VARIABLE INTEREST ENTITIES	6 Months Ended
Aug. 01, 2026
VARIABLE INTEREST ENTITIES
VARIABLE INTEREST ENTITIES	NOTE 6—VARIABLE INTEREST ENTITIES Restructuring As part of a May 2026 restructuring of the Aspen LLCs (defined below) (the “May 2026 Aspen LLC Restructuring”), we received a $50 million cash distribution related to our membership interests in the Aspen LLCs in connection with a series of transactions whereby ownership of certain real estate property companies held by the Aspen LLCs were transferred to entities wholly-owned by the managing member of the Aspen LLCs and ownership of one property company, which also owns the property we plan to operate as an RH Guesthouse, was transferred to an entity wholly-owned by us. Following this distribution, we repaid $31 million of outstanding debt secured by the RH Guesthouse property transferred to us. Additionally, as part of the May 2026 Aspen LLC Restructuring, we received $10 million of deemed non-cash capital contributions in one of the Aspen LLCs. Concurrently with these transactions, the membership interests in the seven Member LLCs (defined below) that were previously held by a third-party real estate developer affiliated with the managing member of the Aspen LLCs were fully assigned to us, and, as a result, each of such seven Member LLCs became a wholly-owned subsidiary entity. The impacts to our condensed consolidated financial statements from these transactions are discussed below. 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 use the hypothetical liquidation at book value (“HLBV”) method to determine our proportionate share of the earnings or losses for each equity method investment. In March 2025 one of the three Aspen LLCs sold its sole real estate property. Subsequent to the property sale, we received $15 million from such Aspen LLC, which consisted of $2.9 million for the repayment of its outstanding promissory note to us, including accrued interest, and a capital distribution of $13 million. The capital distribution of $13 million represented a return of our contributed capital of $7.9 million and a return on investment of $4.6 million. In connection with the May 2026 Aspen LLC Restructuring, we recognized income of $20 million under the HLBV method for the three and six months ended August 1, 2026, which is included in share of equity method investments net (income) loss on the condensed consolidated statements of income. Additionally, upon obtaining control of the company that owns the property planned for the RH Guesthouse Aspen, we acquired its net assets and settled our preexisting lease under which we had been the lessee before the May 2026 Aspen LLC Restructuring. These transactions resulted in a non-cash loss of $11 million, which is comprised of (i) the assumption of outstanding debt on the real estate property transferred to us of $31 million, (ii) a decrease in other non-current assets of $22 million to eliminate previously capitalized lease-related initial direct costs and prepaid rent prior to commencement, (iii) a reduction of our equity method investment of $17 million related to the property company distribution, (iv) a decrease in property and equipment of approximately $2 million to eliminate previously capitalized leasehold improvements and (v) an increase to property and equipment of $61 million to recognize the acquisition of land and building assets at fair value. The non-cash loss of $11 million recognized during the three and six months ended August 1, 2026 is included in selling, general and administrative expenses on the condensed consolidated statements of income and reflected within cash flows from operating activities on the condensed consolidated statements of cash flows for the six months ended August 1, 2026. The cash distribution of $50 million in connection with the May 2026 Aspen LLC Restructuring represented a return of our contributed capital of $42 million and a return on investment of $8.1 million. The $31 million repayment of the acquired real estate loan is included in repayments under real estate loans within cash flows from financing activities on the condensed consolidated statements of cash flows for the six months ended August 1, 2026. We continue to account for the Aspen LLCs as equity method investments since we are not the primary beneficiary of these VIEs. Additionally, Waterworks has membership interests in two European entities that are equity method investments. Our maximum exposure to loss as of August 1, 2026 is the carrying value of our equity method investments. Additionally, we are the lessee for one lease arrangement within an Aspen LLC, which commenced as of January 31, 2026. Refer to Note 8—Leases. 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”) with a third-party real estate development partner (the “development partner”) affiliated with the managing member of the Aspen LLCs (as defined below under “Equity Method Investments”) for real estate development activities related to our Gallery transformation and global expansion strategies. In fiscal 2024, one Member LLC became a wholly-owned subsidiary and accordingly is no longer considered a Member LLC. Concurrently with the May 2026 Aspen LLC Restructuring, the seven remaining Member LLCs became wholly-owned subsidiaries as the membership interests in the Member LLCs that were previously held by a third-party real estate developer were withdrawn, which had an immaterial effect on the condensed consolidated financial statements for the three and six months ended August 1, 2026. Accordingly, there are no noncontrolling interest holders in any of the Member LLCs as of August 1, 2026 and we continue to consolidate these subsidiaries following the transactions described under “Restructuring.”

VARIABLE INTEREST ENTITIES

6 Months Ended

Aug. 01, 2026

NOTE 6—VARIABLE INTEREST ENTITIES

Restructuring

As part of a May 2026 restructuring of the Aspen LLCs (defined below) (the “May 2026 Aspen LLC Restructuring”), we received a $50 million cash distribution related to our membership interests in the Aspen LLCs in connection with a series of transactions whereby ownership of certain real estate property companies held by the Aspen LLCs were transferred to entities wholly-owned by the managing member of the Aspen LLCs and ownership of one property company, which also owns the property we plan to operate as an RH Guesthouse, was transferred to an entity wholly-owned by us. Following this distribution, we repaid $31 million of outstanding debt secured by the RH Guesthouse property transferred to us. Additionally, as part of the May 2026 Aspen LLC Restructuring, we received $10 million of deemed non-cash capital contributions in one of the Aspen LLCs.

Concurrently with these transactions, the membership interests in the seven Member LLCs (defined below) that were previously held by a third-party real estate developer affiliated with the managing member of the Aspen LLCs were fully assigned to us, and, as a result, each of such seven Member LLCs became a wholly-owned subsidiary entity.

The impacts to our condensed consolidated financial statements from these transactions are discussed below.

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 use the hypothetical liquidation at book value (“HLBV”) method to determine our proportionate share of the earnings or losses for each equity method investment.

In March 2025 one of the three Aspen LLCs sold its sole real estate property. Subsequent to the property sale, we received $15 million from such Aspen LLC, which consisted of $2.9 million for the repayment of its outstanding promissory note to us, including accrued interest, and a capital distribution of $13 million. The capital distribution of $13 million represented a return of our contributed capital of $7.9 million and a return on investment of $4.6 million.

In connection with the May 2026 Aspen LLC Restructuring, we recognized income of $20 million under the HLBV method for the three and six months ended August 1, 2026, which is included in share of equity method investments net (income) loss on the condensed consolidated statements of income.

Additionally, upon obtaining control of the company that owns the property planned for the RH Guesthouse Aspen, we acquired its net assets and settled our preexisting lease under which we had been the lessee before the May 2026 Aspen LLC Restructuring. These transactions resulted in a non-cash loss of $11 million, which is comprised of (i) the assumption of outstanding debt on the real estate property transferred to us of $31 million, (ii) a decrease in other non-current assets of $22 million to eliminate previously capitalized lease-related initial direct costs and prepaid rent prior to commencement, (iii) a reduction of our equity method investment of $17 million related to the property company distribution, (iv) a decrease in property and equipment of approximately $2 million to eliminate previously capitalized leasehold improvements and (v) an increase to property and equipment of $61 million to recognize the acquisition of land and building assets at fair value. The non-cash loss of $11 million recognized during the three and six months ended August 1, 2026 is included in selling, general and administrative expenses on the condensed consolidated statements of income and reflected within cash flows from operating activities on the condensed consolidated statements of cash flows for the six months ended August 1, 2026.

The cash distribution of $50 million in connection with the May 2026 Aspen LLC Restructuring represented a return of our contributed capital of $42 million and a return on investment of $8.1 million. The $31 million repayment of the acquired real estate loan is included in repayments under real estate loans within cash flows from financing activities on the condensed consolidated statements of cash flows for the six months ended August 1, 2026.

We continue to account for the Aspen LLCs as equity method investments since we are not the primary beneficiary of these VIEs.

Additionally, Waterworks has membership interests in two European entities that are equity method investments.

Our maximum exposure to loss as of August 1, 2026 is the carrying value of our equity method investments. Additionally, we are the lessee for one lease arrangement within an Aspen LLC, which commenced as of January 31, 2026. Refer to Note 8—Leases.

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”) with a third-party real estate development partner (the “development partner”) affiliated with the managing member of the Aspen LLCs (as defined below under “Equity Method Investments”) for real estate development activities related to our Gallery transformation and global expansion strategies.

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

Concurrently with the May 2026 Aspen LLC Restructuring, the seven remaining Member LLCs became wholly-owned subsidiaries as the membership interests in the Member LLCs that were previously held by a third-party real estate developer were withdrawn, which had an immaterial effect on the condensed consolidated financial statements for the three and six months ended August 1, 2026. Accordingly, there are no noncontrolling interest holders in any of the Member LLCs as of August 1, 2026 and we continue to consolidate these subsidiaries following the transactions described under “Restructuring.”