NOTE 8—VARIABLE INTEREST ENTITIES

Consolidated Variable Interest Entities and Noncontrolling Interests

In fiscal 2022, we formed eight privately-held limited liability companies (each, a “Member LLC” and collectively, the “Member LLCs” or the “consolidated variable interest entities”) with a third-party real estate development partner affiliated with the managing member of the Aspen LLCs (as defined in “Equity Method Investments” below) for real estate development activities related to our Gallery transformation and global expansion strategies.

In December 2024, we acquired 50 percent of the membership interests of one of the Member LLCs from the same development partner for no consideration. As a result, we own 100 percent of the membership interests and this Member LLC was no longer a variable interest entity as of February 1, 2025. No distribution to the former member of this entity was required as a result of the transaction.

As of January 31, 2026, of the remaining seven Member LLCs, we hold a 50 percent membership interest in six of the Member LLCs, and the remaining noncontrolling interest of 50 percent in each Member LLC is held by the same development partner. In one Member LLC, we hold approximately 75 percent membership interest with the remaining noncontrolling interest of approximately 25 percent held by the same development partner.

The Member LLCs are qualitatively determined to be VIEs due to their having insufficient equity investment at risk to finance their activities without additional subordinated financial support. Upon the formation of each Member LLC we determined that the power to direct the most significant activities of each Member LLC is either controlled by us or shared between the members of the Member LLCs. In the instances where there is shared power among related parties as defined in the consolidation accounting guidance, we evaluated the related-party tiebreaker guidance and determined that we are most closely associated with each Member LLC. Accordingly, we are the primary beneficiary of the Member LLCs and we consolidate the results of operations, financial condition and cash flows of the Member LLCs in our consolidated financial statements. Six locations represent current or future RH locations and are included in the RH Segment, four of which are operational as of January 31, 2026. One location represents property, the purpose of which is use by RH or others related to developing, operating and selling such property, and is part of the Real Estate segment.

We measure the noncontrolling interests in the consolidated variable interest entities using the distribution provisions set out in the operating agreements of each Member LLC. As of January 31, 2026 and February 1, 2025, the noncontrolling interest holders had no claim to the net assets of each Member LLC based upon such distribution provisions. Accordingly, we did not recognize any noncontrolling interests in fiscal 2025, fiscal 2024 or fiscal 2023.

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

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Equity Method Investments

Equity method investments primarily represent our membership interests in three privately-held limited liability companies in Aspen, Colorado (each, an “Aspen LLC” and collectively, the “Aspen LLCs” or the “equity method investments”) that were formed for the purpose of acquiring, developing, operating and selling certain real estate projects in Aspen, Colorado. We hold a 50 percent membership interest in two of the Aspen LLCs and a 70 percent membership interest in the third Aspen LLC. The Aspen LLCs are VIEs, however, we are not the primary beneficiary of these VIEs because we do not have the power to direct the activities of each VIE that most significantly impact the VIE’s economic performance. Accordingly, we account for these investments using the equity method of accounting. As of January 31, 2026 and February 1, 2025, the aggregate balance of the investment in the Aspen LLCs was $115 million and $124 million, respectively. We are the lessee for two lease arrangements within an Aspen LLC, one of which commenced as of January 31, 2026.

In March 2025, the Aspen LLC in which we hold a 70 percent interest sold its sole real estate property. Subsequent to the property sale, we received $15 million from the Aspen LLC, which consisted of $2.9 million for the repayment of its outstanding promissory note to us, including accrued interest (refer to Note 4—Prepaid Expense and Other Assets), and a capital distribution of $13 million. The capital distribution of $13 million represented a return of our contributed capital of $7.9 million and a return on investment of $4.6 million.

As of January 31, 2026 and February 1, 2025, $1.2 million and $3.7 million, respectively, of promissory notes receivable, inclusive of accrued interest, were outstanding with the managing member or entities affiliated with the managing member for the Aspen LLCs, which promissory notes were included in prepaid expense and other current assets on the consolidated balance sheets. The promissory note outstanding as of January 31, 2026 is expected to be settled in cash and not converted into additional equity investment in the Aspen LLCs.

Our proportionate share of equity method investments was income of $5.0 million in fiscal 2025 and a loss of $11 million in both fiscal 2024 and fiscal 2023, which is included on the consolidated statements of income.

Other than as described above, we did not receive any distributions or have any undistributed earnings of equity method investments in any fiscal year.

Additionally, Waterworks has membership interests in two European entities, one entity in which we hold a 50 percent membership interest and another entity in which we increased our membership interest from approximately 25 percent as of February 1, 2025 to approximately 28 percent as of January 31, 2026. We are not the primary beneficiary of either of these VIEs because we do not have the power to direct the activities of each VIE that most significantly impact the VIE’s economic performance. Accordingly, we account for these investments using the equity method of accounting.

Our maximum exposure to loss with respect to these equity method investments is the carrying value of the equity method investments as of January 31, 2026.