Arhaus And RH Distinguished By Premium Focus, Scale, And National Networks - Analyst Initiates Coverage

Group 1 - Stifel analyst Andrew Carter initiated coverage on Arhaus, Inc. (ARHS) with a Buy rating and a price forecast of $19.5, citing successful execution and revenue growth post-COVID [1] - The current discount to retail peers undervalues Arhaus's growth outlook, as the company is in the midst of its primary expansion initiative [1] - The analyst also initiated coverage on RH (RH) with a Buy rating and a forecast of $315, noting that RH capitalized on the COVID surge but has faced scrutiny due to a 68% decline in shares from the August 2021 peak [1] Group 2 - The current discount valuation to specialty retail peers on an FY25E EBITDA basis is compelling, with ARHS at 9.4x, RH at 9.5x, and specialty retail peers at 11.3x [2] - Both companies are distinguished by their premium focus, scale, and national networks, enabling above-average retail operating margins with estimated product margins in the mid-to-high 60s [2] - 57% of U.S. households are within 50 miles of ARHS/RH showrooms, which are difficult to replicate, and both companies are expanding from strong positions [2] Group 3 - For Arhaus, the estimated FY26E revenue is $1.6 billion, with a CAGR of 7.4% from FY23 to FY26, while the operating margin is expected to remain relatively flat due to ongoing investments [3] - For RH, the estimated FY26E revenue is $3.96 billion, with a CAGR of 8.6% from FY23 to FY26, and an operating margin increase of 340 bps, constrained by ongoing investments including international expansion losses [3] - As of the latest check, RH shares are trading lower by 0.21% to $241.48, while ARHS shares are trading higher by 0.14% to $14.78 [3]