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]

Core Insights - Arhaus has launched its annual style issue, 'Home & Style,' along with the Fall 2025 Collection, emphasizing the theme "Home is a Feeling" which reflects comfort and belonging [3][4] - The collection features a blend of modern and traditional designs, showcasing rich materials and craftsmanship that create personalized and inviting spaces [4][5] Product Highlights - The Fall 2025 Collection introduces new designs and expands on existing favorites across various categories, including dining and living, with a focus on graceful silhouettes and rich wood tones [5][6] - Notable new pieces include the Milana Collection with midcentury Italian design influences, the Finnley Collection now offering seating options, and the Blaire Round Chandelier with architectural elegance [5][6] - The collection also highlights deep wood tones, particularly American walnut, which adds warmth and refinement to designs like the James Bookcase and Frances Sideboard [6] Dining and Gathering Focus - The collection emphasizes designs that foster connection, such as the Caden Dining Table featuring black Marquina marble and the Jolson Extension Dining Table made from solid oak [7][8] - Seating options like the woven Myers Dining Chair are designed to create inviting spaces for gatherings [8] Artisan Craftsmanship - Arhaus celebrates its partnerships with artisans, particularly a fifth-generation family-run workshop in Northern Romania, known for heirloom-quality furniture [9] - The Cortina collection, inspired by the movement of curtains, is expanding with new pieces this season [9] New Category Expansion - Arhaus has entered the bath category with the debut of Arhaus Bath, featuring a comprehensive range of products including vanities and bath linens, maintaining the brand's focus on quality and detail [9] Design Services - Arhaus offers complimentary Interior Design services to assist customers in creating tailored environments, with options for upholstery customization available [10] Availability - The Fall 2025 Collection is now available on Arhaus.com and in showrooms nationwide, encouraging customers to explore the full assortment [11]

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1]. Group 1 - The investment strategy is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1].

Company Performance - Arhaus, Inc. (NASDAQ: ARHS) reported Q2 2025 results that appear strong on a GAAP basis, but underlying metrics indicate persistent challenges since 2023 [1] - The company is not experiencing growth, reflecting ongoing operational difficulties [1] Investment Perspective - The analysis emphasizes a long-only investment approach, focusing on operational aspects and long-term earnings potential rather than market-driven dynamics [1] - The majority of investment calls are expected to be holds, indicating a cautious stance towards new buys [1]

Core Insights - Arhaus has launched its inaugural Arhaus Bath collection, marking a significant expansion into the bathroom space with a focus on quality, craftsmanship, and timeless design [3][5] - The collection consists of 190 pieces, including vanities, faucets, lighting, and textiles, showcasing the brand's commitment to artisan-crafted home furnishings [3][4] Product Offerings - The Arhaus Bath collection features a variety of vanities in different configurations, including powder, single, and double styles, complemented by matching étagères and customizable hardware [6] - The collection includes solid brass hardware and faucets available in Antique Brass and Polished Nickel finishes, with unique design elements such as knurled detailing [9] - Turkish Bath Textiles are crafted from long-staple Turkish cotton, available in various weights and nature-inspired colors, designed for softness and absorbency [10] Brand Philosophy - The introduction of the Arhaus Bath collection is described as an organic extension of the brand's offerings, aiming to inspire customers to create a home that reflects their personal style [5] - Arhaus emphasizes its commitment to sustainable sourcing and heirloom-quality products, positioning itself as a leader in the premium home furnishings market [12]