ARHS — Arhaus, Inc.

Summary of Arhaus Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Revenue: $314 million, up 0.9% year-over-year, marking the highest first-quarter revenue in company history.
• Gross Profit: $114 million, down 1% year-over-year; gross margin decreased by 70 basis points to 36.4%, impacted by higher fuel and occupancy costs.
• SG&A Expenses: Increased by 1.9% to $112 million, leading to an SG&A margin of 35.7%.
• Net Income: $2.2 million, within guidance.
• Adjusted EBITDA: $18 million, within guidance; adjusted EBITDA margin decreased by 30 basis points year-over-year.
• Comparable Written Sales: Decreased by 5.7%, attributed to weather disruptions and macroeconomic uncertainties.

2. Strategic Updates and Business Highlights

• Product Innovation: The company emphasized a strong focus on product innovation, with a shift toward richer colors and textures in design. The Spring collection was noted as particularly successful.
• Showroom Growth: Arhaus opened a new showroom in Ashburn, Virginia, and expanded another in Colorado. The company plans to complete 10-14 showroom projects in 2026.
• Infrastructure Investments: Continued investments in modernizing distribution and technology infrastructure, including the rollout of a new transportation management system (TMS).
• Trade Program: A redesigned trade program was launched to strengthen relationships with design professionals and builders, enhancing order support and access to exclusive products.

3. Forward Guidance and Outlook

• Full Year 2026 Guidance: Expected net revenue between $1.43 billion and $1.47 billion (3.7% to 6.6% growth), net income of $66 million to $75 million, and adjusted EBITDA of $150 million to $161 million.
• Q2 2026 Guidance: Projected net revenue between $350 million and $370 million, with comparable delivered sales expected to range from -5% to flat. Net income is forecasted between $19 million and $24 million.

4. Bad News, Challenges, or Points of Concern

• Weather-Related Disruptions: Over half of the showrooms faced temporary closures due to adverse weather, impacting sales.
• Macro Uncertainties: Ongoing geopolitical tensions, particularly the conflict in Iran, have contributed to cautious consumer sentiment.
• Declining Metrics: Comparable written sales and traffic were negatively affected in Q1, with a noted decrease in consumer engagement during the quarter.
• Inflationary Pressures: Rising costs, particularly in fuel and logistics, are expected to continue affecting gross margins.

5. Notable Q&A Insights

• Demand Trends: Management indicated that while Q1 faced challenges, there was a significant improvement in demand towards the end of March, with positive trends continuing into April and May.
• Promotional Strategies: The company is shifting promotional strategies to enhance customer engagement, moving away from traditional "buy more, save more" promotions to more tailored approaches.
• Trade Model Reception: The new trade program has received positive feedback, allowing trade professionals to choose between commission or discounts, enhancing their engagement with Arhaus products.
• Supply Chain Confidence: Despite concerns about foam shortages due to a chemical plant incident, management expressed confidence in their supply chain and production capabilities.

Overall, Arhaus demonstrated resilience in a challenging environment, with strategic initiatives aimed at long-term growth while navigating short-term headwinds.