Key Takeaways:
Arhaus posted record first-quarter revenue of $314M, topping estimates, as comparable sales declined 1.7% amid tariff headwinds.
"Consumers remain cautious amid ongoing macroeconomic and geopolitical uncertainty," Chief Financial Officer Michael Lee said.
Net income fell 54.5% to $2M, or 2 cents a share, in line with analyst estimates. Gross margin contracted 70 basis points to 36.4%. Comparable written sales, which measure orders placed, dropped 5.7% from a year earlier.
Shares fell 22% since the May 7 report to a 52-week low of $5.63, giving the company a forward P/E of 12 times — a discount to peers Williams-Sonoma and RH, which trade near 19 times. The company expects tariff-related costs of $30M to $40M for fiscal 2026.
Domestic Manufacturing as a Hedge
Arhaus produces the majority of its custom upholstery domestically, giving it greater control over costs and lead times compared with competitors that rely more heavily on imports. The company also maintains direct partnerships with artisans across North America, Europe and South Asia, many spanning decades.
Management said the diversified sourcing model allows it to remain competitive on pricing while navigating different policy environments. The company's tariff estimate of $30M to $40M reflects mitigation efforts including vendor negotiations, sourcing adjustments and operational efficiencies.
Guidance and Outlook
For the second quarter, Arhaus forecast revenue of $350M to $370M, representing a year-over-year change of down 2.4% to up 3.2%. The company expects comparable delivered sales ranging from down 5% to flat, with net income of $19M to $24M and adjusted EBITDA of $40M to $49M.
For the full fiscal year, Arhaus reiterated its outlook for revenue of $1.43B to $1.47B, representing growth of 3.7% to 6.6%. The company expects comparable delivered sales of flat to up 3%, with net income of $66M to $75M and adjusted EBITDA of $150M to $161M.
The sell-off has pushed Arhaus to its lowest valuation since going public, testing whether the company's domestic manufacturing advantage can justify a re-rating. Investors will watch second-quarter results for signs that tariff mitigation efforts are stabilizing margins.
This article is for informational purposes only and does not constitute investment advice.
