SEGMENT REPORTING |
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| SEGMENT REPORTING | NOTE 14—SEGMENT REPORTING We define reportable and operating segments on the same basis that we use to evaluate our performance internally by the chief operating decision maker (“CODM”), which we have determined is our Chief Executive Officer. We have three operating segments: RH Segment, Waterworks and Real Estate. The RH Segment and Waterworks operating segments (the “retail operating segments”) include all sales channels accessed by our customers, including sales through retail locations and outlets, including hospitality, websites, Sourcebooks, and the Trade and Contract channels. The Real Estate segment represents operations associated with certain of our equity method investments and consolidated VIEs that have operations not directly related to the activities of the retail operating segments. The retail operating segments are strategic business units that offer products for the home furnishings customer. While RH Segment and Waterworks have a shared senior leadership team and customer base, we have determined that their results cannot be aggregated as they do not share similar economic characteristics, as well as due to other quantitative factors. Segment Information The CODM uses segment adjusted operating income to evaluate segment profitability for the retail operating segments and to allocate resources and analyze variances of actual performance to our forecasts when making decisions. Operating income is defined as net income (loss) before interest expense—net, other (income) expense—net, income tax expense (benefit) and our share of equity method investments net (income) loss. Segment adjusted operating income (loss) excludes (i) legal settlement—net and (ii) non-cash compensation amortization related to an option grant made to Mr. Friedman in October 2020, which stock-based compensation for this award was fully recognized as of the first quarter of fiscal 2025. These items are excluded from segment adjusted operating income (loss) in order to provide better transparency of segment operating results. Accordingly, these items are not presented by segment because they are excluded from the segment profitability measure that the CODM and our senior leadership team review. Segment net revenues, which represent our disaggregated net revenues in accordance with Accounting Standards Codification 606, significant segment expenses and segment adjusted operating income (loss), by reportable segment, were as follows:
In the three months ended May 2, 2026 and May 3, 2025, the Real Estate segment share of equity method investments, which is the measure of segment profitability reviewed by the CODM to evaluate performance internally for the Real Estate segment, was a loss of $0.6 million and income of $8.3 million, respectively. The share of (income) loss from equity method investments for the Waterworks segment was immaterial in both fiscal periods presented. Depreciation and amortization for our segments was as follows:
Balance sheet information for our segments consisted of the following:
We are domiciled in the United States and primarily operate our retail locations and outlets in the United States. As of May 2, 2026, we operated the following number of retail locations and outlets outside the United States:
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