, the lenders party thereto and the ABL Agent, which amended and restated the 11th A&R Credit Agreement.
On July 31, 2025, RHI entered into an Amendment (the “Amendment”) to the Twelfth Amended and Restated Credit Agreement, (as amended prior to the Amendment, the “Existing ABL Credit Agreement” and as amended by the Amendment, the “ABL Credit Agreement”). The Amendment, among other things, amends the ABL Credit Agreement to extend the maturity date of the ABL Credit Agreement to be the earlier of (a) July 31, 2030 and (b) the date which is 91 days prior to the final stated maturity of the Term Loan Credit Agreement and any refinancing thereof. Under the ABL Credit Agreement, RHI has a revolving line of credit with initial availability of up to $
The availability of credit at any given time under the ABL Credit Agreement will be constrained by its terms and conditions, including the amount of collateral available, a borrowing base formula based upon numerous factors, including the value of eligible inventory and eligible accounts receivable, and other restrictions contained in the ABL Credit Agreement. All obligations under the ABL Credit Agreement are secured by substantial assets of the loan parties, including inventory, receivables and certain types of intellectual property. As a result, actual borrowing availability under the revolving line of credit could be less than the stated amount of the revolving line of credit (as reduced by the actual borrowings and outstanding letters of credit under the revolving line of credit).
Borrowings under the revolving line of credit (other than swing line loans, which are subject to interest at the base rate) bear interest, at the borrower’s option, at either the base rate or the Secured Overnight Financing Rate (“SOFR”), subject to a
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 21 |
Table of Contents
The ABL Credit Agreement contains various restrictive and affirmative covenants, including required financial reporting, limitations on granting certain liens, limitations on making certain loans or investments, limitations on incurring additional debt, restricted payment limitations limiting the payment of dividends and certain other transactions and distributions, limitations on transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of a similar type and size.
The ABL Credit Agreement requires a daily sweep of all cash receipts and collections to prepay the loans under the agreement while (i) an event of default exists or (ii) when the unused availability under the ABL Credit Agreement drops below the greater of (A) $
The ABL Credit Agreement contains customary representations and warranties, events of default and other customary terms and conditions for an asset based credit facility.
As of November 1, 2025, RHI had $
Term Loan Credit Agreement
On October 20, 2021, RHI entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) by and among RHI as the borrower, the lenders party thereto and Bank of America, N.A. as administrative agent and collateral agent (in such capacities, the “Term Agent”) with respect to an initial term loan (the “Term Loan B”) in an aggregate principal amount equal to $
Through July 31, 2023, the Term Loan B bore interest at an annual rate based on LIBOR subject to a
On May 13, 2022, RHI entered into a 2022 Incremental Amendment (the “2022 Incremental Amendment”) with Bank of America, N.A., as administrative agent, amending the Term Loan Credit Agreement (the Term Loan Credit Agreement as amended by the 2022 Incremental Amendment, the “Amended Term Loan Credit Agreement”). Pursuant to the terms of the 2022 Incremental Amendment, RHI incurred incremental term loans (the “Term Loan B-2”) in an aggregate principal amount equal to $
The Term Loan B-2 bears interest at an annual rate based on SOFR subject to a
22 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
All obligations under the Term Loan B are guaranteed by certain domestic subsidiaries of RHI. Further, RHI and such subsidiaries have granted a security interest in substantially all of their assets (subject to customary and other exceptions) to secure the Term Loan B. Substantially all of the collateral securing the Term Loan B also secures the loans and other credit extensions under the ABL Credit Agreement. On October 20, 2021, in connection with the Term Loan Credit Agreement, RHI and certain other subsidiaries of RH party to the Term Loan Credit Agreement and the ABL Credit Agreement, as the case may be, entered into an Intercreditor Agreement (the “Intercreditor Agreement”) with the Term Agent and the ABL Agent. The Intercreditor Agreement establishes various customary inter-lender terms, including, without limitation, with respect to priority of liens, permitted actions by each party, application of proceeds, exercise of remedies in case of default, releases of liens and certain limitations on the amendment of the ABL Credit Agreement and the Term Loan Credit Agreement without the consent of the other parties.
The borrowings under the Term Loan Credit Agreement may be prepaid in whole or in part at any time, subject to a prepayment premium of
The Term Loan Credit Agreement contains various restrictive and affirmative covenants, including required financial reporting, limitations on granting certain liens, limitations on making certain loans or investments, limitations on incurring additional debt, restricted payment limitations limiting the payment of dividends and certain other transactions and distributions, limitations on transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of a similar type and size, but provides for unlimited exceptions in the case of incurring indebtedness, granting of liens and making investments, dividend payments, and payments of material junior indebtedness, subject to satisfying specified leverage ratio tests.
The Term Loan Credit Agreement does not contain a financial maintenance covenant.
The Term Loan Credit Agreement contains customary representations and warranties, events of default and other customary terms and conditions for a term loan credit agreement.
$
In September 2019, we issued in a private offering $
In September 2024, upon the maturity of the 2024 Notes, the $
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 23 |
Table of Contents
NOTE 10—FAIR VALUE MEASUREMENTS
Fair Value Measurements—Recurring
Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value due to the short-term nature of activity within these accounts. The estimated fair value of the asset based credit facility approximates cost as the interest rate associated with the facility is variable and resets frequently (Level 2).
The estimated fair value and carrying value of the Term Loan Credit Agreement and the real estate loans were as follows:
| NOVEMBER 1, | FEBRUARY 1, | ||||||||||
| 2025 | 2025 | ||||||||||
|
|
| PRINCIPAL |
|
| PRINCIPAL | ||||||
FAIR | CARRYING | FAIR | CARRYING | |||||||||
VALUE | VALUE(1) | VALUE | VALUE(1) | |||||||||
(in thousands) | ||||||||||||
Term loan B | $ | | $ | | $ | | $ | | ||||
Term loan B-2 |
| | |
| |
| | |||||
Real estate loans | | | | | ||||||||
| (1) | The principal carrying values of the Term Loan B and Term Loan B-2 represent the outstanding amount under each class and exclude discounts upon original issuance and third-party offering costs. The principal carrying value of the real estate loans represents the outstanding principal balance and exclude debt issuance costs. |
The fair values of the Term Loan B and Term Loan B-2 were derived from observable bid prices (Level 1). The fair values of the real estate loans were derived from discounted cash flows using risk-adjusted rates (Level 2).
NOTE 11—INCOME TAXES
Our income tax expense and effective tax rates were as follows:
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||
NOVEMBER 1, |
| NOVEMBER 2, | NOVEMBER 1, |
| NOVEMBER 2, | |||||||||||
|
| 2025 |
| 2024 | 2025 |
| 2024 | |||||||||
(dollars in thousands) | ||||||||||||||||
Income tax expense | $ | | $ | |
| $ | | $ | | |||||||
Effective tax rate | % | % | % | % | ||||||||||||
The increase in our effective tax rates for the three and nine months ended November 1, 2025 compared to the three and nine months ended November 2, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.
The Organization for Economic Cooperation and Development (“OECD”) proposed model rules to ensure a minimal level of taxation (commonly referred to as Pillar II) and the European Union member states have agreed to implement Pillar II’s proposed global corporate minimum tax rate of
24 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
On July 4, 2025, the United States enacted tax legislation through the H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), which implemented several corporate tax law changes, including, but not limited to, (1) limitations on deductions for interest expense, (2) changes to the taxation of foreign activity and (3) reinstatement of one hundred percent bonus depreciation for eligible property. A number of other provisions of the OBBBA will not take effect until the 2026 tax year, including various changes to existing international tax provisions. We did not identify any material discrete tax impacts related to our beginning-of-the-year deferred tax assets and liabilities or valuation allowances due to the enactment of the OBBBA. We will continue to monitor any future changes in our business or interpretations of the new tax law that could affect our tax position in subsequent periods.
NOTE 12—NET INCOME PER SHARE
The weighted-average shares used for net income per share were as follows:
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Weighted-average shares—basic | | | | | ||||||||
Effect of dilutive stock-based awards |
| |
| |
| |
| | ||||
Effect of dilutive convertible senior notes(1) |
| — |
| |
| — |
| | ||||
Weighted-average shares—diluted |
| |
| |
| |
| | ||||
| (1) | The dilutive effect of the 2024 Notes is calculated under the if-converted method, which assumes share settlement of the entire convertible debt instrument. The 2024 Notes matured in September 2024 and did not have an impact on our diluted share count post-maturity. Refer to Note 9—Credit Facilities and Convertible Senior Notes. |
The following number of options and restricted stock units were excluded from the calculation of diluted net income per share because their inclusion would have been anti-dilutive:
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Options | | | | | ||||||||
Restricted stock units |
| | |
| | | ||||||
NOTE 13—STOCK-BASED COMPENSATION
The Restoration Hardware 2012 Stock Incentive Plan (the “Stock Incentive Plan”) was adopted on November 1, 2012. The Stock Incentive Plan provided for the grant of incentive stock options to our employees, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants. The Restoration Hardware 2012 Stock Option Plan (the “Option Plan”) was adopted on November 1, 2012. On November 1, 2022, both the Stock Incentive Plan and Option Plan expired.
The RH 2023 Stock Incentive Plan (the “2023 Stock Incentive Plan”, together with the Stock Incentive Plan and Option Plan, “the Plans”) was approved by stockholders on April 4, 2023. The 2023 Stock Incentive Plan provides for the grant of incentive stock options to our employees and the grant of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and any combination thereof to our employees, directors and consultants and our parent and subsidiary corporations’ employees, directors and consultants.
As of November 1, 2025, there were a total of
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 25 |
Table of Contents
Equity Awards Under the Plans
Options outstanding, vested or expected to vest, and exercisable as of November 1, 2025 were as follows:
WEIGHTED- | WEIGHTED- | AGGREGATE | ||||||||||
AVERAGE | AVERAGE | INTRINSIC | ||||||||||
EXERCISE | REMAINING TERM | VALUE | ||||||||||
SHARES |
| PRICE |
| (in years) |
| (in thousands) | ||||||
Options outstanding | | $ | | $ | | |||||||
Options vested or expected to vest | | | | |||||||||
Options exercisable | | | | |||||||||
Stock-based compensation expense, which is included in selling, general and administrative expenses on the condensed consolidated statements of income, was as follows:
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
|
| 2025 |
| 2024 |
| 2025 | 2024 | |||||
(in thousands) | ||||||||||||
Stock-based compensation expense(1) | $ | | $ | | $ | | $ | | ||||
| (1) | On October 18, 2020, our Board of Directors granted Mr. Friedman an option to purchase |
No stock-based compensation cost has been capitalized in the accompanying condensed consolidated financial statements.
As of November 1, 2025, the total unrecognized compensation expense and weighted average remaining term of equity awards were as follows:
UNRECOGNIZED | WEIGHTED- | |||||
STOCK BASED | AVERAGE | |||||
COMPENSATION | REMAINING TERM | |||||
(in thousands) | (in years) | |||||
Unvested options | $ | | ||||
Unvested restricted stock and restricted stock units | | |||||
Total | $ | | ||||
NOTE 14—COMMITMENTS AND CONTINGENCIES
Commitments
We had
Contingencies
We are subject to contingencies, including in connection with lawsuits, claims, investigations and other legal proceedings incident to the ordinary course of our business. These disputes are increasing in number as we expand our business and provide new product and service offerings, such as restaurants and hospitality, and as we enter new markets and legal jurisdictions and face increased complexity related to compliance and regulatory requirements. In addition, we are subject to governmental and regulatory examinations, information requests, and investigations from time to time at the state and federal levels.
26 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
We currently face legal proceedings that involve complex litigation, including class action cases, matters related to our employment practices, the application of state wage and hour laws, product liability and other causes of action. We have faced similar litigation in the past. Due to the inherent difficulty of predicting the course of complex legal actions, including class-action allegations, such as the eventual scope, duration or outcome, we may be unable to estimate the amount or range of any potential loss that could result from an unfavorable outcome arising from such matters. Our assessment of these legal proceedings, as well as other lawsuits, could change based upon the discovery of facts that are not presently known or developments during the course of the litigation. We have settled certain class action and other cases but continue to defend a variety of legal actions and our estimates of our exposure in such cases may evolve over time. Accordingly, the ultimate costs to resolve litigation, including class action cases, may be substantially higher or lower than our estimates.
With respect to such contingencies, we review the need for any loss contingency reserves and establish reserves when, in the opinion of our senior leadership team, it is probable that a matter would result in liability, and the amount of loss, if any, can be reasonably estimated. Loss contingencies determined to be probable and estimable are recorded in accounts payable and accrued expenses on the condensed consolidated balance sheets (refer to Note 7—Accounts Payable, Accrued Expenses and Other Current Liabilities). These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to each matter. In view of the inherent difficulty of predicting the outcome of certain matters, particularly in cases in which claimants seek substantial or indeterminate damages, it may not be possible to determine whether a liability has been incurred or to reasonably estimate the ultimate or minimum amount of that liability until the case is close to resolution, in which case no reserve is established until that time. When and to the extent that we do establish a reserve, there can be no assurance that any such recorded liability for estimated losses will be for the appropriate amount, and actual losses could be higher or lower than what we accrue from time to time. Although we believe that the ultimate resolution of our current legal proceedings will not have a material adverse effect on the condensed consolidated financial statements, the outcome of legal matters is subject to inherent uncertainty.
Although we are self-insured or maintain deductibles in the United States for workers’ compensation, general liability and product liability up to predetermined amounts, above which third-party insurance applies, depending on the facts and circumstances of the underlying claims, coverage under these or other of our insurance policies may not be available. We may elect not to renew certain insurance coverage or renewal of coverage may not be available or may be prohibitively expensive. Even if we believe coverage does apply under our insurance programs, our insurance carriers may dispute coverage based on the underlying facts and circumstances.
The outcome of any contingencies, including lawsuits, claims, investigations and other legal proceedings, could result in unexpected expenses and liability that could adversely affect our operations. In addition, any legal proceedings in which we are involved or claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of our senior leadership team’s time, result in the diversion of significant operational resources, and require changes to our business operations, policies and practices. Legal costs related to such matters are expensed as incurred.
NOTE 15—SEGMENT REPORTING
We define
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.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 27 |
Table of Contents
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, (v) contract termination settlement—net and (vi) legal settlements—net. 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.
28 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Segment net revenues, which represent our disaggregated net revenues in accordance with ASC 606, significant segment expenses and segment adjusted operating income, by reportable segment, were as follows:
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||||||||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||||||||||||||||||||||||||
|
| 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 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
Cost of goods sold | | | | | | | | | | | | | ||||||||||||||||||||||||
Advertising expense | | | | | | | | | | | | | ||||||||||||||||||||||||
Other segment expenses(2) | | | | | | | | | | | | | ||||||||||||||||||||||||
Segment adjusted operating income(1) | | | | | | | | | | | | | ||||||||||||||||||||||||
Asset impairments |
|
|
| — |
| |
|
| |
| | |||||||||||||||||||||||||
Product recall |
|
|
| — |
| — |
|
| |
| — | |||||||||||||||||||||||||
Reorganization related costs |
| — |
| — | |
| — | |||||||||||||||||||||||||||||
Non-cash compensation |
| — |
| | |
| | |||||||||||||||||||||||||||||
Contract termination settlement—net | ( | — | ( | — | ||||||||||||||||||||||||||||||||
Legal settlements—net |
| — |
| — | — |
| ( | |||||||||||||||||||||||||||||
Operating income |
|
|
| |
| |
|
| |
| | |||||||||||||||||||||||||
Interest expense—net |
|
|
| |
| |
|
| |
| | |||||||||||||||||||||||||
Other (income) expense—net |
| |
| | ( |
| | |||||||||||||||||||||||||||||
Income before taxes and equity method investments | $ | | $ | | $ | | $ | | ||||||||||||||||||||||||||||
| (1) | All intercompany transactions are immaterial and have been eliminated. |
| (2) |
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 29 |
Table of Contents
In the three months ended November 1, 2025 and November 2, 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 $
Depreciation and amortization for our segments was as follows:
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
(in thousands) | ||||||||||||
RH Segment | $ | | $ | | $ | | $ | | ||||
Waterworks | | | | | ||||||||
Real Estate(1) | — | — | — | — | ||||||||
Total depreciation and amortization |
| $ | |
| $ | |
| $ | |
| $ | |
| (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:
| NOVEMBER 1, | FEBRUARY 1, | ||||||||||||||||||||||
| 2025 | 2025 | ||||||||||||||||||||||
|
| RH SEGMENT |
| WATERWORKS |
| REAL ESTATE |
| TOTAL |
| RH SEGMENT |
| WATERWORKS |
| REAL ESTATE |
| TOTAL | ||||||||
(in thousands) | ||||||||||||||||||||||||
Goodwill(1) | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | ||||||||
Tradenames, trademarks and other intangible assets(2) |
| |
| |
| — |
| |
| |
| |
| — |
| | ||||||||
Equity method investments(3) | — | | | | — | | | | ||||||||||||||||
Total assets |
| | | |
| |
| |
| |
| |
| | ||||||||||
| (1) | The Waterworks reporting unit goodwill of $ |
| (2) | The Waterworks reporting unit tradename is presented net of an impairment charge of $ |
| (3) | The Waterworks segment balance represents membership interests in |
30 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
We are domiciled in the United States and primarily operate our retail locations and outlets in the United States.
COUNT | ||
Canada | | |
United Kingdom | | |
Germany | | |
Belgium | | |
France | | |
Spain | | |
Total(1) | |
| (1) | Geographic revenues generated outside of the United States did not exceed 10% of total consolidated net revenues in either fiscal period presented. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and the results of our operations should be read together with the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and the related notes included in our 2024 Form 10-K.
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) contains forward-looking statements that are subject to risks and uncertainties. Refer to “Special Note Regarding Forward-Looking Statements and Market Data” below and Item 1A—Risk Factors in our 2024 Form 10-K for a discussion of the risks, uncertainties and assumptions associated with these statements. MD&A should be read in conjunction with our historical consolidated financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, those listed in our 2024 Form 10-K.
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 nine months ended November 1, 2025, and a comparison to the three and nine months ended November 2, 2024. The discussion related to cash flows for the nine months ended November 2, 2024, has been omitted from this Quarterly Report on Form 10-Q, but is included in Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations on our Form 10-Q for the quarter ended November 2, 2024, filed with the Securities and Exchange Commission (“SEC”) on December 12, 2024.
MD&A is a supplement to the condensed consolidated financial statements within Part I of this Quarterly Report on Form 10-Q and is provided to enhance an understanding of our results of operations and financial condition. Our MD&A is organized as follows:
Overview. This section provides a general description of our business, including our key value-driving strategies and an overview of certain known trends and uncertainties.
Basis of Presentation and Results of Operations. This section provides the 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 financial and operational decision-making and as a means to evaluate period-to-period comparisons.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 31 |
Table of Contents
Liquidity and Capital Resources. This section provides an overview of our sources and uses of cash and our financing arrangements, including our credit facilities and debt arrangements, in addition to the cash requirements for our business, such as our capital expenditures.
Critical Accounting Policies and Estimates. This section provides the accounting policies and estimates that involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position, including the significant estimates and judgments used in the preparation of the condensed consolidated financial statements.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA
This quarterly report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “short-term,” “non-recurring,” “one-time,” “unusual,” “should,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
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 entitled Risk Factors in our 2024 Form 10-K and Management’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 periods ended May 3, 2025 and August 2, 2025 and in our 2024 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.
We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect, or that future developments affecting us will be those that we have anticipated. The forward-looking statements included in this quarterly report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Overview
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 have an integrated RH Hospitality experience in 24 of our Design Gallery locations, which includes restaurants and wine bars.
We have recently undertaken efforts to introduce the most prolific collection of new products in our history, with a substantial number of new furniture and upholstery collections across RH Interiors, RH Modern, RH Outdoor, RH Baby & Child and RH TEEN. These new collections reflect a level of design and quality inaccessible in our current market and a value proposition that we believe will be disruptive across multiple markets.
32 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
As of November 1, 2025, we operated the following number of locations:
COUNT | ||
RH | ||
North America | ||
Design Galleries | 37 | |
Legacy Galleries | 26 | |
Outdoor Galleries | 2 | |
Modern Gallery | 1 | |
Baby & Child and TEEN Gallery | 1 | |
Interior Design Office | 1 | |
Total RH retail locations—North America | 68 | |
Europe Design Galleries | 6 | |
Total RH retail locations | 74 | |
Outlets | 43 | |
Guesthouse | 1 | |
Waterworks Showrooms | 14 |
Business Conditions
In recent years, our business has been negatively affected and limited by macroeconomic conditions, including high interest rates and mortgage rates, volatility in the global financial markets and the slowdown in the luxury home market, as well as other negative factors related to the effects of lingering higher inflation and increased costs, including higher construction expenses.
Since the majority of our product assortment is imported from vendors outside the U.S., we also face uncertainty and risks related to tariffs and other trade policies, which may continue to 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. 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 operation and we may face challenges in implementing the optimal responses to changing trade conditions.
In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. While our expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain. We also believe we have positioned the business to take advantage of any favorable progression in macroeconomic conditions.
Our decisions regarding the sources and uses of capital will continue to reflect and adapt to changes in market conditions and our business, including further developments with respect to macroeconomic factors.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 33 |
Table of Contents
Strategic Initiatives
We are in the process of implementing a number of significant business initiatives that have had, and will continue to have, an impact on our results of operations. As a result, 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 net revenues that we ordinarily 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.
For more information, refer to the sections entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors in our 2024 Form 10-K.
Key Value-Driving Strategies
In order to achieve our long-term strategies of product transformation, platform expansion and cash generation as well as drive growth across our business, we are focused on the following key strategies and business initiatives:
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. In addition, over the next few years, we plan to introduce RH Couture, RH Bespoke and RH Color.
Gallery Transformation. Our products are elevated and rendered more valuable by our architecturally inspiring Galleries. We believe our strategy to open new Design Galleries in every major market in North America will unlock the value of our vast assortment, generating an expected annual revenue opportunity for our business of $5 to $6 billion. We believe we can significantly increase our sales by transforming our real estate platform from our existing legacy retail footprint to a portfolio of Design Galleries sized to the potential of each market and the size of our assortment. In addition, we plan to incorporate hospitality into many of the new Design Galleries that we open in the future, which further elevates and renders our product and brand more valuable. We believe hospitality has created a unique new retail experience that cannot be replicated online and that the addition of hospitality drives incremental sales of home furnishings in these Galleries.
Brand Elevation. Our strategy is to move the brand beyond curating and selling product to conceptualizing and selling spaces by building an ecosystem of Products, Places, Services and Spaces that establishes the RH brand as a global thought leader, taste and place maker. We believe our seamlessly integrated ecosystem of immersive experiences inspires customers to dream, design, dine, travel and live in a world thoughtfully curated by RH, creating an impression and connection unlike any other brand in the world. Our hospitality efforts will continue to elevate the RH brand as we extend beyond the four walls of our Galleries into RH Guesthouses, where our goal is to create a new market for travelers seeking privacy and luxury in the $200 billion North American hotel industry. We entered this industry with the opening of the RH Guesthouse New York in September 2022 and are in the process of constructing our second RH Guesthouse in Aspen. In June 2023, we opened RH England, The Gallery at the Historic Aynho Park, a 400-year-old landmark estate representing the most inspiring and immersive physical expression of the brand to date. RH England marked the beginning of our global expansion beyond North America. Additionally, we offer bespoke experiences like RH Yountville, an integration of Food, Wine, Art & Design in the Napa Valley; RH One & RH Two, our private jets; and RH Three, our luxury yacht that is available for charter in the Caribbean and Mediterranean, where the wealthy and affluent visit and vacation. These immersive experiences expose both new and existing customers to our evolving authority in architecture, interior design and landscape architecture.
34 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Global Expansion. We believe that our luxury brand positioning and unique aesthetic have strong international appeal and that pursuit of global expansion will provide RH with a substantial opportunity to build over time a projected $20 to $25 billion global brand in terms of annual revenues. Our view is that the competitive environment globally 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. The Gallery, spanning seven levels connected by a soaring atrium of floating cast medallion stairs, features a freestanding RH Interior Design Studio opposite the spectacular six-meter cast medallion bronze doors marking the entrance, and two restaurants. We believe the opening of RH Paris marks a major step forward in the European expansion of our business. We are also under construction in London and Milan in inspiring spaces that will celebrate the heritage of the historic structures and will integrate full expressions of our hospitality experiences. In addition, we plan to open RH Sydney, The Gallery in Double Bay, in Australia in the coming years.
Digital Reimagination. Our strategy is to digitally reimagine the RH brand and business model both internally and externally. Internally, our multiyear effort began with the reimagination of our Center of Innovation to incorporate digitally integrated visuals and decision data designed to amplify the creative process from product ideation to product presentation. Externally, our strategy comes to life digitally through The World of RH, an online portal where customers can explore and be inspired by the depth and dimension of our brand. We expect to continue to elevate the customer experience on The World of RH with further enhancements to content, navigation and search functionality. We believe an opportunity exists to create similar strategic separation online as we have with our Galleries offline, reconceptualizing what a website can and should be. We are making meaningful investments to elevate and differentiate our online experience with plans to upgrade our website throughout 2025.
Basis of Presentation and Results of Operations
The following table sets forth the condensed consolidated statements of income:
THREE MONTHS ENDED | NINE MONTHS ENDED |
| |||||||||||||||||||||||
NOVEMBER 1, | % OF NET | NOVEMBER 2, | % OF NET | NOVEMBER 1, | % OF NET | NOVEMBER 2, | % OF NET | ||||||||||||||||||
2025 | REVENUES | 2024 | REVENUES | 2025 | REVENUES | 2024 | REVENUES | ||||||||||||||||||
(dollars in thousands) |
| ||||||||||||||||||||||||
Net revenues | $ | 883,810 | 100.0 | % | $ | 811,732 | 100.0 | % | $ | 2,596,913 | 100.0 | % | $ | 2,368,347 | 100.0 | % | |||||||||
Cost of goods sold |
| 494,074 | 55.9 |
| 450,392 | 55.5 |
| 1,442,585 | 55.5 |
| 1,316,212 | 55.6 | |||||||||||||
Gross profit |
| 389,736 | 44.1 |
| 361,340 | 44.5 |
| 1,154,328 | 44.5 |
| 1,052,135 | 44.4 | |||||||||||||
Selling, general and administrative expenses |
| 283,806 | 32.1 |
| 259,872 | 32.0 |
| 863,611 | 33.3 |
| 799,877 | 33.7 | |||||||||||||
Operating income |
| 105,930 | 12.0 |
| 101,468 | 12.5 |
| 290,717 | 11.2 |
| 252,258 | 10.7 | |||||||||||||
Other expenses |
| ||||||||||||||||||||||||
Interest expense—net |
| 57,152 | 6.5 |
| 57,590 | 7.1 |
| 171,113 | 6.6 |
| 173,624 | 7.4 | |||||||||||||
Other (income) expense—net | 694 | 0.1 | 27 | 0.0 | (3,533) | (0.1) | 529 | 0.0 | |||||||||||||||||
Total other expenses |
| 57,846 | 6.6 |
| 57,617 | 7.1 |
| 167,580 | 6.5 |
| 174,153 | 7.4 | |||||||||||||
Income before taxes and equity method investments |
| 48,084 | 5.4 |
| 43,851 | 5.4 |
| 123,137 | 4.7 |
| 78,105 | 3.3 | |||||||||||||
Income tax expense |
| 11,625 | 1.3 |
| 9,256 | 1.1 |
| 33,784 | 1.3 |
| 10,882 | 0.5 | |||||||||||||
Income before equity method investments | 36,459 | 4.1 | 34,595 | 4.3 | 89,353 | 3.4 | 67,223 | 2.8 | |||||||||||||||||
Share of equity method investments (income) loss—net | 194 | 0.0 | 1,427 | 0.2 | (6,659) | (0.3) | 8,728 | 0.3 | |||||||||||||||||
Net income | $ | 36,265 | 4.1 | % | $ | 33,168 | 4.1 | % | $ | 96,012 | 3.7 | % | $ | 58,495 | 2.5 | % | |||||||||
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 35 |
Table of Contents
How We Assess the Performance of Our Business
Demand
Demand is an operating metric that we use in reference to the dollar value of orders placed (orders convert to net revenue upon a customer obtaining control of the merchandise) and excludes exchanges, shipping fees and cancellations. Demand represents the demand generated from all of our businesses including RH Interiors, RH Modern, RH Contemporary, RH Outdoor, RH Baby & Child, RH TEEN, RH Contract, Membership, Dmitriy & Co, Joseph Jeup and Waterworks, as well as sales from RH Hospitality and RH Outlet.
Non-GAAP Financial Measures
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.
For more information on the non-GAAP financial measures, please see the reconciliation of GAAP to non-GAAP financial measures tables outlined below. These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Adjusted Operating Income. Adjusted operating income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted operating income as consolidated operating income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our underlying operating performance.
Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||
| NOVEMBER 1, |
| NOVEMBER 2, |
| NOVEMBER 1, |
| NOVEMBER 2, | |||||
2025 | 2024 | 2025 | 2024 | |||||||||
(in thousands) | ||||||||||||
Net income | $ | 36,265 | $ | 33,168 | $ | 96,012 | $ | 58,495 | ||||
Interest expense—net(1) |
| 57,152 |
| 57,590 |
| 171,113 |
| 173,624 | ||||
Other (income) expense—net(1) | 694 |
| 27 | (3,533) |
| 529 | ||||||
Income tax expense(1) |
| 11,625 |
| 9,256 |
| 33,784 |
| 10,882 | ||||
Share of equity method investments (income) loss—net(1) | 194 | 1,427 | (6,659) | 8,728 | ||||||||
Operating income |
| 105,930 |
| 101,468 |
| 290,717 |
| 252,258 | ||||
Asset impairments(2) |
| — |
| 19,545 |
| 3,597 |
| 19,545 | ||||
Product recall(3) |
| — |
| — |
| 1,913 |
| — | ||||
Reorganization related costs(4) |
| — |
| — |
| 1,233 |
| — | ||||
Non-cash compensation(5) | — | 861 | 851 | 3,669 | ||||||||
Contract termination settlement—net(6) | (3,375) | — | (3,375) | — | ||||||||
Legal settlements—net(7) |
| — |
| — |
| — |
| (9,375) | ||||
Adjusted operating income | $ | 102,555 | $ | 121,874 | $ | 294,936 | $ | 266,097 | ||||
36 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
| (1) | Refer to discussion “Three Months Ended November 1, 2025 Compared to Three Months Ended November 2, 2024” and “Nine Months Ended November 1, 2025 Compared to Nine Months Ended November 2, 2024” below for a discussion of our results of operations for the three and nine months ended November 1, 2025 and November 2, 2024. |
| (2) | The adjustment in the nine months ended November 1, 2025 includes inventory impairment of $2.6 million and property and equipment impairment of $1.0 million, primarily related to Galleries under construction. The adjustment in the three and nine months ended November 2, 2024 includes $19 million of long-lived asset impairment for our two Design Galleries in Germany (refer to “Long-Lived Asset Impairment” within Note 8—Leases), as well as impairment of pre-acquisition costs related to an unsuccessful joint venture arrangement of $1.0 million. |
| (3) | Represents costs and inventory charges associated with a product recall initiated in the second quarter of fiscal 2025. |
| (4) | Represents severance costs and related payroll taxes associated with a reorganization. |
| (5) | Represents the amortization of the non-cash compensation charge related to an option grant made to Mr. Friedman in October 2020. |
| (6) | Represents favorable contract termination settlement of $3.8 million, partially offset by costs related to the early termination. |
| (7) | Represents favorable legal settlements received of $10 million, partially offset by costs incurred in connection with one of the matters. |
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.
Reconciliation of GAAP Net Income to Adjusted Net Income
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | |||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
|
| (in thousands) | ||||||||||
Net income | $ | 36,265 | $ | 33,168 | $ | 96,012 | $ | 58,495 | ||||
Adjustments pre-tax: |
|
|
|
|
|
|
|
| ||||
Asset impairments(1) | — | 19,545 | 3,597 | 19,545 | ||||||||
Product recall(1) |
| — |
| — |
| 1,913 |
| — | ||||
Reorganization related costs(1) |
| — |
| — | 1,233 | — | ||||||
Non-cash compensation(1) |
| — |
| 861 |
| 851 |
| 3,669 | ||||
Contract termination settlement—net(1) | (3,375) | — | (3,375) | — | ||||||||
Legal settlements—net(1) | — | — | — | (9,375) | ||||||||
Subtotal adjusted items |
| (3,375) |
| 20,406 |
| 4,219 |
| 13,839 | ||||
Impact of income tax items(2) | 883 | (5,652) |
| 799 |
| (5,576) | ||||||
Share of equity method investments (income) loss—net(1) |
| 194 | 1,427 | (6,659) |
| 8,728 | ||||||
Adjusted net income | $ | 33,967 | $ | 49,349 | $ | 94,371 | $ | 75,486 | ||||
| (1) | Refer to table titled “Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income” and the related footnotes for additional information. |
| (2) | We exclude the GAAP tax provision and apply a non-GAAP tax provision based upon (i) adjusted pre-tax net income, (ii) the projected annual adjusted tax rate and (iii) the exclusion of material discrete tax items that are unusual or infrequent. The adjustments for the three months ended November 1, 2025 and November 2, 2024 are based on adjusted tax rates of 24.0% and 23.2%, respectively. The adjustments for the nine months ended November 1, 2025 and November 2, 2024 are based on adjusted tax rates of 25.9% and 17.9%, respectively. |
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 37 |
Table of Contents
EBITDA and Adjusted EBITDA. EBITDA and Adjusted 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 depreciation and amortization, interest expense—net and income tax expense. 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.
Reconciliation of GAAP Net Income to EBITDA and Adjusted EBITDA
| THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||
| NOVEMBER 1, | NOVEMBER 2, | NOVEMBER 1, | NOVEMBER 2, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| (in thousands) | |||||||||||
Net income | $ | 36,265 | $ | 33,168 | $ | 96,012 | $ | 58,495 | ||||
Depreciation and amortization |
| 38,376 |
| 32,998 |
| 108,241 |
| 96,082 | ||||
Interest expense—net |
| 57,152 |
| 57,590 |
| 171,113 |
| 173,624 | ||||
Income tax expense |
| 11,625 |
| 9,256 |
| 33,784 |
| 10,882 | ||||
EBITDA |
| 143,418 |
| 133,012 |
| 409,150 |
| 339,083 | ||||
Non-cash compensation(1) |
| 11,308 |
| 11,684 |
| 35,315 |
| 33,757 | ||||
Capitalized cloud computing amortization(2) | 3,571 | 2,852 | 9,727 | 8,017 | ||||||||
Asset impairments(3) |
| — |
| 19,545 |
| 3,597 |
| 19,545 | ||||
Product recall(3) |
| — |
| — |
| 1,913 |
| — | ||||
Reorganization related costs(3) | — | — | 1,233 | — | ||||||||
Share of equity method investments (income) loss—net(3) |
| 194 |
| 1,427 |
| (6,659) |
| 8,728 | ||||
Other (income) expense—net(3) | 694 | 27 | (3,533) | 529 | ||||||||
Contract termination settlement—net(3) | (3,375) | — | (3,375) | — | ||||||||
Legal settlements—net(3) | — | — | — | (9,375) | ||||||||
Adjusted EBITDA | $ | 155,810 | $ | 168,547 | $ | 447,368 | $ | 400,284 | ||||
| (1) | Represents non-cash compensation related to equity awards granted to employees, including the amortization of the non-cash compensation charge related to an option grant made to Mr. Friedman in October 2020. |
| (2) | Represents amortization associated with capitalized cloud computing costs. |
| (3) | Refer to table titled “Reconciliation of GAAP Net Income to Operating Income and Adjusted Operating Income” and the related footnotes for additional information. |
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.
Reconciliation of Adjusted Capital Expenditures
NINE MONTHS ENDED | ||||||
NOVEMBER 1, |
| NOVEMBER 2, | ||||
2025 | 2024 | |||||
|
| (in thousands) | ||||
Capital expenditures | $ | 158,387 | $ | 179,897 | ||
Landlord assets under construction—net of tenant allowances | 64,691 | 33,032 | ||||
Adjusted capital expenditures | $ | 223,078 | $ | 212,929 | ||
38 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $15 million in the nine months ended November 1, 2025, which are reflected as a reduction to principal payments under finance leases—net of tenant allowances within financing activities on the condensed consolidated statements of cash flows. We did not receive any such tenant allowances in the nine months ended November 2, 2024.
Retail Metrics
Our retail location square footage metrics and activity were as follows:
| NINE MONTHS ENDED | |||||||||
| NOVEMBER 1, | NOVEMBER 2, | ||||||||
| 2025 | 2024 | ||||||||
|
| TOTAL |
|
| TOTAL | |||||
SELLING SQUARE | SELLING SQUARE | |||||||||
COUNT | FOOTAGE(1) | COUNT | FOOTAGE(1) | |||||||
| (square footage in thousands) | |||||||||
Beginning of period | 83 |
| 1,527 |
| 84 |
| 1,378 | |||
RH Design Galleries |
|
|
|
|
|
| ||||
Oklahoma City | 1 | 31.1 | — | — | ||||||
Montreal | 1 | 31.1 | — | — | ||||||
San Diego | 1 | 20.0 | — | — | ||||||
Manhasset | 1 | 16.6 | — | — | ||||||
Paris | 1 | 14.3 | — | — | ||||||
Raleigh | — | — | 1 | 37.6 | ||||||
Cleveland | — | — | 1 | 33.1 | ||||||
Palo Alto | — | — | 1 | 32.5 | ||||||
Brussels | — | — | 1 | 27.7 | ||||||
Madrid | — | — | 1 | 8.3 | ||||||
RH Legacy Galleries | ||||||||||
San Diego | (1) | (6.2) | — | — | ||||||
Plano | — | — | (1) | (9.6) | ||||||
Cleveland | — | — | (1) | (7.1) | ||||||
Palo Alto | — | — | (1) | (6.1) | ||||||
Raleigh | — | — | (1) | (4.7) | ||||||
RH Outdoor Galleries | ||||||||||
Greenwich | 1 | 4.2 | — | — | ||||||
East Hampton | 1 | 2.6 | — | — | ||||||
RH Baby & Child and TEEN Gallery | ||||||||||
Greenwich | (1) | (4.2) | — | — | ||||||
Waterworks Showroom | ||||||||||
Dallas (remodel) | — | 2.4 | — | — | ||||||
End of period | 88 |
| 1,639 |
| 85 |
| 1,490 | |||
Total square footage at end of period(2) | 2,246 | 2,050 | ||||||||
| (1) | Represents retail space at our retail locations used to sell our products, as well as space for our restaurants and wine bars. Excludes backrooms at retail locations used for storage, office space, food preparation, kitchen space or similar purpose, as well as exterior sales space located outside a retail location, such as courtyards, gardens and rooftops. |
Includes approximately 89,000 square feet related to three owned retail locations as of both November 1, 2025 and November 2, 2024.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 39 |
Table of Contents
| (2) | Includes approximately 142,000 square feet related to three owned retail locations as of both November 1, 2025 and November 2, 2024. |
Weighted-average square footage and selling square footage are calculated based on the number of days a retail location was opened during the period divided by the total number of days in the period, and were as follows:
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||
NOVEMBER 1, |
| NOVEMBER 2, |
| NOVEMBER 1, |
| NOVEMBER 2, | ||||||
2025 | 2024 | 2025 | 2024 | |||||||||
|
| (in thousands) | ||||||||||
Weighted-average square footage | 2,211 |
| 2,014 | 2,144 |
| 1,984 | ||||||
Weighted-average selling square footage | 1,613 | 1,462 | 1,563 | 1,440 | ||||||||
Three Months Ended November 1, 2025 Compared to Three Months Ended November 2, 2024
| THREE MONTHS ENDED | |||||||||||||||||
| NOVEMBER 1, | NOVEMBER 2, | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
|
| RH SEGMENT |
| WATERWORKS | TOTAL(1) |
| RH SEGMENT |
| WATERWORKS |
| TOTAL(1) | |||||||
| (in thousands) | |||||||||||||||||
Net revenues(2) | $ | 835,821 | $ | 47,989 | $ | 883,810 | $ | 768,063 | $ | 43,669 | $ | 811,732 | ||||||
Cost of goods sold |
| 472,171 |
| 21,903 |
| 494,074 |
| 429,121 |
| 21,271 |
| 450,392 | ||||||
Gross profit |
| 363,650 |
| 26,086 |
| 389,736 |
| 338,942 |
| 22,398 |
| 361,340 | ||||||
Selling, general and administrative expenses |
| 263,126 |
| 20,680 |
| 283,806 |
| 240,558 |
| 19,314 |
| 259,872 | ||||||
Operating income | $ | 100,524 | $ | 5,406 | $ | 105,930 | $ | 98,384 | $ | 3,084 | $ | 101,468 | ||||||
| (1) | The results for the Real Estate segment were immaterial in the three months ended November 1, 2025 and November 2, 2024, thus, such results are presented within the RH Segment each period. Refer to Note 15—Segment Reporting in the condensed consolidated financial statements. Additionally, all intercompany transactions are immaterial and have been eliminated. |
| (2) | RH Segment net revenues include outlet revenues of $75 million and $64 million for the three months ended November 1, 2025 and November 2, 2024, respectively. |
Net revenues
Consolidated net revenues increased $72 million, or 8.9%, to $884 million in the three months ended November 1, 2025 compared to $812 million in the three months ended November 2, 2024.
RH Segment net revenues
RH Segment net revenues increased $68 million, or 8.8%, to $836 million in the three months ended November 1, 2025 compared to $768 million in the three months ended November 2, 2024. The below discussion highlights the primary factors that impacted RH Segment net revenues, which are listed in order of magnitude.
RH Segment net revenues for the three months ended November 1, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion. In addition, hospitality revenue increased as a result of new Gallery openings and we had higher outlet revenue.
Waterworks net revenues
Waterworks net revenues increased $4.3 million, or 9.9%, to $48 million in the three months ended November 1, 2025 compared to $44 million in the three months ended November 2, 2024.
40 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Gross profit
Consolidated gross profit increased $28 million, or 7.9%, to $390 million in the three months ended November 1, 2025 compared to $361 million in the three months ended November 2, 2024. As a percentage of net revenues, consolidated gross margin decreased 40 basis points to 44.1% of net revenues in the three months ended November 1, 2025 from 44.5% of net revenues in the three months ended November 2, 2024.
RH Segment gross profit
RH Segment gross profit increased $25 million, or 7.3%, to $364 million in the three months ended November 1, 2025 compared to $339 million in the three months ended November 2, 2024. As a percentage of net revenues, RH Segment gross margin decreased 60 basis points to 43.5% of net revenues in the three months ended November 1, 2025 from 44.1% of net revenues in the three months ended November 2, 2024.
The decrease in RH Segment gross margin was primarily attributable to decreased margins in the RH core business year over year as well as deleverage in occupancy costs, partially offset by leverage in shipping costs.
Waterworks gross profit
Waterworks gross profit increased $3.7 million, or 16.5%, to $26 million in the three months ended November 1, 2025 compared to $22 million in the three months ended November 2, 2024. As a percentage of net revenues, Waterworks gross margin increased 310 basis points to 54.4% of net revenues in the three months ended November 1, 2025 from 51.3% of net revenues in the three months ended November 2, 2024.
Selling, general and administrative expenses
Consolidated selling, general and administrative expenses increased $24 million, or 9.2%, to $284 million in the three months ended November 1, 2025 compared to $260 million in the three months ended November 2, 2024.
RH Segment selling, general and administrative expenses
RH Segment selling, general and administrative expenses increased $23 million, or 9.4%, to $263 million the three months ended November 1, 2025 compared to $241 million in the three months ended November 2, 2024. RH Segment selling, general and administrative expenses were 31.5% and 31.3% of net revenues for the three months ended November 1, 2025 and November 2, 2024, respectively.
The increase in selling, general and administrative expenses as a percentage of net revenues was primarily driven by an increase in advertising costs due to the timing of the 2025 RH Interiors Sourcebook circulation, as well as higher compensation, pre-opening and other corporate costs. This increase was partially offset by leverage in our occupancy costs year over year. RH Segment selling, general and administrative expenses for the three months ended November 1, 2025 included a favorable net contract termination settlement of $3.4 million. RH Segment selling, general and administrative expenses for the three months ended November 2, 2024 included asset impairments of $19 million related to certain of our Galleries and $1.0 million related to pre-acquisition costs for an unsuccessful joint venture arrangement, as well as amortization of non-cash compensation of $0.9 million related to an option grant made to Mr. Friedman in October 2020. Excluding the $3.4 million and $20 million of such costs, RH Segment selling, general and administrative expenses would have increased 330 basis points to 31.9% from 28.6% of net revenues for the three months ended November 1, 2025 and November 2, 2024, respectively.
Waterworks selling, general and administrative expenses
Waterworks selling, general and administrative expenses increased $1.4 million, or 7.1%, to $21 million in the three months ended November 1, 2025 compared to $19 million in the three months ended November 2, 2024. Waterworks selling, general and administrative expenses were 43.1% and 44.2% of net revenues for the three months ended November 1, 2025 and November 2, 2024, respectively.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 41 |
Table of Contents
Interest expense—net
Interest expense—net consisted of the following:
| THREE MONTHS ENDED | |||||
| NOVEMBER 1, | NOVEMBER 2, | ||||
| 2025 |
| 2024 | |||
| (in thousands) | |||||
Term loan interest expense | $ | 44,687 | $ | 50,389 | ||
Finance lease interest expense |
| 10,690 |
| 7,894 | ||
Asset based credit facility | 2,171 | 2,027 | ||||
Other interest expense |
| 1,085 |
| 745 | ||
Capitalized interest for capital projects |
| (995) |
| (2,413) | ||
Interest income |
| (486) |
| (1,052) | ||
Interest expense—net | $ | 57,152 | $ | 57,590 | ||
Other (income) expense—net
Other (income) expense—net consisted of the following:
| THREE MONTHS ENDED | ||||||
NOVEMBER 1, |
| NOVEMBER 2, | |||||
|
|
| 2025 |
| 2024 | ||
(in thousands) | |||||||
Foreign exchange from transactions(1) | $ | 398 | $ | 673 | |||
Foreign exchange from remeasurement of intercompany loans(2) | 296 | (646) | |||||
Other expense—net | $ | 694 | $ | 27 | |||
| (1) | Represents net foreign exchange gains and losses related to exchange rate changes affecting foreign currency denominated transactions, primarily between the U.S. dollar as compared to the euro and pound sterling. |
| (2) | Represents remeasurement of intercompany loans with subsidiaries in Switzerland and the United Kingdom. |
Income tax expense
| THREE MONTHS ENDED | ||||||||
NOVEMBER 1, |
| NOVEMBER 2, | |||||||
|
|
| 2025 |
| 2024 | ||||
(dollars in thousands) | |||||||||
Income tax expense | $ | 11,625 | $ | 9,256 | |||||
Effective tax rate | 24.3 | % | 21.8 | % | |||||
The increase in our effective tax rate for the three months ended November 1, 2025 compared to the three months ended November 2, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.
42 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Nine Months Ended November 1, 2025 Compared to Nine Months Ended November 2, 2024
| NINE MONTHS ENDED | |||||||||||||||||
| NOVEMBER 1, | NOVEMBER 2, | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| RH SEGMENT |
| WATERWORKS | TOTAL(1) |
| RH SEGMENT |
| WATERWORKS |
| TOTAL(1) | ||||||||
| (in thousands) | |||||||||||||||||
Net revenues(2) | $ | 2,447,536 | $ | 149,377 | $ | 2,596,913 | $ | 2,226,054 | $ | 142,293 | $ | 2,368,347 | ||||||
Cost of goods sold |
| 1,373,186 |
| 69,399 |
| 1,442,585 |
| 1,248,680 |
| 67,532 |
| 1,316,212 | ||||||
Gross profit | 1,074,350 | 79,978 | 1,154,328 | 977,374 |
| 74,761 |
| 1,052,135 | ||||||||||
Selling, general and administrative expenses |
| 801,215 |
| 62,396 |
| 863,611 |
| 743,665 |
| 56,212 |
| 799,877 | ||||||
Operating income | $ | 273,135 | $ | 17,582 | $ | 290,717 | $ | 233,709 | $ | 18,549 | $ | 252,258 | ||||||
| (1) | The results for the Real Estate segment were immaterial in both the nine months ended November 1, 2025 and November 2, 2024, thus, such results are presented within the RH Segment in each period. Refer to Note 15—Segment Reporting in the condensed consolidated financial statements. Additionally, all intercompany transactions are immaterial and have been eliminated. |
| (2) | RH Segment net revenues include outlet revenues of $214 million and $189 million for the nine months ended November 1, 2025 and November 2, 2024, respectively. |
Net revenues
Consolidated net revenues increased $229 million, or 9.7%, to $2,597 million in the nine months ended November 1, 2025 compared to $2,368 million in the nine months ended November 2, 2024.
RH Segment net revenues
RH Segment net revenues increased $221 million, or 9.9%, to $2,448 million in the nine months ended November 1, 2025 compared to $2,226 million in the nine months ended November 2, 2024. The below discussion highlights several significant factors that impacted RH Segment net revenues, which are listed in order of magnitude.
RH Segment net revenues for the nine months ended November 1, 2025 increased primarily due to higher revenue in our core business driven by our continued product transformation and platform expansion. In addition, hospitality revenue increased as a result of new Gallery openings and we had higher outlet revenue.
Waterworks net revenues
Waterworks net revenues increased $7.1 million, or 5.0%, to $149 million in the nine months ended November 1, 2025 compared to $142 million in the nine months ended November 2, 2024.
Gross profit
Consolidated gross profit increased $102 million, or 9.7%, to $1,154 million in the nine months ended November 1, 2025 compared to $1,052 million in the nine months ended November 2, 2024. As a percentage of net revenues, consolidated gross margin increased 10 basis points to 44.5% of net revenues in the nine months ended November 1, 2025 from 44.4% of net revenues in the nine months ended November 2, 2024.
RH Segment gross profit
RH Segment gross profit increased $97 million, or 9.9%, to $1,074 million in the nine months ended November 1, 2025 from $977 million in the nine months ended November 2, 2024. As a percentage of net revenues, RH Segment gross margin was 43.9% of net revenues in both the nine months ended November 1, 2025 and November 2, 2024.
The increase in RH Segment gross profit was primarily attributable to leverage in shipping costs, partially offset by decreased margins in the RH core business year over year. RH Segment gross profit for the nine months ended November 1, 2025 was negatively impacted by $2.6 million of asset impairments and $1.4 million of costs related to a product recall. Excluding the $4.0 million of such costs, RH Segment gross margin would have been 20 basis points higher at 44.1% of net revenues for the nine months ended November 1, 2025.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 43 |
Table of Contents
Waterworks gross profit
Waterworks gross profit increased $5.2 million, or 7.0%, to $80 million in the nine months ended November 1, 2025 compared to $75 million in the nine months ended November 2, 2024. As a percentage of net revenues, Waterworks gross margin increased 100 basis points to 53.5% of net revenues in the nine months ended November 1, 2025 from 52.5% of net revenues in the nine months ended November 2, 2024.
Selling, general and administrative expenses
Consolidated selling, general and administrative expenses increased $64 million, or 8.0%, to $864 million in the nine months ended November 1, 2025 compared to $800 million in the nine months ended November 2, 2024.
RH Segment selling, general and administrative expenses
RH Segment selling, general and administrative expenses increased $58 million, or 7.7%, to $801 million in the nine months ended November 1, 2025 compared to $744 million in the nine months ended November 2, 2024. RH Segment selling, general and administrative expenses as a percentage of net revenues decreased to 32.7% for the nine months ended November 1, 2025 from 33.4% for the nine months ended November 2, 2024, primarily driven by asset impairments of $19 million related to certain of our Galleries, $1.0 million related to pre-acquisition costs for an unsuccessful joint venture arrangement, non-cash compensation of $3.7 million related to an option grant made to Mr. Friedman in October 2020, as well as favorable net legal settlements of $6.2 million recognized during the nine months ended November 2, 2024.
RH Segment selling, general and administrative expenses for the nine months ended November 1, 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, as well as a favorable net contract termination settlement of $3.4 million.
Excluding the $0.2 million and $17 million of such costs noted above for the nine months ended November 1, 2025 and November 2, 2024, respectively, RH Segment selling, general and administrative expenses would have increased 20 basis points to 32.8% from 32.6% of net revenues, respectively. This increase in selling, general and administrative expenses as a percentage of net revenues was primarily driven by an increase in compensation and other corporate costs, partially offset by leverage in occupancy and advertising costs year over year.
Waterworks selling, general and administrative expenses
Waterworks selling, general and administrative expenses increased $6.2 million, or 11.0%, to $62 million in the nine months ended November 1, 2025 compared to $56 million in the nine months ended November 2, 2024. Waterworks selling, general and administrative expenses were 41.8% and 39.5% of net revenues for the nine months ended November 1, 2025 and November 2, 2024, respectively.
Waterworks selling, general and administrative expenses in the nine months ended November 2, 2024 include $3.2 million related to a favorable legal settlement. Excluding the $3.2 million of such costs, Waterworks selling, general and administrative expenses would have been 220 basis points higher at 41.7% of net revenues for the nine months ended November 2, 2024.
44 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Interest expense—net
Interest expense—net consisted of the following:
| NINE MONTHS ENDED | |||||
| NOVEMBER 1, | NOVEMBER 2, | ||||
| 2025 |
| 2024 | |||
| (in thousands) | |||||
Term loan interest expense | $ | 135,084 | $ | 155,232 | ||
Finance lease interest expense |
| 28,883 |
| 23,223 | ||
Asset based credit facility | 9,032 | 2,179 | ||||
Other interest expense |
| 3,257 |
| 2,824 | ||
Capitalized interest for capital projects |
| (2,710) |
| (6,865) | ||
Interest income |
| (2,433) |
| (2,969) | ||
Interest expense—net | $ | 171,113 | $ | 173,624 | ||
Other (income) expense—net
Other (income) expense—net consisted of the following in each period:
| NINE MONTHS ENDED | ||||||
NOVEMBER 1, |
| NOVEMBER 2, | |||||
|
| 2025 |
| 2024 | |||
(in thousands) | |||||||
Foreign exchange from transactions(1) | $ | (335) | $ | 1,811 | |||
Foreign exchange from remeasurement of intercompany loans(2) |
| (3,198) |
| (1,282) | |||
Other (income) expense—net | $ | (3,533) | $ | 529 | |||
| (1) | Represents net foreign exchange gains and losses related to exchange rate changes affecting foreign currency denominated transactions, primarily between the U.S. dollar as compared to the euro and pound sterling. |
| (2) | Represents remeasurement of intercompany loans with subsidiaries in Switzerland and the United Kingdom. |
Income tax expense
| NINE MONTHS ENDED | ||||||||
NOVEMBER 1, |
| NOVEMBER 2, | |||||||
|
| 2025 |
| 2024 | |||||
(dollars in thousands) | |||||||||
Income tax expense |
| $ | 33,784 | $ | 10,882 | ||||
Effective tax rate | 26.0 | % | 15.7 | % | |||||
The increase in our effective tax rate for the nine months ended November 1, 2025 compared to the nine months ended November 2, 2024 is primarily attributable to reporting higher net income in the current year and the impact of higher net excess tax benefits from stock-based compensation in fiscal 2024.
Share of equity method investments (income) loss—net
Our share of equity method investments income of $6.7 million in the nine months ended November 1, 2025 was primarily attributable to an Aspen LLC distribution in the first quarter of fiscal 2025 of $7.9 million (refer to Note 6—Variable Interest Entities in the condensed consolidated financial statements). Our share of equity method investments loss in the nine months ended November 2, 2024 was $8.7 million.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 45 |
Table of Contents
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash flows generated from operations, our current balances of cash and cash equivalents, and amounts available under our ABL Credit Agreement.
Net debt and availability under the ABL Credit Agreement were as follows:
NOVEMBER 1, | FEBRUARY 1, | |||||
2025 | 2025 | |||||
(in thousands) | ||||||
Asset based credit facility(1) | $ | 65,000 | $ | 200,000 | ||
Term loan B(1) | 1,920,000 | 1,935,000 | ||||
Term loan B-2(1) | 485,000 | 488,750 | ||||
Notes payable for share repurchases | 315 | 315 | ||||
Total debt | $ | 2,470,315 | $ | 2,624,065 | ||
Cash and cash equivalents | (43,086) | (30,413) | ||||
Total net debt(2) | $ | 2,427,229 | $ | 2,593,652 | ||
Availability under the asset based credit facility—net(3) | $ | 428,176 | $ | 355,260 | ||
| (1) | Amounts exclude discounts upon original issuance and third party offering and debt issuance costs. |
| (2) | Net debt as of November 1, 2025 and February 1, 2025 excludes non-recourse real estate loans of $18 million as of both periods. These loans are secured by specific real estate assets and the associated creditors do not have recourse against RH’s general assets. |
| (3) | The amount available for borrowing under the revolving line of credit under the ABL Credit Agreement is presented net of $48 million and $45 million in outstanding letters of credit as of November 1, 2025 and February 1, 2025, respectively. |
General
The primary cash needs of our business have historically been for merchandise inventories, payroll, rent for our retail and outlet locations, capital expenditures associated with opening new locations and related real estate investments, updating existing locations, as well as the development of our infrastructure and information technology, and Sourcebooks. We seek out and evaluate opportunities for effectively managing and deploying capital in ways that improve working capital and support and enhance our business initiatives and strategies. During fiscal 2022 and fiscal 2023, we invested $2,265 million of cash, inclusive of excise taxes paid, in the purchase of shares of our common stock pursuant to our Share Repurchase Program. We continuously evaluate our capital allocation strategy and may engage in future investments in connection with existing or new share repurchase programs (refer to “Share Repurchase Program” below), which may include investments in derivatives or other equity linked instruments. We have in the past been, and continue to be, opportunistic in responding to favorable market conditions regarding both sources and uses of capital. Capital raised from debt financing arrangements has enabled us to pursue various investments, including our investments in joint ventures. We expect to continue to take an opportunistic approach regarding both sources and uses of capital in connection with our business.
We believe our capital structure provides us with substantial optionality regarding capital allocation. Our near-term decisions regarding the sources and uses of capital will continue to reflect and adapt to changes in market conditions and our business, including further developments with respect to macroeconomic factors affecting business conditions, such as trends in luxury housing, increases in interest rates, equity market performance and inflation. We believe our existing cash balances and operating cash flows, in conjunction with available financing arrangements, will be sufficient to repay our debt obligations as they become due, meet working capital requirements and fulfill other capital needs for more than the next 12 months.
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.
46 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
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 the 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, including the repayment of the principal amount of our convertible senior notes in cash, whether upon stated maturity, early conversion or otherwise of such convertible senior notes. 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.
Credit Facilities and Debt Arrangements
We amended and restated the ABL Credit Agreement in July 2025, which provides an asset based credit facility with an initial availability of up to $600 million, of which (i) $10 million is available to the RH subsidiary Restoration Hardware Canada, Inc. and (ii) $100 million is available to the RH subsidiary, RH Geneva Sàrl. The ABL Credit Agreement includes a $300 million accordion feature under which the revolving line of credit may be expanded by agreement of the parties to the ABL Credit Agreement from $600 million to up to $900 million if and to the extent the lenders revise their credit commitments to encompass a larger facility. The accordion feature may be added as a first-in, last-out term loan facility. The ABL Credit Agreement further provides that the borrowers may request a European sub-credit facility under the revolving line of credit or under the accordion feature for borrowing by certain European subsidiaries of RH if certain conditions set out in the ABL Credit Agreement are met. The maturity date of the ABL Credit Agreement is the earlier of (a) July 31, 2030 and (b) the date which is 91 days prior to the final stated maturity of the Term Loan Credit Agreement and any refinancing thereof.
We entered into a $2,000 million term debt financing in October 2021 (the “Term Loan B”) by means of a Term Loan Credit Agreement through RHI as the borrower, Bank of America, N.A. as administrative agent and collateral agent, and the various lenders party thereto (the “Term Loan Credit Agreement”). Term Loan B has a maturity date of October 20, 2028. We are required to make quarterly principal payments of $5.0 million with respect to Term Loan B.
In May 2022, we entered into an incremental term debt financing (the “Term Loan B-2”) in an aggregate principal amount equal to $500 million by means of an amendment to the Term Loan Credit Agreement with RHI as the borrower, Bank of America, N.A. as administrative agent and the various lenders parties thereto (the “Amended Term Loan Credit Agreement”). Term Loan B-2 has a maturity date of October 20, 2028. Term Loan B-2 constitutes a separate class from the existing Term Loan B under the Term Loan Credit Agreement. We are required to make quarterly principal payments of $1.3 million with respect to Term Loan B-2.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 47 |
Table of Contents
Capital
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 nine months ended November 1, 2025, adjusted capital expenditures were $223 million in aggregate, net of cash received related to landlord tenant allowances of $4.1 million. In addition, we also received landlord tenant allowances under finance leases subsequent to lease commencement of $15 million during the nine months ended November 1, 2025. We anticipate our adjusted capital expenditures to be $275 million to $325 million in fiscal 2025, 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 2025 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.
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.
Cash Flow Analysis
Cash flows from operating, investing, and financing activities were as follows:
| NINE MONTHS ENDED | |||||
| NOVEMBER 1, | NOVEMBER 2, | ||||
|
| 2025 |
| 2024 | ||
| (in thousands) | |||||
Net cash provided by operating activities | $ | 356,175 | $ | 35,869 | ||
Net cash used in investing activities |
| (182,060) |
| (189,517) | ||
Net cash provided by (used in) financing activities | (162,644) | 116,758 | ||||
Net increase (decrease) in cash and cash equivalents | 12,673 | (36,676) | ||||
Cash and cash equivalents at end of period | 43,086 | 87,012 | ||||
48 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Net Cash Provided by Operating Activities
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.
For the nine months ended November 1, 2025, net cash provided by operating activities was $356 million and consisted of net income of $96 million and an increase in non-cash items of $261 million, partially offset by a change in working capital and other activities of $0.7 million. The use of cash from working capital was primarily driven by a decrease in operating lease liabilities of $79 million, an increase in landlord assets under construction, net of tenant allowances, of $65 million, a decrease in accounts payable and accrued expenses of $30 million, an increase in prepaid expense and other assets of $22 million and a net decrease in other current and non-current liabilities of $13 million. These uses of cash from working capital were partially offset by a decrease in merchandise inventory of $155 million and an increase in deferred revenue and customer deposits of $52 million.
Net Cash Used in Investing Activities
Investing activities consist primarily of investments in capital expenditures related to investments in retail stores, information technology and systems infrastructure, as well as supply chain investments. Investing activities also include our strategic investments.
For the nine months ended November 1, 2025, net cash used in investing activities was $182 million and was comprised of investments in retail stores, information technology and systems infrastructure of $158 million, a business acquisition of $32 million and an acquisition of an intangible asset of $3.2 million. These cash outflows were partially offset by cash received from a distribution of return of equity method investments of $7.9 million, proceeds from insurance recoveries of $2.3 million and receipt of a promissory note repaid by our equity method investee of $1.8 million.
Net Cash Used in Financing Activities
Financing activities consist primarily of borrowings and repayments related to convertible senior notes and other financing arrangements, and cash used in connection with such financing activities include investments in our share repurchase program, repayment of indebtedness, including principal payments under finance lease agreements and other equity related transactions.
For the nine months ended November 1, 2025, net cash used in financing activities was $163 million, primarily due to net repayments under the asset based credit facility of $135 million, payments under term loans of $19 million, net payments under finance lease agreements of $7.8 million and debt issuance costs of $3.0 million associated with the ABL Credit Agreement amendment. These cash outflows were partially offset by proceeds from the exercise of stock options of $2.2 million.
Non-Cash Transactions
Non-cash transactions consist of non-cash additions of property and equipment and landlord assets under construction and reclassification of assets from landlord assets under construction to finance lease right-of-use assets included in accounts payable and accrued expenses at period-end.
Cash Requirements from Contractual Obligations
Leases
We lease nearly all of our retail and outlet locations, corporate headquarters, distribution centers and home delivery center locations, as well as other storage and office space. Refer to Note 8—Leases in the condensed consolidated financial statements for further information on our lease arrangements, including the maturities of our lease liabilities.
Most lease arrangements provide us with the option to renew the leases at defined terms. The table presenting the maturities of our lease liabilities included in Note 8—Leases in the condensed consolidated financial statements includes future obligations for renewal options that are reasonably certain to be exercised and are included in the measurement of the lease liability. Amounts presented therein do not include future lease payments under leases that have not commenced or estimated contingent rent due under leases.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 49 |
Table of Contents
Asset Based Credit Facility
Refer to Note 9—Credit Facilities and Convertible Senior Notes in the 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.
Term Loan
Refer to Note 9—Credit Facilities and Convertible Senior Notes in the condensed consolidated financial statements for further information on our Term Loan.
Real Estate Loans
Refer to Note 6—Variable Interest Entities in the condensed consolidated financial statements for further information on the real estate loan held as part of our joint ventures with a third-party development partner.
Share Repurchase Program
In 2018, our Board of Directors authorized a share repurchase program through open market purchases, privately negotiated transactions or other means, including through Rule 10b-18 open market repurchases, Rule 10b5-1 trading plans or through the use of other techniques such as the acquisition of other equity linked instruments, accelerated share repurchases, including through privately negotiated arrangements in which a portion of the share repurchase program is committed in advance through a financial intermediary and/or in transactions involving hedging or derivatives.
On June 2, 2022, the Board of Directors authorized an additional $2,000 million for the purchase of shares of our outstanding common stock, which increased the total authorized size of the share repurchase program to $2,450 million (the “Share Repurchase Program”). We did not repurchase any shares of our common stock under the Share Repurchase Program during the nine months ended November 1, 2025. As of November 1, 2025, $201 million remains available for future share repurchases under the Share Repurchase Program.
We regularly review share repurchase activity and consider various factors in determining whether and when to execute investments in connection with our share repurchase program, including, among others, current cash needs, capacity for leverage, cost of borrowings, results of operations and the market price of our common stock. We believe that our share repurchase program will continue to be an excellent allocation of capital for the long-term benefit of our shareholders. We may undertake other repurchase programs in the future with respect to our securities. Since January 1, 2023, share repurchases under our Share Repurchase Program are subject to a 1% excise tax imposed under the Inflation Reduction Act.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires senior leadership to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our accounting policies, estimates, and judgments on an on-going basis. We base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions and such differences could be material to the condensed consolidated financial statements.
50 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
Our senior leadership team evaluates the development and selection of our critical accounting policies and estimates and believes that certain of our significant accounting policies involve a higher degree of judgment or complexity and are most significant to reporting our consolidated results of operations and financial position and are therefore discussed as critical:
Merchandise Inventories—Reserves
Impairment—Long-Lived Assets
Lease Accounting—Determination of the Classification of New Real Estate Lease Contracts
Reasonably Certain Lease Term
Incremental Borrowing Rate
Fair Value
Variable Interest Entities
There have been no material changes to the critical accounting policies and estimates listed above from the disclosures included in the 2024 Form 10-K. For further discussion regarding these policies, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates in the 2024 Form 10-K.
Recently Issued Accounting Pronouncements
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our exposures to market risk since February 1, 2025. Refer to Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk in our 2024 Form 10-K for a discussion on our exposures to market risk.
Interest Rate Risk
As described in our 2024 Form 10-K and in Note 9—Credit Facilities and Convertible Senior Notes of the condensed consolidated financial statements herein, we are subject to interest rate risk in connection with borrowings under the ABL Credit Agreement and the Term Loan Credit Agreement, as amended, since such borrowings bear interest at variable rates. We may also incur additional indebtedness that bears interest at variable rates. In addition, the real estate loan held by our VIE also bears interest at variable rates. We are also subject to interest rate risk through interest income received on our cash and cash equivalent balances.
There have been no material changes in our market risk exposures or how those exposures are managed from the information disclosed in our 2024 Form 10-K.
PART I. FINANCIAL INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 51 |
Table of Contents
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our senior leadership team, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a 15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of November 1, 2025, the end of the period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior leadership team, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, that occurred during our most recent fiscal quarter ended November 1, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
52 | 2025 THIRD QUARTER FORM 10-Q | PART I. FINANCIAL INFORMATION |
Table of Contents
PART II
ITEM 1. LEGAL PROCEEDINGS
From time to time, we and/or members of our senior leadership team are involved in litigation, claims, investigations and other proceedings relating to the conduct of our business, including purported class action litigation, as well as securities class action litigation. Such legal proceedings may include claims related to our employment practices, wage and hour claims, claims of intellectual property infringement, including with respect to trademarks and trade dress, claims asserting unfair competition and unfair business practices, claims with respect to our collection and sale of reproduction products, and consumer class action claims relating to our consumer practices. In addition, from time to time, we are subject to product liability and personal injury claims for the products that we sell and the Galleries we operate. Subject to certain exceptions, our purchase orders generally require the vendor to indemnify us against any product liability claims; however, if the vendor does not have insurance or becomes insolvent, we may not be indemnified. In addition, we could face a wide variety of employee claims against us, including general discrimination, privacy, labor and employment, ERISA and disability claims. Any claims could result in litigation against us and could also result in regulatory proceedings being brought against us by various federal and state agencies that regulate our business, including the U.S. Equal Employment Opportunity Commission. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant senior leadership time. Litigation and other claims and regulatory proceedings against us could result in unexpected expenses and liability and could also materially adversely affect our operations and our reputation.
For additional information, refer to Note 14—Commitments and Contingencies in the condensed consolidated financial statements within Part I of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
We operate in a rapidly changing environment that involves a number of risks that could materially and adversely affect our business, financial condition, prospects, operating results or cash flows. For a detailed discussion of certain risks that affect our business, refer to the section entitled “Risk Factors” in our 2024 Form 10-K. There have been no material changes to the risk factors disclosed in our 2024 Form 10-K.
The risks described in our 2024 Form 10-K are not the only risks we face. We describe in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I of this Quarterly Report on Form 10-Q certain known trends and uncertainties that affect our business. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, operating results and financial condition.
PART II. OTHER INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 53 |
Table of Contents
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchases of Common Stock
During the three months ended November 1, 2025, we repurchased the following shares of our common stock:
|
|
| TOTAL NUMBER OF | APPROXIMATE DOLLAR | ||||||
AVERAGE | SHARES REPURCHASED | VALUE OF SHARES THAT | ||||||||
PURCHASE | AS PART OF PUBLICLY | MAY YET BE | ||||||||
NUMBER OF | PRICE PER | ANNOUNCED PLANS | PURCHASED UNDER THE | |||||||
SHARES(1) | SHARE | OR PROGRAMS | PLANS OR PROGRAMS(2) | |||||||
(in millions) | ||||||||||
August 3, 2025 to August 30, 2025 |
| — | $ | — | — | $ | 201 | |||
August 31, 2025 to October 4, 2025 |
| 3,406 | $ | 230.51 | — | $ | 201 | |||
October 5, 2025 to November 1, 2025 |
| — | $ | — | — | $ | 201 | |||
Total |
| 3,406 | — |
| ||||||
| (1) | Includes shares withheld from delivery to satisfy tax withholding obligations of employee recipients that occur upon the vesting of restricted stock units granted under the Plans. |
| (2) | Reflects the dollar value of shares that may yet be repurchased under our Share Repurchase Program. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1
During the three months ended November 1, 2025,
54 | 2025 THIRD QUARTER FORM 10-Q | PART II. OTHER INFORMATION |
Table of Contents
ITEM 6. EXHIBITS
|
| INCORPORATED BY REFERENCE | ||||||||||
EXHIBIT |
| EXHIBIT DESCRIPTION |
| FORM |
| FILE |
| DATE OF |
| EXHIBIT |
| FILED |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | — | — | — | — | X | ||||||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | — | — | — | — | X | ||||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | — | — | — | — | X | ||||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | — | — | — | — | X | ||||||
101.INS | XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | — | — | — | — | X | ||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | — | — | — | — | X | ||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | — | — | — | — | X | ||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | — | — | — | — | X | ||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | — | — | — | — | X | ||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | — | — | — | — | X | ||||||
104 | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | — | — | — | — | X | ||||||
PART II. OTHER INFORMATION | 2025 THIRD QUARTER FORM 10-Q | 55 |
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| ||
Date: December 11, 2025 | By: | /s/ Gary Friedman | |
Gary Friedman | |||
Chairman and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: December 11, 2025 | By: | /s/ Jack Preston | |
Jack Preston | |||
Chief Financial Officer | |||
(Principal Financial Officer) | |||
Date: December 11, 2025 | By: | /s/ Christina Hargarten | |
Christina Hargarten | |||
Chief Accounting Officer | |||
(Principal Accounting Officer) | |||
5
56 | 2025 THIRD QUARTER FORM 10-Q | SIGNATURES |
FAQ
How did RH (RH) perform financially in Q3 2025?
For the quarter ended November 1, 2025, RH generated net revenues of $883,810,000, up from $811,732,000 a year earlier. Net income was $36,265,000, and diluted earnings per share were $1.83, compared with $1.66 in the prior‑year quarter.
What were RH (RH)'s results for the first nine months of fiscal 2025?
For the nine months ended November 1, 2025, net revenues totaled $2,596,913,000 versus $2,368,347,000 in the prior year. Net income increased to $96,012,000 from $58,495,000, and diluted EPS rose to $4.84 from $2.93.
What acquisition did RH (RH) complete in 2025 and for how much?
On July 8, 2025, RH acquired a home furnishings business operating under the Formations and Dennis & Leen brands for total consideration of $32,119,000, funded with available cash. The transaction added $2,770,000 of goodwill and additional inventory, property and lease assets.
How strong is RH (RH)'s cash flow and liquidity position as of Q3 2025?
RH generated $356,175,000 of net cash from operating activities in the first nine months of fiscal 2025, compared with $35,869,000 last year. Cash and cash equivalents were $43,086,000. Under its amended asset based credit facility, the company had $65,000,000 outstanding and $428,000,000 of availability as of November 1, 2025.
What is RH (RH)'s current debt load and interest expense?
As of November 1, 2025, RH had an asset based credit facility balance of $65,000,000, term loan B principal of $1,920,000,000 and term loan B‑2 principal of $485,000,000. Net interest expense was $171,113,000 for the first nine months of fiscal 2025.
How large are RH (RH)'s lease obligations?
Total lease liabilities were $1,507,689,000 as of November 1, 2025, including $127,748,000 current and $1,379,941,000 non‑current. Finance lease right‑of‑use assets totaled $1,191,150,000, and operating lease right‑of‑use assets were $726,556,000.
What segments drive RH (RH)'s revenues?
RH reports three operating segments: the RH Segment, Waterworks, and Real Estate. For the nine months ended November 1, 2025, RH Segment net revenues were $2,447,536,000, Waterworks revenues were $149,377,000, and total consolidated net revenues were $2,596,913,000.
