Arhaus(US:ARHS)2023-11-04 07:52Financial Data and Key Metrics Changes - The company reported net revenue of $326 million, an increase of $6 million or 1.9% year-over-year, with a comparable decline of 2.1% versus Q3 last year when comp growth was 54.3% [12][14] - Demand comparable growth was 11.7% on a one-year basis and 99.5% on a four-year stack basis [12] - Gross margin decreased by 4% to $131 million, with gross margin as a percentage of net revenue down 250 basis points to 40% [12][13] - Third quarter net income decreased by 47% to $20 million, and adjusted EBITDA decreased by 41% to $34 million from $57 million in Q3 2022 [13] Business Line Data and Key Metrics Changes - The company experienced strong demand across all regions, products, and channels, with a notable performance in e-commerce, which was up 26% [7][58] - The retail side of the business saw a decline of 2.7% [58] - The company is focusing on growing its trade business and enhancing in-home delivery experiences [8][76] Market Data and Key Metrics Changes - The company is expanding its showroom footprint, with plans to open six to eight new traditional showrooms and two to three new outlet locations in 2024 [10][11] - The company has opened eight new showrooms year-to-date and plans to open three additional showrooms in California by December [9] Company Strategy and Development Direction - The company aims to expand its collection of globally inspired heirloom quality artisan-crafted furniture and grow its showroom footprint [11] - The company is investing in enhancing the final mile delivery experience and increasing the number of in-home designers [8][76] - The company is also focusing on the trade business, which has shown significant growth potential [76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and the ability to clear the abnormal backlog by the end of the year, leading to a normalized backlog in 2024 [21][67] - The company is being conservative in its fourth-quarter guidance due to macroeconomic uncertainties and the timing of promotions [70] - Management noted that brand awareness is growing, driven by new showroom openings and positive customer experiences [39][41] Other Important Information - The company made a significant donation of $10 million to the Nature Conservancy, which impacted the SG&A expenses [13] - Management indicated that the donation was a one-time opportunity and there are no current plans for similar donations in 2024 [82] Q&A Session Summary Question: Demand trends and backlog flow-through - Management expects to clear the abnormal backlog by the end of the year, with a higher normalized backlog rolling into next year [17][21] Question: Performance of new stores - New stores are performing well, meeting or exceeding expectations, particularly in larger markets [22][23] Question: Pricing actions and gross margin pressures - The company has seen sales increase on certain collections due to pricing actions, but there has been some gross margin compression as a result [26][28] Question: E-commerce performance - E-commerce has shown strong growth, with clients responding well to price actions and full-price products [58][60] Question: Future showroom openings and cash management - The company is focused on reinvesting cash into growth opportunities, including showroom expansions and trade programs [56] Question: Sustainability initiatives - The recent donation to the Nature Conservancy was a one-time event, with no current plans for similar initiatives in 2024 [82]