Core Insights - Arhaus has opened its first showroom in Montana, located in Bozeman's Gallatin Crossing, covering an area of 12,006 square feet [3][6] - The showroom features a curated selection of artisan-crafted furniture and décor, emphasizing natural materials and the rugged yet refined aesthetic of Montana [4][5] - To celebrate the opening, Arhaus is donating $10,000 to Habitat for Humanity of Gallatin Valley to support local housing initiatives [6] Company Overview - Founded in 1986, Arhaus is an omni-channel retailer specializing in premium home furnishings, with over 100 showrooms and design studios across the United States [7] - The company focuses on sustainable sourcing and craftsmanship, offering heirloom-quality products designed in collaboration with leading manufacturers and artisans [7] - Arhaus provides complimentary design services to assist clients with home projects, whether for individual spaces or entire homes [5][7]

Core Insights - Arhaus reported Q3 CY2025 results that exceeded Wall Street's revenue expectations, with sales increasing by 8% year-on-year to $344.6 million, surpassing analyst estimates of $337.7 million by 2% [1][6] - The company's GAAP profit was $0.09 per share, aligning with analysts' consensus estimates [1][6] - Revenue guidance for Q4 CY2025 is optimistic at $351 million at the midpoint, which is above analyst estimates of $344.1 million [1][6] Financial Performance - Adjusted EBITDA for Q3 was $31.24 million, exceeding analyst estimates of $29.46 million, resulting in a margin of 9.1% [6] - Operating margin improved to 4.8%, up from 3.3% in the same quarter last year [6] - Same-store sales rose by 4.1% year-on-year, a significant improvement compared to a decline of 9.2% in the same quarter last year [6] - Market capitalization stands at $1.33 billion [6] Management Commentary - Management attributed the strong performance to a successful product lineup, particularly the Fall 2025 Collection, which saw record demand [3][5] - The in-home design program has been effective in enhancing customer loyalty and conversion rates [3] - The company is focused on new product introductions and showroom expansion to maintain growth momentum [4] - CFO acknowledged macroeconomic uncertainties and tariff challenges but expressed confidence in strategic pricing and sourcing diversification to protect margins [4] Future Outlook - Arhaus plans to continue innovating its product assortment to differentiate itself in the premium market [4] - The company is investing in digital transformation initiatives aimed at improving operational efficiencies and supporting long-term growth [4]

Arhaus (NasdaqGS:ARHS) Q3 2025 Earnings Call November 06, 2025 08:30 AM ET Speaker1Good morning and welcome to the Arhaus Q3 2025 earnings call. Please note that this call is being recorded, and the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Tara Atwood Saja, Vice President of Investor Relations. Please go ahead.Speaker0Good morning, and thank you for joining us for the Arhaus Q3 2025 earnings call. Joini ...

Core Insights - Arhaus, Inc. reported quarterly earnings of $0.09 per share, exceeding the Zacks Consensus Estimate of $0.08 per share, and showing an increase from $0.07 per share a year ago, resulting in an earnings surprise of +12.50% [1] - The company achieved revenues of $344.57 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.00% and up from $319.13 million year-over-year [2] Earnings Performance - Over the last four quarters, Arhaus has surpassed consensus EPS estimates three times [2] - The company had a significant earnings surprise of +66.67% in the previous quarter, where actual earnings were $0.25 compared to an expected $0.15 [1][2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.10 on revenues of $348.02 million, and for the current fiscal year, it is $0.45 on revenues of $1.36 billion [7] - The estimate revisions trend for Arhaus was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Retail - Miscellaneous industry, to which Arhaus belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Financial Performance - For the nine months ended September 30, 2025, Arhaus generated net revenue of $1,014.4 million, a gross margin of $397.2 million, and net income of $52.2 million[87]. - For the three months ended September 30, 2025, net revenue was $344.6 million, with a gross margin of $133.4 million and net income of $12.2 million[87]. - Net revenue increased by $90.3 million, or 9.8%, to $1,014.4 million for the nine months ended September 30, 2025, compared to $924.1 million for the same period in 2024[105]. - Gross margin increased by $34.7 million, or 9.6%, to $397.2 million for the nine months ended September 30, 2025, maintaining a gross margin percentage of 39.2%[106][107]. - Net and comprehensive income increased by $4.9 million to $52.2 million for the nine months ended September 30, 2025, compared to $47.3 million for the same period in 2024[112]. - The company reported a net income of $52.2 million for the nine months ended September 30, 2025, compared to $47.3 million in 2024, marking an increase of 6.9%[133][134]. Showroom Operations - As of September 30, 2025, Arhaus operated 103 Showrooms, maintaining the same total number as of December 31, 2024, with an increase in traditional Showrooms from 85 to 87[86]. - The total square footage of Showroom locations increased from 1,676 thousand square feet at December 31, 2024, to 1,718 thousand square feet by September 30, 2025[87]. - The company opened 7 new Showrooms from January 1, 2024, to September 30, 2025, while closing 1 permanently and relocating 6[101]. - Total showrooms at the end of the period increased to 103, up from 101 in the previous year[104]. Expenses and Costs - Selling, general and administrative (SG&A) expenses rose by $24.4 million, or 8.0%, to $328.5 million for the nine months ended September 30, 2025, with SG&A as a percentage of net revenue decreasing to 32.4%[108][109]. - Selling, general and administrative expenses (SG&A) are expected to increase as new Showrooms are opened and new product categories are developed[95]. - The gross margin is calculated as net revenue minus cost of goods sold, which includes various operational costs associated with merchandise[94]. Cash Flow and Investments - The company had cash and cash equivalents of $262.2 million as of September 30, 2025, with operating cash flows expected to meet working capital requirements for at least the next 12 months[121][122]. - For the nine months ended September 30, 2025, net cash provided by operating activities was $127.5 million, an increase from $115.4 million in the same period of 2024, representing a growth of 10.1%[133][134]. - Net cash used in investing activities for the nine months ended September 30, 2025, was $59.7 million, a decrease from $88.7 million in 2024, reflecting a reduction of 32.8%[136][137]. - Total capital expenditures, net of landlord contributions, decreased by $18.4 million to $42.9 million for the nine months ended September 30, 2025, compared to $61.3 million in 2024[139]. - The company anticipates total capital expenditures, net of landlord contributions, to be between $65 million and $75 million in fiscal year 2025, primarily for opening new Showrooms[140]. - Net cash used in financing activities was $2.9 million for the nine months ended September 30, 2025, significantly lower than $72.1 million in 2024, indicating a reduction of 96.0%[141][142]. Tax and Interest - The effective tax rate increased to 26.6% for the nine months ended September 30, 2025, compared to 23.1% for the same period in 2024[111]. - Interest income, net decreased to $2.1 million for the nine months ended September 30, 2025, compared to $2.6 million for the same period in 2024[110]. Strategic Initiatives - The company is undergoing a multi-year transformation with an expected investment of approximately $30 million for technology upgrades, including a new ERP system[125]. - The company emphasizes a direct-to-consumer approach, sourcing products directly from factories to offer exclusive assortments at attractive values[84]. - Demand comparable growth is a key performance indicator, reflecting year-over-year percentage changes in demand from comparable Showrooms and eCommerce[91]. Financial Instruments and Risks - The company does not currently use derivative instruments to manage foreign currency exchange risk or interest rate risk[146][147]. - Inflation has historically been managed through price increases, but the company cannot estimate future recovery of these costs[148]. - The company has no borrowings under the 2021 Credit Facility as of September 30, 2025, except for a $5.1 million irrevocable standby letter of credit[147].

Financial Performance - Net revenue for Q3 2025 reached $345 million, an increase of 8.0% year-over-year, marking the highest third-quarter net revenue in the company's history[4] - Demand comparable growth was 7.4% in Q3 2025, driven by the success of the Fall 2025 Collection and strong client demand for both core and new products[5] - Gross margin increased 8.4% to $133 million compared to Q3 2024[6] - Net income rose 23.1% to $12 million in Q3 2025 compared to the same period last year[6] - Adjusted EBITDA increased 35.2% to $31 million in Q3 2025 compared to Q3 2024[6] - Net revenue for the nine months ended September 30, 2025, was $1,014,377, an increase of 9.8% compared to $924,096 for the same period in 2024[24] - Gross margin for the nine months ended September 30, 2025, was $397,235, representing a gross margin percentage of 39.2%[24] - Net and comprehensive income for the nine months ended September 30, 2025, was $52,166, up 10.5% from $47,256 in the prior year[26] - Adjusted EBITDA for the nine months ended September 30, 2025, was $110,115, which is 10.9% of net revenue, compared to 10.0% in 2024[26] Cash and Assets - As of September 30, 2025, the company reported cash and cash equivalents of $262 million and no long-term debt[10] - Total assets as of September 30, 2025, were $1,378,638, an increase of 14.3% from $1,206,316 as of December 31, 2024[22] - Cash and cash equivalents increased to $262,230 as of September 30, 2025, compared to $197,511 at the end of 2024, marking a growth of 32.7%[22] - The company reported a net cash provided by operating activities of $127,538 for the nine months ended September 30, 2025, compared to $115,426 in the same period of 2024[25] - The company’s retained earnings increased to $195,266 as of September 30, 2025, up from $142,898 as of December 31, 2024[22] Company Outlook and Expansion - The company updated its full-year 2025 outlook, raising the low end of its prior net revenue guidance to a range of $1.35 billion to $1.38 billion[11] - The company plans to complete approximately 12 to 15 Total Showroom Projects in 2025, including 4 to 6 new openings[10] - The company opened its largest Traditional Showroom in Pasadena, California, and plans to open its first Montana Showroom in Bozeman[9] Client Deposits and Liabilities - Client deposits increased by 15.0% to $254 million from December 31, 2024, to September 30, 2025[10] - Total liabilities as of September 30, 2025, were $978,222, reflecting a rise of 13.4% from $862,571 as of December 31, 2024[22] Share Information - The weighted-average number of common shares outstanding, basic, was 140,635,317 for the nine months ended September 30, 2025, compared to 139,990,522 in 2024[24]

Core Insights - Arhaus, Inc. reported a record net revenue of $345 million for Q3 2025, reflecting an 8.0% year-over-year increase, driven by strong brand performance and successful showroom expansions [3][6][10] - Demand comparable growth reached 7.4% in Q3 2025, supported by the success of the Fall 2025 Collection and high client engagement [4][8] - The company remains debt-free with significant liquidity, positioning itself strongly in the current market environment [6][17] Financial Performance - Net revenue increased to $345 million, up 8.0% from Q3 2024 [10] - Gross margin rose by 8.4% to $133 million compared to the same quarter last year [10] - Net income increased by 23.1% to $12 million, while adjusted EBITDA grew by 35.2% to $31 million [10][36] Showroom Expansion - Arhaus operated 103 showrooms across 30 states by the end of Q3 2025, completing 8 total showroom projects, including 1 new opening and 6 relocations [9][12] - The company opened its largest Traditional Showroom in Pasadena, California, and plans to open its first Montana showroom in Bozeman [11][12] Balance Sheet and Liquidity - As of September 30, 2025, cash and cash equivalents totaled $262 million, with no long-term debt [17][28] - Net merchandise inventory increased by 10.7% to $329 million compared to December 31, 2024 [17] Outlook - The company updated its full-year 2025 outlook, raising the lower end of its revenue guidance to $1.35 billion to $1.38 billion, while maintaining the high end [13][15] - Fourth-quarter guidance includes expected net revenue of $336 million to $366 million, with a projected net income of $6 million to $16 million [15]

Core Viewpoint - Arhaus, Inc. is set to release its third quarter 2025 financial results on November 6, 2025, before the market opens, followed by a conference call to discuss the results [1]. Company Overview - Arhaus, founded in 1986, is a growing lifestyle brand and omnichannel retailer specializing in premium artisan-crafted home furnishings [3]. - The company employs a proprietary model that involves direct design and sourcing from leading manufacturers and artisans globally, offering exclusive heirloom quality products that are sustainably sourced and built to last [3]. - Arhaus operates over 100 showroom and design studio locations across the United States and provides complimentary in-home design services through a team of interior designers [3]. - The company is recognized for its innovative design, responsible sourcing, and client-first service [3].

Core Insights - Arhaus has opened its largest showroom to date in Old Pasadena, California, covering 38,600 square feet within the historic Penn Oil Building, marking a significant expansion in Southern California [3][4]. Company Expansion - The new Pasadena location is Arhaus' twelfth showroom in California and fifth in the greater Los Angeles area, joining existing locations at The Grove, Topanga, Thousand Oaks, and Del Amo [3]. Design Services - The Pasadena showroom offers complimentary design services, assisting clients with home projects of any scale, supported by a team of seasoned interior designers and design consultants [6]. Community Engagement - In celebration of the showroom opening, Arhaus has partnered with the Altadena Girls organization to furnish their first dedicated space with artisan-crafted pieces, reflecting the company's commitment to community involvement [7]. Company Overview - Founded in 1986, Arhaus is a growing lifestyle brand and omni-channel retailer of premium home furnishings, known for its sustainable sourcing and innovative design, with over 100 showroom locations across the United States [9].

Core Insights - The Retail–Miscellaneous industry demonstrates resilience due to diversified product portfolios and adaptive business models, benefiting from value-driven and lifestyle-oriented demand [1][2] - Companies are focusing on enhancing omnichannel platforms, expanding private-label offerings, and improving digital engagement to meet consumer preferences for quality and convenience [1][2] - The industry is leveraging data analytics and loyalty programs to boost personalization and customer retention, with a positive outlook for retailers with balanced assortments and operational agility [2][4] Industry Overview - The Zacks Retail–Miscellaneous industry includes a variety of retailers, such as those in sporting goods, beauty products, and specialty items, with profitability reliant on balanced pricing strategies and efficient supply chain management [3] - The industry is currently ranked 29 in the Zacks Industry Rank, placing it in the top 12% of over 250 Zacks industries, indicating encouraging near-term prospects [8][9] Key Trends - U.S. retail sales increased by 0.6% in August, supported by recent Federal Reserve interest rate cuts, which have lowered borrowing costs and enhanced consumer spending flexibility [4] - Holiday retail sales are projected to rise between 2.9% and 3.4% during the November-to-January period, creating opportunities for stronger sales and revenue growth [4] - Companies are focusing on product diversification, digital engagement, and pricing efficiency to drive growth, with targeted marketing strategies enhancing brand visibility [5] Digital Transformation - Industry players are investing in digital platforms and optimizing supply chains to adapt to evolving consumer shopping patterns, enhancing convenience through expanded delivery options [6] - Retailers are modernizing store formats and checkout systems to maintain relevance in brick-and-mortar settings while deepening investments in technology for long-term growth [6] Margin Pressures - Competitive pressures related to pricing and product breadth are leading to elevated expenses, prompting companies to implement cost-mitigation strategies to protect profitability [7] - Retailers are streamlining operations and optimizing supply networks to address margin pressures stemming from higher labor and marketing costs [7] Stock Performance and Valuation - The Zacks Retail–Miscellaneous industry has underperformed the broader Retail–Wholesale sector and the S&P 500 over the past year, with a 6.7% increase compared to 18.3% for the S&P 500 [11] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 18.13X, lower than the S&P 500's 23.65X and the sector's 24.58X [14] Notable Companies - **Arhaus, Inc. (ARHS)**: Demonstrates brand strength and operational excellence, with a projected revenue growth of 6.9% for the current financial year [16][17] - **Petco Health and Wellness Company, Inc. (WOOF)**: Undergoing a transformation strategy with a projected EPS growth of 250% for the current financial year [20][21] - **Sally Beauty Holdings, Inc. (SBH)**: Gaining traction as a modern specialty beauty retailer, with an EPS growth estimate of 8.9% for the current financial year [24][25] - **Ulta Beauty, Inc. (ULTA)**: Reflects strong momentum with a projected revenue growth of 6.8% for the current financial year [28][29]