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]

Core Insights - Arhaus, Inc. reported revenue of $358.44 million for the quarter ended June 2025, marking a year-over-year increase of 15.7% [1] - The earnings per share (EPS) for the same period was $0.25, compared to $0.16 a year ago, indicating significant growth [1] - The reported revenue exceeded the Zacks Consensus Estimate of $336.1 million by 6.65%, while the EPS surpassed the consensus estimate of $0.15 by 66.67% [1] Financial Performance Metrics - Comparable sales growth was 10.5%, significantly higher than the average estimate of 1.2% based on seven analysts [4] - Total showroom locations stood at 103, slightly below the five-analyst average estimate of 105 [4] - Net revenue from eCommerce was $60.25 million, which fell short of the average estimate of $61.76 million based on three analysts [4] - Net revenue from retail was $298.19 million, exceeding the average estimate of $274.08 million from three analysts [4] Stock Performance - Shares of Arhaus, Inc. have returned +6.9% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company achieved record net revenue of $358 million, representing a 15.7% increase year-over-year [28] - Comparable growth was up 10.5%, driven by the successful conversion of strong first-quarter demand [28] - Net income grew by 57.7% to $35 million, reflecting over three times earnings leverage on 16% net revenue growth [33] - Adjusted EBITDA increased by 51.2% to $60 million, with an adjusted EBITDA margin of 16.8%, up 390 basis points year-over-year [34] Business Line Data and Key Metrics Changes - Demand comparable growth decreased by 3.6% due to macroeconomic pressures, but July saw a rebound with a 15.7% increase [31][32] - The upholstery business remains a significant driver, with a focus on customization and a wide range of fabric options [56] Market Data and Key Metrics Changes - The company operates in a $100 billion market, holding less than a 2% share, indicating significant growth potential [41] - The showroom expansion strategy is aimed at increasing market presence, with plans to open five to seven traditional showrooms annually [41] Company Strategy and Development Direction - The company is focused on increasing brand awareness, expanding showroom footprint, enhancing omnichannel client experience, and investing in scalable infrastructure [6] - The launch of the Our House Bath Collection represents a strategic expansion into a new product category [14][15] - The company aims to navigate macroeconomic challenges from a position of strength, being debt-free with ample liquidity [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a dynamic and uncertain operating environment but expressed confidence in the brand's strength and long-term outlook [31] - The company expects continued choppiness in demand trends but remains optimistic about the resilience of its client base [31][32] - Full-year guidance reflects confidence in strategy execution, with net revenue expected between $1.29 billion and $1.38 billion [49] Other Important Information - The company is investing approximately $10 million in strategic initiatives to support long-term growth [46] - A diversified sourcing strategy is in place to mitigate risks associated with tariffs and geopolitical tensions [38] Q&A Session Summary Question: Opportunities with the Bath Collection - Management noted that customer preferences are evolving towards softer, warmer designs, and the Bath Collection aligns with these trends [55] Question: Demand Trends and Tariff Impact - Management acknowledged the choppiness in demand and the expected impact of tariffs, emphasizing the resilience of their consumer base [64][94] Question: Market Share and Competitive Position - Management believes the company is gaining market share and has a unique product offering that differentiates it from competitors [98]

Company Performance - Arhaus, Inc. reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.15 per share, and up from $0.16 per share a year ago, representing an earnings surprise of +66.67% [1] - The company posted revenues of $358.44 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.65%, compared to year-ago revenues of $309.8 million [2] - Over the last four quarters, Arhaus has surpassed consensus EPS estimates two times and topped consensus revenue estimates once [2] Future Outlook - The sustainability of the stock's immediate price movement will depend on management's commentary during the earnings call and future earnings expectations [3] - Current consensus EPS estimate for the coming quarter is $0.07 on revenues of $332.94 million, and for the current fiscal year, it is $0.40 on revenues of $1.34 billion [7] - The estimate revisions trend for Arhaus was unfavorable ahead of the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Retail - Miscellaneous industry, to which Arhaus belongs, is currently in the bottom 39% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5]

Financial Performance - For the six months ended June 30, 2025, Arhaus generated $669.8 million in net revenue, with a gross margin of $263.8 million and net income of $39.9 million[82]. - For the three months ended June 30, 2025, net revenue was $358.4 million, gross margin was $148.2 million, and net income was $35.1 million[82]. - Net revenue increased by $64.8 million, or 10.7%, to $669.8 million for the six months ended June 30, 2025, compared to $605.0 million for the same period in 2024[101]. - Gross margin rose by $24.4 million, or 10.2%, to $263.8 million for the six months ended June 30, 2025, with a gross margin percentage of 39.4%[102][103]. - Net and comprehensive income increased by $2.6 million to $39.9 million for the six months ended June 30, 2025, compared to $37.3 million for the same period in 2024[108]. Showroom Operations - As of June 30, 2025, Arhaus operated 103 Showrooms, maintaining the same number as December 31, 2024, with an increase in Showrooms featuring in-home interior designers from 89 to 93[81]. - 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 June 30, 2025[82]. - The company opened 7 new Showrooms from January 1, 2024, to June 30, 2025, while closing 1 permanently and relocating 6[97]. - The company opened new Showrooms contributing $36.9 million to revenue growth in the six months ended June 30, 2025[101]. - Total Showrooms at the end of the period increased to 103 as of June 30, 2025, up from 97 in the previous year[100]. Expenses and Income - Selling, general and administrative (SG&A) expenses increased by $19.8 million, or 10.3%, to $211.5 million for the six months ended June 30, 2025, representing 31.6% of net revenue[104][105]. - Selling, general and administrative expenses (SG&A) are expected to increase as new Showrooms are opened and new product categories are developed[91]. - Interest income, net decreased to $1.3 million for the six months ended June 30, 2025, down from $2.0 million for the same period in 2024[106]. - The effective tax rate was 25.7% for the six months ended June 30, 2025, compared to 25.3% for the same period in 2024[107]. Cash Flow and Capital Expenditures - Cash and cash equivalents as of June 30, 2025, totaled $234.8 million, with operating cash flows expected to meet working capital requirements for at least the next 12 months[117][118]. - Net cash provided by operating activities was $81.4 million for the six months ended June 30, 2025, compared to $84.3 million for the same period in 2024[124]. - For the six months ended June 30, 2025, net cash provided by operating activities was $81.4 million, consisting of net income of $39.9 million adjusted for non-cash items of $60.3 million[126]. - Net cash used in investing activities for the six months ended June 30, 2025, was $41.6 million, a decrease from $62.2 million in the same period of 2024[129][130]. - Total capital expenditures, net of landlord contributions, decreased by $9.7 million to $30.5 million for the six months ended June 30, 2025, compared to $40.2 million for the same period in 2024[132]. - The company anticipates total capital expenditures, net of landlord contributions, to be between $80 million and $100 million in fiscal year 2025, primarily for opening new Showrooms[133]. - Net cash used in financing activities for the six months ended June 30, 2025, was $2.3 million, significantly lower than $71.1 million in the same period of 2024[134]. Risk Management and Inflation - The company has no borrowings under the 2021 Credit Facility as of June 30, 2025, except for a $5.1 million irrevocable standby letter of credit issued in May 2025[139]. - The company does not currently use derivative instruments to manage foreign currency exchange risk or interest rate risk[138][139]. - Inflation has historically been managed through price increases, but the company cannot estimate future recovery of cost increases due to inflation[140]. Performance Metrics - Adjusted EBITDA for the six months ended June 30, 2025, was $78.9 million, compared to $69.0 million for the same period in 2024[95]. - Demand comparable growth is a key performance indicator, measuring year-over-year percentage change in demand from comparable Showrooms and eCommerce[87].

[Arhaus Q2 2025 Earnings Release](index=1&type=section&id=Arhaus%20Q2%202025%20Earnings%20Release) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Arhaus achieved record net revenue of $358 million in Q2 2025, a 15.7% year-over-year increase, driven by strong brand performance and efficient conversion of demand Q2 2025 Key Financial Metrics vs. Q2 2024 | Metric | Q2 2025 | Change vs. Q2 2024 | | :--- | :--- | :--- | | Net Revenue | $358 million | +15.7% | | Gross Margin | $148 million | +19.1% | | Net and Comprehensive Income | $35 million | +57.7% | | Adjusted EBITDA | $60 million | +51.2% | | Comparable Growth | 10.5% | N/A | - **Successfully brought the Dallas Distribution Center operations in-house**, which ramped up ahead of schedule, enabling more efficient conversion of strong Q1 demand into net revenue[5](index=5&type=chunk) - Demand comparable growth was **(3.6)%** in Q2 due to macro headwinds, but rebounded sharply to **15.7%** in July[5](index=5&type=chunk)[8](index=8&type=chunk) - Launched the new **Arhaus Bath Collection**, expanding the company's product offerings into a new home category[5](index=5&type=chunk) [Showroom and Balance Sheet Highlights](index=2&type=section&id=Showroom%20and%20Balance%20Sheet%20Highlights) The company operated 103 showrooms and maintained a strong financial position with $235 million in cash, no long-term debt, and increased inventory - Operated **103 Showrooms** across 30 states at the end of Q2 2025[9](index=9&type=chunk) - Completed **3 Total Showroom Projects** in Q2 and expects to complete **12 to 15 total projects** in 2025, including 4 to 6 new openings[9](index=9&type=chunk) Balance Sheet and Liquidity Highlights (as of June 30, 2025) | Metric | Value | Change from Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $235 million | +18.9% | | Long-term debt | None | N/A | | Net merchandise inventory | $311 million | +4.7% | | Client deposits | $233 million | +5.5% | | Net cash from operating activities (YTD) | $81 million | N/A | [Company Outlook](index=3&type=section&id=Outlook) Arhaus reaffirmed its full-year 2025 guidance, reduced its capital expenditure forecast by $10 million, and introduced specific guidance for Q3 2025 Q3 and Full-Year 2025 Guidance | Metric | Q3 2025 Guidance | Full-Year 2025 Guidance | | :--- | :--- | :--- | | Net Revenue | $320M - $350M | $1.29B - $1.38B | | Net Revenue Growth | 0.3% to 9.7% | 1.5% to 8.6% | | Comparable Growth | (4)% to 5% | (5)% to 1.5% | | Net Income | $7M - $17M | $48M - $68M | | Adjusted EBITDA | $23M - $33M | $123M - $145M | | Company-funded Capital Expenditures | N/A | $80M - $100M (reduced by $10M) | [Financial Statements](index=6&type=section&id=Financial%20Statements) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $1.32 billion as of June 30, 2025, driven by increases in cash, inventory, and right-of-use assets Selected Balance Sheet Data (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $234,797 | $197,511 | | Merchandise inventory, net | $311,117 | $297,010 | | Total current assets | $577,569 | $531,043 | | Total assets | $1,318,376 | $1,206,316 | | **Liabilities & Equity** | | | | Client deposits | $233,070 | $220,873 | | Total current liabilities | $434,723 | $402,451 | | Total liabilities | $932,763 | $862,571 | | Total stockholders' equity | $385,613 | $343,745 | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For Q2 2025, net revenue increased 15.7% to $358.4 million and net income rose 57.7% to $35.1 million compared to the prior-year period Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $358,435 | $309,801 | $669,807 | $604,963 | | Gross Margin | $148,227 | $124,372 | $263,814 | $239,426 | | Income from Operations | $46,765 | $29,381 | $52,186 | $47,742 | | Net and Comprehensive Income | $35,066 | $22,234 | $39,948 | $37,333 | | Diluted EPS | $0.25 | $0.16 | $0.28 | $0.27 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operations was $81.4 million, resulting in a net cash increase of $37.5 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $81,428 | $84,304 | | Net cash used in investing activities | ($41,622) | ($62,158) | | Net cash used in financing activities | ($2,316) | ($71,052) | | **Net increase (decrease) in cash** | **$37,490** | **($48,906)** | [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Net%20and%20Comprehensive%20Income%20to%20EBITDA%20and%20Adjusted%20EBITDA) For Q2 2025, Net Income of $35.1 million was reconciled to an Adjusted EBITDA of $60.3 million, yielding an Adjusted EBITDA margin of 16.8% Reconciliation to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net and comprehensive income | $35,066 | $22,234 | | Interest income, net | ($744) | ($606) | | Income tax expense | $12,593 | $7,828 | | Depreciation and amortization | $11,597 | $9,106 | | **EBITDA** | **$58,512** | **$38,562** | | Equity based compensation | $1,795 | $1,327 | | **Adjusted EBITDA** | **$60,307** | **$39,889** | | Adjusted EBITDA as a % of net revenue | 16.8% | 12.9% |

Core Insights - Arhaus, Inc. reported record net revenue of over $358 million for Q2 2025, marking a 15.7% increase year-over-year, driven by brand strength and client loyalty [3][8] - The company successfully transitioned its Dallas Distribution Center operations in-house, enhancing efficiency and volume in revenue generation [4][8] - Demand comparable growth showed a decline of 3.6% in Q2 due to macroeconomic challenges, but rebounded to 15.7% in July, indicating strong client engagement [5][9] Financial Performance - Q2 2025 net revenue reached $358 million, a 15.7% increase compared to Q2 2024 [10] - Gross margin increased by 19.1% to $148 million, while selling, general, and administrative expenses rose by 6.8% to $101 million [10] - Net income surged by 57.7% to $35 million, and adjusted EBITDA rose by 51.2% to $60 million compared to the same quarter last year [10] Showroom Expansion - As of the end of Q2 2025, Arhaus operated 103 showrooms across 30 states, completing 3 showroom projects during the quarter [10][11] - The company plans to complete approximately 12 to 15 showroom projects in 2025, including 4 to 6 new openings [11] Balance Sheet and Liquidity - As of June 30, 2025, Arhaus reported cash and cash equivalents of $235 million and no long-term debt [15] - Net merchandise inventory increased by 4.7% to $311 million from December 31, 2024, and client deposits rose by 5.5% to $233 million [15] Outlook - For full-year 2025, Arhaus expects net revenue between $1.29 billion and $1.38 billion, with comparable growth projected between -5% and 1.5% [13] - Q3 2025 guidance includes net revenue expectations of $320 million to $350 million [13]