Arhaus, Inc. (ARHS) | Investment Case

1. Company Snapshot

1.a. Company Description

Arhaus, Inc.operates as a lifestyle brand and premium retailer in the home furnishings market.It provides merchandise assortments across various categories, including furniture, lighting, textiles, décor, and outdoor.

The company's furniture products comprise bedroom, dining room, living room, and home office furnishings, which includes sofas, dining tables and chairs, accent chairs, console and coffee tables, beds, headboards, dressers, desks, bookcases and modular storage, etc.; and outdoor products include outdoor dining tables, chairs, chaises and other furniture, lighting, textiles, décor, umbrellas, and fire pits.It also offers lighting products, such as various distinct and artistic lighting fixtures, including chandeliers, pendants, table and floor lamps, and sconces; textile products comprising handcrafted indoor and outdoor rugs, bed linens, and pillows and throws; and décor products, including various wall art to mirrors, vases to candles, and other decorative accessories.The company distributes its products through an omni-channel model comprising showrooms, e-commerce platform, catalog, and in-home designer services.

As of December 31, 2021, it operated through a network of 71 traditional showrooms, 5 Design Studios, and 3 Outlets, as well as 58 showrooms with in-home interior designers.The company was founded in 1986 and is headquartered in Boston Heights, Ohio.

Show Full description

1.b. Last Insights on ARHS

Arhaus, Inc.'s recent performance was negatively impacted by structural margin pressures, with long-term margins potentially lower than 2023 levels. The company's Q4 2024 results showed a 10.5% adjusted EBITDA margin, reflecting potential structural shifts. Additionally, the stock price drop of 50% has raised valuation concerns, with Arhaus trading at 20x FY25 earnings, which seems high given margin pressures. Management's guidance for FY25 suggests flat comparable sales, further exacerbating margin concerns.

1.c. Company Highlights

Last Price	10.54
Change Percentage	0.14%
Open	10.6
Previous Close	10.53
Market Cap ( Millions)	1487
Volume	447634
Year High	13.02
Year Low	6.61
M A 50	10.08
M A 200	9.61

FCF Yield	5.43%
Dividend Yield	0.00%
ROE	19.87%
Debt / Equity	142.75%
Net Debt / EBIDTA	186.72%
Price To Book	3.71
Price Earnings Ratio	20.21
Price To FCF	18.4
Price To sales	1.09
EV / EBITDA	10.84

2. Arhaus' Q3 2025 Earnings: A Strong Performance

Arhaus reported a robust third quarter 2025, with net revenue reaching $345 million, an 8% year-over-year increase, near the high-end of the company's guidance range. The company's gross margin expanded 10 basis points, while selling, general and administrative expenses (SG&A) load decreased 120 basis points to 34% of net revenue. Net income was $12.2 million, up 23.1% versus last year, with adjusted EBITDA expanding 180 basis points to 9.1%. Earnings per share (EPS) came in at $0.09, beating estimates of $0.08.

Publication Date: Nov -26

                                    📋 Highlights
                                    Revenue Growth::
                                                Q3 net revenue reached $345M, an 8% YoY increase, with demand comparable growth at 7.4%.
Product Launch Success::
                                                The Fall 2025 Collection drove record September performance, with 70% of upholstery sourced domestically.
Financial Strength::
                                                Net income surged 23.1% YoY to $12.2M, while adjusted EBITDA expanded to 9.1% (180 bps growth).
Capital Efficiency::
                                                SG&A costs grew 4.1% to $117M but decreased as a percentage of revenue to 34% (120 bps reduction).
Strategic Investments::
                                                $30M allocated to digital transformation, aiming to enhance scalability and productivity across operations.

                                

Operational Highlights

The company's operational performance was strong, with demand comparable growth of 7.4%, driven by the successful launch of the Fall 2025 Collection, which resonated deeply with clients. The collection's focus on modern and traditional silhouettes, natural materials, and artisan craftsmanship contributed to the company's record performance in September. Upholstery and customization continued to be key drivers of success, with nearly 70% of upholstery sourced domestically.

Growth Strategy and Outlook

Arhaus remains focused on disciplined profitability growth and is investing in scalable systems and leadership to fuel the next phase of growth. The company is on track to complete approximately 12 to 15 total showroom projects in 2025 and is expanding its distribution network and technology infrastructure. The company's digital transformation project is underway, with a total incremental program investment of approximately $30 million. Arhaus has updated its full-year 2025 outlook, raising the low end of its prior ranges while maintaining the high end, with expected net revenue between $1.35 billion and $1.38 billion.

Valuation and Future Prospects

With a P/E Ratio of 18.98 and an EV/EBITDA of 10.3, the market is pricing in a certain level of growth for Arhaus. Analysts estimate next year's revenue growth at 6.2%, which is slightly lower than the current year's expected growth rate. The company's strong operational performance and growth strategy position it well for future success. As John Reed noted, "We're confident in the momentum and fundamentals of our business, with strong client engagement and a robust product offering."

Tariff Impact and Pricing Strategy

The company is taking a disciplined approach to managing the impact of tariffs, with a focus on operational savings, vendor concessions, and pricing actions. As Jennifer Porter stated, "We're taking a collaborative approach to identify opportunities for price increases... Our goal is to cover 100% of the tariff impact while protecting margins." The company's diversified sourcing strategy and domestic exposure are also helping to mitigate the impact of tariffs.

3. NewsRoom

Arhaus, Inc. (ARHS) Presents at Morgan Stanley Global Consumer & Retail Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

Arhaus Provides Mixed Signals About The Demand Cycle

Dec -02

Source: seekingalpha.com

Comparing Winmark (NASDAQ:WINA) and Arhaus (NASDAQ:ARHS)

Nov -30

Source: defenseworld.net

Arhaus to Participate in Upcoming Investor Conferences

Nov -25

Source: globenewswire.com

Arhaus, Inc. (ARHS) Q3 2025 Earnings Call Transcript

Nov -07

Source: seekingalpha.com

Arhaus, Inc. (ARHS) Reports Q3 Earnings: What Key Metrics Have to Say

Nov -06

Source: zacks.com

Arhaus, Inc. (ARHS) Beats Q3 Earnings and Revenue Estimates

Nov -06

Source: zacks.com

Arhaus Reports Third Quarter 2025 Financial Results

Nov -06

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.88%)

6. Segments

Retail

Expected Growth: 7.5%

Arhaus' 7.5% retail growth is driven by increasing demand for premium home furnishings, expansion into new markets, and strategic investments in e-commerce and digital marketing. Additionally, the company's focus on sustainability and high-quality products resonates with environmentally conscious consumers, contributing to its growth momentum.

eCommerce

Expected Growth: 9.5%

Arhaus Inc.'s 9.5% eCommerce growth is driven by increasing online furniture demand, effective digital marketing strategies, and an enhanced user experience on their website and mobile app. Additionally, the company's focus on sustainability and high-quality, made-to-order products resonates with environmentally conscious consumers, contributing to the segment's growth.

7. Detailed Products

Furniture

Arhaus offers a wide range of stylish and comfortable furniture pieces for living rooms, dining rooms, bedrooms, and outdoor spaces.

Lighting

Arhaus provides a variety of stylish and functional lighting options, including table lamps, floor lamps, chandeliers, and sconces.

Rugs

Arhaus offers a diverse selection of high-quality rugs in various styles, materials, and sizes to complement any room's décor.

Decor

Arhaus provides a wide range of decorative items, including vases, sculptures, wall art, and accessories, to enhance any room's décor.

Textiles

Arhaus offers a variety of high-quality textiles, including throw pillows, blankets, and upholstery fabric, to add comfort and style to any room.

Outdoor

Arhaus provides a range of stylish and durable outdoor furniture and decor, perfect for creating an inviting outdoor living space.

8. Arhaus, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Arhaus, Inc. faces moderate threat from substitutes due to the availability of alternative furniture options from online retailers and local furniture stores.

Bargaining Power Of Customers

Arhaus, Inc. has a low bargaining power of customers due to its strong brand reputation and high-quality products, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

Arhaus, Inc. has a moderate bargaining power of suppliers due to its reliance on a few key suppliers for high-quality materials, giving them some negotiating power.

Threat Of New Entrants

Arhaus, Inc. faces a low threat of new entrants due to the high barriers to entry in the furniture industry, including high startup costs and the need for established supply chains.

Intensity Of Rivalry

Arhaus, Inc. operates in a highly competitive industry with many established players, leading to a high intensity of rivalry among competitors.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	57.64%
Debt Cost	3.95%
Equity Weight	42.36%
Equity Cost	16.35%
WACC	9.20%
Leverage	136.06%

11. Quality Control: Arhaus, Inc. passed 3 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Dillard's

A-Score: 6.9/10

Value: 5.1

Growth: 6.9

Quality: 7.1

Yield: 8.0

Momentum: 9.5

Volatility: 5.0

1-Year Total Return ->

H&R Block

A-Score: 5.8/10

Value: 5.6

Growth: 6.1

Quality: 5.5

Yield: 7.0

Momentum: 1.5

Volatility: 9.0

1-Year Total Return ->

Allison Transmission Holdings

A-Score: 5.6/10

Value: 5.8

Growth: 7.4

Quality: 7.5

Yield: 2.0

Momentum: 3.0

Volatility: 8.0

1-Year Total Return ->

KB Home

A-Score: 4.9/10

Value: 6.2

Growth: 7.1

Quality: 5.0

Yield: 3.0

Momentum: 2.5

Volatility: 5.7

1-Year Total Return ->

Arhaus

A-Score: 3.5/10

Value: 4.2

Growth: 4.1

Quality: 4.9

Yield: 0.0

Momentum: 5.5

Volatility: 2.3

1-Year Total Return ->

Floor & Decor

A-Score: 3.4/10

Value: 2.6

Growth: 7.7

Quality: 4.3

Yield: 0.0

Momentum: 1.5

Volatility: 4.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

10.59%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

9.20%

Arhaus, Inc. - US04035M1027

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ARHS

1.c. Company Highlights

Strong Momentum

Higher Growth

Higher Yield

Earnings Beats

Revenues Beats

More Volatile

Expensive

Revenues Miss

Average Yield

Medium Volatility

Earnings Miss

Fairly Valued

Stable Momentum

Weak Momentum

2. Arhaus' Q3 2025 Earnings: A Strong Performance

Operational Highlights

Growth Strategy and Outlook

Valuation and Future Prospects

Tariff Impact and Pricing Strategy

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.88%)

6. Segments

Retail

Expected Growth: 7.5%

eCommerce

Expected Growth: 9.5%

7. Detailed Products

Furniture

Lighting

Rugs

Decor

Textiles

Outdoor

8. Arhaus, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Arhaus, Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

10.54$

Current Price

10.54$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA