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Arhaus Reports First Quarter 2025 Financial Results

1. ARHS reported a 5.5% increase in net revenue to $311 million. 2. Net income decreased 67.6%, reflecting ongoing macroeconomic volatility. 3. Selling, general and administrative expenses rose 13.9% to $110 million. 4. Company plans to open 4-6 new showrooms in 2025. 5. Expect reduced sourcing from China to 1% by Q4 2025.

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FAQ

Why Bearish?

Despite revenue growth, the significant drop in net income signals potential issues. Historical examples show that persistent income declines often lead to stock price reductions.

How important is it?

While revenue growth is a positive sign, the sharp decline in income and rising expenses dampen overall confidence in ARHS's near-term performance.

Why Short Term?

The negative quarterly results can affect investor sentiment immediately, as seen in similar retail performance declines reflecting short-term market reactions.

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BOSTON HEIGHTS, Ohio, May 08, 2025 (GLOBE NEWSWIRE) -- Arhaus, Inc. (“Arhaus” or the “Company”) (NASDAQ: ARHS), a growing lifestyle brand and omni-channel retailer of premium artisan-crafted home furnishings, reported first quarter 2025 results for the period ended March 31, 2025. Highlights include: Net revenue increased 5.5% to $311 million compared to the same period in 2024Gross margin increased 0.4% to $116 million compared to the same period in 2024Selling, general and administrative expenses increased 13.9% to $110 million compared to the same period in 2024Net and comprehensive income decreased 67.6% to $5 million compared to the same period in 2024Adjusted EBITDA decreased 36.2% to $19 million compared to the same period in 2024Comparable growth(1) of (1.5)%Demand comparable growth(2) of 4.1%Total Showroom Projects(3) of 5 locations, inclusive of 1 new Traditional Showroom opening and 4 strategic relocations. John Reed, Co-Founder and Chief Executive Officer, said: “We’re pleased with our first quarter performance, which met our expectations despite continued macroeconomic volatility—underscoring the strength of our brand and the resilience of our business model. As we look ahead, we’re focused on what we can control: executing with discipline, investing strategically, and expanding our showroom footprint to support long-term, profitable growth. In 2025, we plan to have 12 to 15 Total Showroom Projects(3) and expect to reduce China sourcing to approximately 1% of Total Receipts(4) in the fourth quarter. While we revised our full-year outlook to reflect the broader uncertainty, we remain confident in our business—supported by a strong balance sheet, operational agility, and the momentum of our growth strategy. I’m proud of what we’ve accomplished and even more excited about the opportunities ahead.” Operational Highlights First quarter comparable growth(1) was (1.5)%, near the midpoint of the Company’s expectations. Demand comparable growth(2) was 4.1%, driven by healthy client engagement and the ongoing success of the Company’s product assortment, marketing initiatives, and planned promotions. The Company is pleased with the overall strength of the quarter. Showroom Highlights In the first quarter 2025, the Company’s showroom footprint was 103 Showrooms across 30 states and all four geographic regions. The Company completed 5 Showroom Projects, including 1 new showroom opening and 4 strategic relocations. Showroom highlights include: Winter Park, Florida – A new Traditional showroom opened in Winter Park Village, an upscale lifestyle center.Sarasota, Florida – A relocated showroom opened in Center Point at Waterside, a key Florida market.Burlingame, California – A relocated showroom in downtown Burlingame tailored to the local clientele. Including these 5 Showroom Projects, the Company expects to complete approximately 12 to 15 Total Showroom Projects(3) in 2025, opening 4 to 6 new Showrooms, along with 8 to 9 strategic relocations, remodels, or expansions. The Company’s long-term strategy remains focused on opening an average of five to seven new Traditional Showrooms annually, along with additional Design Studios and showroom relocations. The Company has a robust pipeline in place toward its goal of 165 Traditional Showrooms. Balance Sheet and Liquidity As of March 31, 2025, the Company reported the following: No long-term debt.Cash and cash equivalents totaled $214 million.Net merchandise inventory of $301 million, a 1.5% increase from December 31, 2024 to March 31, 2025.Client deposits of $263 million, a 19.2% increase from December 31, 2024 to March 31, 2025.Net cash provided by operating activities totaled $47 million for the first quarter 2025.Net cash used in investing activities was approximately $28 million. Company-funded capital expenditures(5) were approximately $22 million and landlord contributions were approximately $6 million. Outlook In response to increased tariff-related volatility and softening consumer sentiment, the Company is updating its full-year 2025 outlook and introducing second-quarter 2025 outlook for select financial and operating metrics to reflect a more cautious stance. The midpoint of the prior full-year outlook now represents the high-end of the updated range. This outlook reflects currently implemented tariff actions in effect as of the date hereof.  Full Year 2025   Current Guidance Previous Guidance Q2 2025Net revenue$1.29 billion to $1.38 billion $1.36 billion to $1.40 billion $320 million to $350 millionComparable growth(1)(5)% to 1.5% 0% to 3% (2)% to 5%Net income(6)$48 million to $68 million $63 million to $73 million $17 million to $24 millionAdjusted EBITDA(7)$123 million to $145 million $140 million to $150 million $41 million to $48 million      Other Estimates     Company-funded capital expenditures(5)$90 million to $110 million $90 million to $110 million  Depreciation & amortization$47 million to $52 million    Fully diluted shares~141 million ~141 million  Effective tax rate~ 26% ~ 26%  Showroom openings4 to 6 new showrooms 3 to 5 new showrooms  Total Showroom Projects(3)12 to 15 showroom projects     (1) Comparable growth is a key performance indicator and is defined as the year-over-year percentage change of the dollar value of orders delivered (based on purchase price), net of the dollar value of returns (based on amount credited to client), from our comparable Showrooms and eCommerce, including through our catalogs and other mailings.(2) Demand comparable growth is a key performance indicator and is defined as the year-over-year percentage change of demand from our comparable Showrooms and eCommerce, including through our catalogs and other mailings.(3) Total Showroom Projects is defined as the number of showroom projects completed during the period, including new showroom openings, strategic relocations, remodels, and expansions. The Company considers all showroom projects integral to its long-term growth strategy, with each evaluated based on strategic relevance and expected return on investment.(4) Total Receipts is a sourcing indicator measured by the total dollar value of product received excluding tariffs and freight. This metric offers a more accurate, forward-looking view of the Company’s sourcing mix, supporting real-time monitoring and a go-forward basis of tariff exposure and supply chain diversity.(5) Company-funded capital expenditures is defined as total net cash used in investing activities less landlord contributions.(6) U.S. GAAP net income (loss).(7) We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. These items include, but are not limited to, future share-based compensation expense, income taxes, interest income, and transaction costs. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort.  Conference Call You are invited to listen to Arhaus’ conference call to discuss the first quarter 2025 financial results scheduled for today, May 8, 2025, at 8:30 a.m. Eastern Time. The call will be available over the Internet on our website (http://ir.arhaus.com) or by dialing (877) 407-3982 within the U.S., or 1 (201) 493-6780, outside the U.S. The conference ID number is 13748991. A recorded replay of the conference call will be available within approximately three hours of the conclusion of the call and can be accessed online at http://ir.arhaus.com for approximately twelve months. About Arhaus Founded in 1986, Arhaus is a growing lifestyle brand and omni-channel retailer of premium home furnishings. Through a differentiated proprietary model that directly designs and sources products from leading manufacturers and artisans around the world, Arhaus offers an exclusive assortment of heirloom quality products that are sustainably sourced, lovingly made, and built to last. With more than 100 showroom and design studio locations across the United States, a team of interior designers providing complimentary in-home design services, and robust online and eCommerce capabilities, Arhaus is known for innovative design, responsible sourcing, and client-first service. For more information, please visit www.arhaus.com. Investor Contact: Tara Louise AtwoodVice President, Investor Relations(440) 439-7700 invest@arhaus.com Non-GAAP Financial Measures In addition to the results provided in accordance with U.S. GAAP, this press release and related tables include adjusted EBITDA and adjusted EBITDA as a percentage of net revenue, which present operating results on an adjusted basis. We use non-GAAP measures to help assess the performance of our business, identify trends affecting our business, formulate business plans and make strategic decisions. In addition to our results determined in accordance with U.S. GAAP, we believe that providing these non-GAAP financial measures is useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of non-recurring items. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. These non-U.S. GAAP measures are not a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. These measures should only be read together with the corresponding U.S. GAAP measures. Please refer to the reconciliations of adjusted EBITDA to the most directly comparable financial measures prepared in accordance with U.S. GAAP below. Forward-Looking Statements Certain statements contained herein, including statements under the heading “Outlook” are not based on historical fact and are “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our ability to manage and maintain the growth rate of our business; our ability to obtain quality merchandise in sufficient quantities; disruption in our receiving and distribution system, including delays in the integration of our distribution centers and the possibility that we may not realize the anticipated benefits of multiple distribution centers; effects of new or proposed tariffs and changes to international trade policies and agreements; the possibility of cyberattacks and our ability to maintain adequate cybersecurity systems and procedures; loss, corruption and misappropriation of data and information relating to clients and employees; changes in and compliance with applicable data privacy rules and regulations; risks as a result of constraints in our supply chain; a failure of our vendors to meet our quality standards; declines in general economic conditions that affect consumer confidence and consumer spending that could adversely affect our revenue; our ability to anticipate changes in consumer preferences; risks related to maintaining and increasing Showroom traffic and sales; our ability to compete in our market; our ability to adequately protect our intellectual property; compliance with applicable governmental regulations; effectively managing our eCommerce sales channel and digital marketing efforts; our reliance on third-party transportation carriers and risks associated with freight and transportation costs; and compliance with SEC rules and regulations as a public reporting company. These factors should not be construed as exhaustive. Further information on potential factors that could affect the financial results of the Company and its forward-looking statements is included in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statement, except as may be required by law. These forward-looking statements speak only as of the date of this release. All forward-looking statements are qualified in their entirety by this cautionary statement. Arhaus, Inc. and Subsidiaries Condensed Consolidated Balance Sheets(Unaudited, amounts in thousands, except share and per share data)   March 31,2025 December 31,2024Assets   Current assets   Cash and cash equivalents$214,394 $197,511 Restricted cash 3,520  3,418 Accounts receivable, net 1,050  1,252 Merchandise inventory, net 301,403  297,010 Prepaid and other current assets 32,391  31,852 Total current assets 552,758  531,043 Operating right-of-use assets 345,661  322,302 Financing right-of-use assets 34,608  36,105 Property, furniture and equipment, net 297,538  282,520 Deferred tax assets 21,449  21,091 Goodwill 10,961  10,961 Other noncurrent assets 1,967  2,294 Total assets$1,264,942 $1,206,316     Liabilities and Stockholders’ Equity   Current liabilities   Accounts payable$59,709 $68,621 Accrued taxes 10,835  10,480 Accrued wages 14,221  11,538 Accrued other expenses 39,832  47,668 Client deposits 263,206  220,873 Current portion of operating lease liabilities 48,916  42,247 Current portion of financing lease liabilities 600  1,024 Total current liabilities 437,319  402,451 Operating lease liabilities, long-term 422,848  402,916 Financing lease liabilities, long-term 52,550  53,312 Other long-term liabilities 3,397  3,892 Total liabilities$916,114 $862,571     Commitments and contingencies       Stockholders’ equity   Class A shares, par value $0.001 per share (600,000,000 shares authorized, 54,265,837 shares issued and 53,783,985 outstanding as of March 31, 2025; 53,788,036 shares issued and 53,514,062 outstanding as of December 31, 2024) 54  53 Class B shares, par value $0.001 per share (100,000,000 shares authorized, 87,115,600 shares issued and outstanding as of March 31, 2025; 87,115,600 shares issued and outstanding as of December 31, 2024) 87  87 Retained earnings 147,840  142,898 Additional paid-in capital 200,847  200,707 Total stockholders’ equity 348,828  343,745 Total liabilities and stockholders’ equity$1,264,942 $1,206,316   Arhaus, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited, amounts in thousands, except share and per share data)  Three months ended March 31,  2025   2024 Net revenue$311,372  $295,162 Cost of goods sold 195,785   180,108 Gross margin 115,587   115,054 Selling, general and administrative expenses 110,058   96,693 Loss on disposal of assets 108   — Income from operations$5,421  $18,361 Interest income, net (573)  (1,432)Other income (86)  (122)Income before taxes 6,080   19,915 Income tax expense 1,198   4,816 Net and comprehensive income$4,882  $15,099     Net and comprehensive income per share, basic   Weighted-average number of common shares outstanding, basic 140,361,588   139,816,792 Net and comprehensive income per share, basic$0.03  $0.11 Net and comprehensive income per share, diluted   Weighted-average number of common shares outstanding, diluted 141,090,633   140,556,031 Net and comprehensive income per share, diluted$0.03  $0.11  Arhaus, Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows(Unaudited, amounts in thousands)   Three months ended March 31,  2025   2024 Cash flows from operating activities   Net income$4,882  $15,099 Adjustments to reconcile net income to net cash provided by operating activities   Depreciation and amortization 11,362   8,603 Amortization of operating lease right-of-use asset 10,046   8,738 Amortization of deferred financing fees, interest on finance lease in excess of principal paid and interest on operating leases 6,902   6,233 Equity based compensation 1,595   2,024 Deferred tax assets (358)  174 Amortization of cloud computing arrangements 413   310 Loss on disposal of property, furniture and equipment 108   — Amortization and write-off of lease incentives —   (80)Changes in operating assets and liabilities   Accounts receivable 202   589 Merchandise inventory (4,393)  (14,118)Prepaid and other assets (380)  (5,758)Other noncurrent liabilities (377)  18 Accounts payable (8,685)  (4,819)Accrued expenses (3,209)  (5,092)Operating lease liabilities (13,926)  (4,207)Client deposits 42,333   29,114 Net cash provided by operating activities 46,515   36,828 Cash flows from investing activities   Purchases of property, furniture and equipment (27,621)  (25,932)Net cash used in investing activities (27,621)  (25,932)Cash flows from financing activities   Principal payments under finance leases (212)  (221)Repurchase of shares for payment of withholding taxes for equity based compensation (1,458)  (540)Cash dividend payments (239)  — Net cash used in financing activities (1,909)  (761)Net increase in cash, cash equivalents and restricted cash 16,985   10,135 Cash, cash equivalents and restricted cash   Beginning of period 200,929   226,305 End of period$217,914  $236,440     Supplemental disclosure of cash flow information   Interest paid in cash$1,258  $840 Interest received in cash 1,938   2,871 Income taxes paid in cash 541   991 Noncash investing activities:   Purchase of property, furniture and equipment in current liabilities 6,648   15,250          Arhaus, Inc. and SubsidiariesReconciliation of Net Income to Adjusted EBITDA (Unaudited, amounts in thousands)   Three months ended March 31,  2025   2024 Net and comprehensive income$4,882  $15,099 Interest income, net (573)  (1,432)Income tax expense 1,198   4,816 Depreciation and amortization 11,362   8,603 EBITDA 16,869   27,086 Equity based compensation 1,595   2,024 Other expenses(1) 108   — Adjusted EBITDA$18,572  $29,110     Net revenue$311,372  $295,162 Net and comprehensive income as a % of net revenue 1.6%  5.1%Adjusted EBITDA as a % of net revenue 6.0%  9.9%    (1)Other expenses represent costs and investments not indicative of ongoing business performance, such as loss on disposal of assets. 

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