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RH, RH

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.

RH (collectively, "we," "us," or the "Company") is a leading retailer and luxury lifestyle brand operating primarily in the home furnishings market.

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.

Latest annual: FY2026 10-K

RH · RH

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2026

$3.4B

+8.1% YoY · 4% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $3.4B 5-yr avg $3.4B

Gross margin 44% 5-yr avg 47%

Operating margin 10.7% 5-yr avg 15.7%

ROIC 11% 5-yr avg 32%

Owner-earnings margin 7% 5-yr avg 6%

Free cash flow margin 7% 5-yr avg 3%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Cyclical. Margins collapse and recover repeatedly across the record; a single year, good or bad, misstates the through-cycle earning power.
What moves the needle: Gross margin has run about 44% and operating margin about 11% through the cycle, a spread the cycle sets more than the company does. The margin is cyclical, swinging between 2.5% and 25% over the years, so the through-cycle figure carries more than any single year — and the balance sheet at the trough more than the peak. The cash cycle has run negative through the cycle (a median of −38 days): the operation is paid before it pays, so working capital releases cash as the business grows rather than tying it up. On its own account, the filing leans hardest on pricing power & competition, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has run high across the record (median 29%, above 15% in 5 of 8 years). Owner earnings agree: roughly 9% of revenue reaches owners as cash, consistently. Whether these returns reflect real pricing power or an accounting artifact is the judgment the 10-K is for.

Every line is arithmetic on the company's filings, shown in full in the sections below.

The record

Ten years of arithmetic, read across the cycle.

The record, 2017–2026

realized figures from each filing · older years to the left

2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	2026’26	TTMTTMMay 2026
											Income statement
$2.1B	$2.4B	$2.5B	$2.6B	$2.8B	$3.8B	$3.6B	$3.0B	$3.2B	$3.4B	$3.4B	RevenueRevenue
32%	34%	39%	41%	47%	49%	50%	46%	44%	44%	44%	Gross marginGross mgn
29%	30%	29%	28%	30%	25%	30%	34%	34%	33%	33%	SG&A / revenueSG&A/rev
$53M	$117M	$262M	$363M	$467M	$927M	$722M	$366M	$323M	$387M	$366M	Operating incomeOp. inc.
2.5%	4.8%	10.4%	13.7%	16.4%	24.7%	20.1%	12.1%	10.1%	11.3%	10.7%	Operating marginOp. mgn
$5M	($3M)	$136M	$220M	$272M	$689M	$529M	$128M	$72M	$125M	$103M	Net incomeNet inc.
37%	—	16%	18%	28%	16%	—	18%	6%	27%	27%	Effective tax rateTax rate
											Cash flow & returns
$81M	$475M	$250M	$339M	$501M	$662M	$404M	$202M	$17M	$452M	$418M	Operating cash flowOp. cash
$57M	$83M	$91M	$101M	$100M	$96M	$109M	$119M	$130M	$149M	$152M	DepreciationDeprec.
($11M)	$343M	($1M)	($4M)	($17M)	($171M)	($277M)	($84M)	($230M)	$135M	$120M	Working capital & otherWC & other
$170M	$68M	$80M	$94M	$111M	$185M	$174M	$269M	$231M	$200M	$186M	CapexCapex
8.0%	2.8%	3.2%	3.5%	3.9%	4.9%	4.8%	8.9%	7.3%	5.8%	5.4%	Capex / revenueCapex/rev
$24M	$406M	$170M	$246M	$390M	$566M	$295M	$83M	($113M)	$304M	$232M	Owner earningsOwner earn.
1.1%	16.6%	6.8%	9.3%	13.7%	15.1%	8.2%	2.7%	−3.6%	8.8%	6.8%	Owner earnings marginOE mgn
($90M)	$406M	$170M	$246M	$390M	$477M	$230M	($67M)	($214M)	$252M	$232M	Free cash flowFCF
−4.2%	16.6%	6.8%	9.3%	13.7%	12.7%	6.4%	−2.2%	−6.7%	7.3%	6.8%	Free cash flow marginFCF mgn
$116M	—	—	—	$18M	—	—	—	—	$32M	$32M	AcquisitionsAcquis.
—	$1.0B	$250M	$250M	—	—	$1.0B	$1.3B	$12M	—	—	BuybacksBuybacks
4%	—	—	124%	88%	79%	42%	15%	13%	12%	11%	ROICROIC
1%	—	—	1182%	61%	59%	67%	—	—	206%	181%	Return on equityROE
1%	—	—	n/m	61%	59%	67%	—	—	206%	181%	Retained to equityRetained/eq
											Balance sheet
$230M	$18M	$6M	$48M	$100M	$2.2B	$1.5B	$124M	$30M	$41M	$196M	Cash & investmentsCash+inv
$34M	$31M	$40M	$49M	$59M	$58M	$60M	$55M	$63M	$63M	$72M	ReceivablesReceiv.
$135M	$195M	$183M	$181M	$225M	$242M	$166M	$192M	$245M	$198M	$203M	Accounts payablePayables
($101M)	($164M)	($143M)	($132M)	($165M)	($184M)	($106M)	($137M)	($182M)	($134M)	($131M)	Operating working capitalOper. WC
$1.1B	$645M	$704M	$597M	$801M	$3.1B	$2.5B	$1.1B	$1.3B	$1.1B	$1.1B	Current assetsCur. assets
$416M	$519M	$993M	$983M	$922M	$1.1B	$886M	$873M	$905M	$931M	$997M	Current liabilitiesCur. liab.
2.7×	1.2×	0.7×	0.6×	0.9×	2.9×	2.8×	1.3×	1.4×	1.2×	1.1×	Current ratioCurr. ratio
$174M	$142M	$124M	$124M	$141M	$141M	$141M	$141M	$141M	$144M	$144M	GoodwillGoodwill
$2.2B	$1.7B	$2.4B	$2.4B	$2.9B	$5.5B	$5.3B	$4.1B	$4.6B	$4.8B	$4.9B	Total assetsAssets
$0	$279M	$58M	$268M	$37M	$2.0B	$2.4B	$2.4B	$2.6B	$2.4B	$2.4B	Total debtDebt
($230M)	$262M	$52M	$221M	($63M)	($190M)	$924M	$2.3B	$2.6B	$2.4B	$2.2B	Net debt / (cash)Net debt
1.2×	2.1×	3.9×	4.2×	6.7×	13.9×	4.8×	1.5×	1.4×	1.7×	1.6×	Interest coverageInt. cov.
$924M	($8M)	($39M)	$19M	$447M	$1.2B	$785M	($297M)	($164M)	$61M	$57M	Shareholders’ equityEquity
1.4%	2.1%	1.0%	0.8%	5.1%	1.3%	1.2%	1.3%	1.4%	1.3%	1.3%	Stock comp / revenueSBC/rev
—	$34M	$51M	—	—	—	—	—	—	—	$51M	Goodwill written downGW imp.
											Per share
27.3M	27.1M	26.5M	24.3M	27.3M	31.1M	26.6M	21.6M	20.0M	19.8M	18.8M	Shares out (diluted)Shares
$78.24	$90.20	$94.43	$108.95	$104.34	$120.81	$135.17	$140.23	$159.10	$173.79	$181.79	Revenue / shareRev/sh
$0.20	$-0.10	$5.12	$9.07	$9.96	$22.13	$19.90	$5.91	$3.62	$6.31	$5.47	EPS (diluted)EPS
$0.86	$15.01	$6.39	$10.11	$14.27	$18.19	$11.11	$3.85	$-5.66	$15.35	$12.29	Owner earnings / shareOE/sh
$-3.28	$15.01	$6.39	$10.11	$14.27	$15.32	$8.66	$-3.11	$-10.69	$12.75	$12.29	Free cash flow / shareFCF/sh
$6.23	$2.53	$3.01	$3.85	$4.07	$5.96	$6.54	$12.47	$11.54	$10.10	$9.90	Cap. spending / shareCapex/sh
$33.86	$-0.30	$-1.46	$0.77	$16.37	$37.61	$29.54	$-13.77	$-8.18	$3.06	$3.02	Book value / shareBVPS

Share counts before 2018 are restated ×1/1.5 for a stock split, so per-share figures sit on one basis.

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Revenue / share	+9.3%/yr	+10.7%/yr
Owner earnings / share	+37.7%/yr	+1.5%/yr
EPS	+46.9%/yr	−8.7%/yr
Capital spending / share	+5.5%/yr	+19.9%/yr
Book value / share	−23.4%/yr	−28.5%/yr

The record, charted

FY2017–2026

Each measure over its full record; the current point and the worst year marked. Share counts on the current split basis.

Share count

20Mpeak FY2022

ROIC

12%low FY2017

Gross margin

44%low FY2017

Net debt ÷ owner earnings

7.8×peak FY2024

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

$304Mowner earningsvs.$125Mnet incomelow FY2025

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetainedBeyond op. cash

Each year's outlays against its operating cash: the mix, and how it drifts. The hatched cap is spending beyond that year's operating cash — financed from the balance sheet or borrowing, not operations.

FY2017FY2026

Owner-earnings bridge

FY2022–FY2026cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2026 the business earned $304M of owner earnings, the operating cash left after the $149M it takes just to hold its position. It put $51M more into growth; free cash flow, after that spending, was $252M.

Reported net income$125M

Owner earnings$304M · 9% of revenue

	FY2026	FY2025	FY2024	FY2023	FY2022
Reported net income	$125M	$72M	$128M	$529M	$689M
Depreciation & amortizationnon-cash charge added back	+$149M	+$130M	+$119M	+$109M	+$96M
Stock-based compensationreal costnon-cash, but a real cost	+$44M	+$44M	+$39M	+$44M	+$48M
Working capital & othertiming of cash in and out, other non-cash items	+$135M	−$230M	−$84M	−$277M	−$171M
Cash from operations	$452M	$17M	$202M	$404M	$662M
Maintenance capital expenditurethe spending needed just to hold position and volume	−$149M	−$130M	−$119M	−$109M	−$96M
Owner earnings	$304M	($113M)	$83M	$295M	$566M
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	−$51M	−$101M	−$150M	−$65M	−$89M
Free cash flow	$252M	($214M)	($67M)	$230M	$477M
Owner-earnings marginowner earnings ÷ revenue	9%	-4%	3%	8%	15%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the maintenance capital it must spend to hold its position (here about $149M, roughly its depreciation, the rate its assets wear out). The other $51M of its capital spending is growth it chose, not upkeep it owed; charged only with the maintenance it must do, the business earns well more than the year's free cash flow shows. The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $44M), owner earnings is nearer $260M.

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2026 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? 1.7×

Thin

Operating income $387M ÷ interest expense $228M

What this means
Operating profit covers interest, but with little room. A bad year, a refinancing at higher rates, or a revenue wobble closes the gap fast.
How heavy is the debt, net of cash? $2.2B · 5.7× operating profit

Heavy net debt

Cash $41M + ST investments $143M − debt $2.4B

What this means
Netting $184M of cash and short-term investments against $2.4B of debt leaves $2.2B owed, about 5.7× a year's operating profit (6.2× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? —

Not enough data

What this means
The filing data didn't include the inputs for this check.

Is it a good business?

Return on invested capital 15%

High through the cycle

8-yr median, range 4%–124%; 12% latest = NOPAT $281M ÷ invested capital $2.4B

Industry peers: median 44%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 8 years (it ran 12% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin 8%

Solid through the cycle

10-yr median margin, range -4%–17%; latest $304M = operating cash $452M − maintenance capex $149M

Industry peers: median 5%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 9% of revenue this year, a 8% median across 10 years. It chose to put $51M more into growth, so free cash flow this year was $252M — the gap is investment, not weakness. Treating stock comp as the real expense it is (less $44M of SBC) leaves $260M.
Are earnings backed by cash? 3.62×

Cash-backed

Cash from ops $452M ÷ net income $125M

What this means
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

Where do the earnings go? 4%

Reinvests most of it

Dividends + buybacks $12M ÷ Owner Earnings $304M

What this means
Of $304M Owner Earnings, $12M (4%) went back to shareholders, $0 dividends, $12M buybacks. But the buybacks barely exceed stock issued to employees ($44M SBC), net of dilution, little was truly returned. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
Investing or harvesting? 1.35×

Expanding

Capex $200M ÷ depreciation $149M

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Pass

Revenue ≥ $2B · $3.4B

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Miss

Current ratio ≥ 2× · 1.19×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Miss

Debt ≤ working capital · $2.4B vs $177M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Near

A profit every year (10-yr record) · 1 loss year

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · none paid

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth Pass

Earnings +33% over the record · +134%

What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $5.73/share (latest year $6.60), the averaged base the calculator's gate runs on, and book value is $3.21/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2017–2026

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 9 of 10

What this means
Lost money in 1 year(s), look at what happened there before trusting the average.
Return on capital ≥ 15% 7 of 10 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin 6% → 11% (3-yr avg ends)

In the filing’s words The filing ties gains to its own pricing, but names price competition too — pricing power that is real yet contested, not unopposed. The margin shows who is winning.

What this means
Through the cycle the operating margin widened — about 6% early to 11% lately, median 11% — pricing power intact or improving.
Reinvestment, incremental ROIC 10%

What this means
Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.
Owner earnings growth −9%/yr

What this means
Owner earnings shrank about 9% a year over the record.
Worst year 2017 · 2.5% op. margin

What this means
Stayed profitable even in its hardest year, the resilience that survives recessions.

Does AI threaten the moat?

Moderate contestability

AI is likely to reshape costs and some products here without clearly contesting or sparing the core moat; how the company itself frames it is the tell.

The question is whether a moat the record shows as durable outlasts a technology that lowers the cost of part of what the firm sells. The durability is read in the record above, the filing's own framing of AI beside it; the industry label decides nothing on its own.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, May 2, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$1.1B

Cash & short-term investments$196M
Receivables$72M
Other current assets$855M

Current liabilities$997M

Debt due within a year$1M
Accounts payable$203M
Other current liabilities$793M

Current ratio1.13×all current assets ÷ what's due · Graham looked for 2×

Quick ratio—inventory untagged this quarter, so withheld rather than shown equal to the current ratio

Cash ratio0.20×strictest: cash alone against what's due

Working capital$127Mthe cushion left after near-term bills

Debt due this year vs. cash$1M due · $196M cash covered by cash on hand, no refinancing forced · both figures from the May 2, 2026 balance sheet

Revenue, latest quarter vs. a year ago−1.7%the freshest read on whether the business is still growing

Current ratio, recent quarters1.2× → 1.1×

Deeper floors

Tangible book value($159M)equity stripped of goodwill & intangibles

Net current asset value($3.8B)Graham's net-net: current assets less all liabilities

Debt incl. operating leases$846M$844M of it operating leases; with finance leases, “total fixed claims” below reaches $4.0B (annual-report basis)

Deferred revenue$382Mcustomer cash collected before delivery; operating float

From the company's latest filing.

Lease obligations

the lease note, SEC EDGAR →

Debt by another name. What the business owes on the property, aircraft, stores and equipment it rents rather than owns is a fixed claim due on a schedule; added back to the debt, it is the true leverage. That ladder, operating and finance leases together, and what it adds to the debt on the page above.

Operating leasesFinance leases

'26$216M

'27$208M

'28$176M

'29$164M

'30$156M

later$1.8B

Lease payments by year, scaled to the largest; “later” is everything beyond year five, shown apart. These are the contractual cash payments, before the interest the filing imputes back out to the balance-sheet liability.

Due in the next 12 months$216Ma fixed cash payment, owed whether or not the business has a good year

Total lease payments$2.7Bevery year plus the tail, undiscounted: the full cash the leases will take

On the balance sheet$1.6Bthe present value of those payments, the recognised lease liability

True leverage: debt plus leases

On-balance-sheet debt$2.4B

Lease obligations (present value)$1.6B

Total fixed claims on the business$4.0B

Counting the leases the way Buffett does, the fixed claims on this business come to $4.0B, of which the leases are 39%. The lease wall above and the debt schedule together are the calendar of what must be paid, and when.

Lease ladder read from the ASC 842 tags in the company’s Jan 31, 2026 annual report and reconciled: the yearly buckets sum to the undiscounted total, which less the imputed interest equals the balance-sheet liability; a ladder that doesn’t tie out is withheld.

How the cash was used, 2017–2026

Over the record, the business generated $3.4B of operating cash; how management split it reads as a cash returner, paying most of what it earns straight back to owners.

Reinvested$1.6B · 47%
Buybacks$3.8B · 111%

Returned to owners$3.8B
159% of the owner earnings the business produced over the span, $0 as dividends and $3.8B as buybacks.
Source of funding−$2.0B
Reinvestment and shareholder returns ran $2.0B beyond the operating cash the business generated, so the gap was financed off the balance sheet: debt rose from $0 to $2.4B.
Average price paid for buybacks$268.85
Across the years where the filing reports a share count, 4M shares were bought for $1.0B, about $268.85 each.
Net change in share count−30.9%
The diluted count fell from 27M to 19M, so the buybacks outran the stock issued to staff.
Dividend record—
No dividend line was reported in the filing data over the span; the record here neither confirms nor rules out a payout.

Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.

Acquisitions & goodwill

from the balance sheet & the 10-year cash-flow record

Goodwill grows only when a company acquires and falls only when it concedes it overpaid. The size of that bet, the cash put into buying rather than building, and how much has already been written off.

Goodwill & intangibles$230M5% of all assets; the premium carried on the balance sheet for businesses acquired

Against book equityexceeds itgoodwill alone is larger than the company’s entire book equity; stripped of the acquisition premium, there is no net book worth

Cash spent acquiring$166Mover 10 years buying other businesses, against $1.6B of capital spent building

$85M written down across 2 years (2018, 2019): goodwill the company has already conceded it overpaid for, charged against earnings. That is roughly 51% of the cash it put into acquisitions over the span. A write-down costs no cash (the cash went out when the deal was signed), but it is management marking its own past judgment to market.

Goodwill, acquired intangibles and equity from the latest balance sheet; acquisition spend and write-downs summed across the 10-year record, from the company's own filings.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Chief executive	Pay, as filed	“Actually paid”	Owner earnings
2022	Mr. Friedman	$4.5M	$4.5M	$566M
2023	Mr. Friedman	$2.8M	$2.8M	$295M
2024	Mr. Friedman	$1.3M	$1.3M	$83M
2025	Mr. Friedman	$1.3M	$1.3M	($113M)
2026	Mr. Friedman	$1.3M	$1.3M	$304M

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.

Insider ownership26.9%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
Stock-based compensation$44M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 11% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why RH is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2017–2026.

3 of the 6 tests turned up something to look into; the other 3 came back clean.

Look hereDid debt outgrow the business?$0 → $2.4B
Debt rose from $0 to $2.4B while owner earnings went from about $200M to $91M — under 0.1 years of owner earnings in debt then, about 26 now: measured against what the business earns, the balance sheet carries more debt than it did. Debt raised for buybacks or deals rather than growth is the kind that bites in a downturn.
Look hereDid receivables and inventory outpace sales?2% → 2% of sales
Receivables and inventory grew from $34M to $72M while revenue grew 60%: working capital is climbing faster than sales (2% of revenue then, 2% now). That can mean customers paying slower, stock building up, or revenue pulled forward. The filing's cash-flow and receivables notes say which.
Look hereAre "one-time" charges a yearly habit?9 of 10 years
Management took an impairment or write-down in 9 of the last 10 years, $206M in all. A charge taken almost every year is not one-time; it is the business — past deals coming due, and an admission the assets were worth less than what was paid. Munger's rule: when the "one-time" keeps happening, it is the business. Read it beside the goodwill the company still carries.

And these came back clean

Is it less profitable than it was?
Did the share count rise anyway?
Did reported profit become cash?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

What an owner would ask, FY2026

read the 10-K →

Which reported numbers are a judgment call?
Management names Inventory as critical estimates
each rests partly on management's judgment; the filing's note sets out the assumptionsverify →

The questions the record and the charts do not answer on their own; each carries the figure and the place to look.

Peers, Specialty Retail

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
BBYBest Buy Co. Inc.	$41.7B	23%	4.4%	44%	4%
WSMWilliams-Sonoma	$7.8B	46%	14.7%	88%	12%
GMEGameStop Corp.	$3.6B	28%	-2.7%	-59%	2%
RHRH	$3.4B	44%	11.7%	29%	9%
ARHSArhaus Inc.	$1.4B	39%	6.4%	45%	8%
HVTHaverty Furniture Companies Inc.	$759M	56%	5.7%	12%	5%
Group median	—	42%	6.1%	36%	7%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what RH has delivered.

Today’s price $

Through the cycle, RH earns about $293M on its 8.5% median owner-earnings margin. This year’s 8.8% margin runs in line with that. Normalize, below, values the price on that through-cycle figure rather than the latest year.

Base Normalize · through-cycle ($293M) Net of stock comp (−$43M) Steady-state · maintenance capex ($270M)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth · ’22→’26−31%/yr

Owner-earnings growth · ’17→’26−21%/yr

Owner-earnings yield—

P/E (3-yr earnings ’24–’26)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Free cash flow $232M on 19M shares outstanding, per the 10-Q cover, as of 2026-06-05; net debt $2.2B. The base is the latest year by default; Normalize values it on the through-cycle median owner-earnings margin (to avoid paying on a peak year). Net of stock comp treats option pay as the expense it is. Capex ($186M) runs well above depreciation ($152M), so this is a build-out; Steady-state swaps total capex for maintenance (≈ depreciation), lifting the base to about $270M, the cash it would throw off if it stopped expanding. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh RH against another business →

Cite: Owner Scorecard, "RH (RH), the owner's record," https://ownerscorecard.com/c/RH, data as of 2026-07-09.

Manual order: ← RGTIW its page in the Manual RHI →

Industry order: ← RERE the Specialty Retail chapter ROST →