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Arhaus, Inc. (ARHS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered net revenue of $311.4M (+5.5% YoY) and diluted EPS of $0.03, but margins compressed and adjusted EBITDA fell to $18.6M (6.0% of revenue). Management attributed margin pressure to showroom occupancy deleverage and higher product and delivery costs; demand comps were healthy at +4.1% while delivered comps were -1.5% .
  • Versus Wall Street consensus, Arhaus missed on Q1 revenue ($311.4M vs ~$314.9M*), EPS ($0.03 vs ~$0.06*), and EBITDA ($16.9M vs ~$24.7M*, EBITDA basis), reflecting softer April demand and macro/tariff volatility; Q4 2024 had been a modest beat on EPS and EBITDA but a slight revenue miss* .
  • Full-year 2025 guidance was lowered: revenue to $1.29–$1.38B (from $1.36–$1.40B), net income to $48–$68M (from $63–$73M), and adjusted EBITDA to $123–$145M (from $140–$150M); showroom project plans were raised to 12–15, with 4–6 new showrooms (from 3–5) .
  • Near-term catalyst: explicit tariff commentary (170% on China, 10% elsewhere; ~$10M net P&L impact chiefly in 2H) and April demand comp down ~10% pressured sentiment; Q2 guide embeds delivered comp of -2% to +5% and revenue of $320–$350M, positioning delivery to catch up with deposit build .

Consensus values marked with * retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Demand comparable growth rose +4.1% with strong engagement in both retail and e-commerce; record average order values and more transactions over $5k and $10k supported mix quality .
  • Balance sheet strength: $214M cash, no long-term debt; client deposits rose to $263M (+19% vs Dec 31) signaling future deliveries and revenue conversion in Q2 .
  • Sourcing diversification accelerating: management expects China receipts to ~5% in Q3 and ~1% in Q4; “we expect to reduce China sourcing to approximately 1% of Total Receipts in the fourth quarter” .

What Went Wrong

  • Gross margin rate declined 190 bps to ~37.1% driven by occupancy (+120 bps) and product margin (-40 bps), with delivery/transport costs also higher; adjusted EBITDA fell 36% YoY to $18.6M (6.0% margin) .
  • April demand comp down ~10% on “Liberation Day” and stock market volatility, prompting cautious near-term posture and estimates reset; Q2 comp guide widened (-2% to +5%) .
  • Guidance cut for FY25 (revenue, net income, EBITDA) reflecting tariff actions (including 170% on China) and softening sentiment; midpoint of prior FY outlook now equals high end of updated range .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Revenue ($USD Millions)$319.133 $347.011 $311.372
Diluted EPS ($USD)$0.07 $0.15 $0.03
Gross Margin ($USD Millions)$123.072 $138.731 $115.587
Operating Income ($USD Millions)$10.671 $28.592 $5.421
Net Income ($USD Millions)$9.923 $21.294 $4.882
Adjusted EBITDA ($USD Millions)$23.108 $41.176 $18.572
Adjusted EBITDA Margin (%)7.2% 11.9% 6.0%

Q1 2025 actual vs consensus:

MetricQ1 2025 ActualQ1 2025 Consensus*Beat/Miss
Net Revenue ($USD Millions)$311.372 $314.949*Miss
Diluted EPS ($USD)$0.03 $0.061*Miss
EBITDA ($USD Millions)$16.869 $24.691*Miss

Consensus values marked with * retrieved from S&P Global.

KPIs and operating metrics:

MetricQ3 2024Q4 2024Q1 2025
Comparable Growth (%)(9.2)% (6.4)% (1.5)%
Demand Comparable Growth (%)(11.3)% 5.7% 4.1%
Showrooms (period-end)101 103 103
Showroom Projects in Quarter——5
Client Deposits ($USD Millions)$224.138 $220.873 $263.206
Cash & Equivalents ($USD Millions)$177.722 $197.511 $214.394
Merchandise Inventory ($USD Millions)$294.596 $297.010 $301.403

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenue ($USD)FY 2025$1.36B–$1.40B $1.29B–$1.38B Lowered
Comparable Growth (%)FY 20250%–3% (5)%–1.5% Lowered/Widened
Net Income ($USD)FY 2025$63M–$73M $48M–$68M Lowered
Adjusted EBITDA ($USD)FY 2025$140M–$150M $123M–$145M Lowered
Company-funded Capex ($USD)FY 2025$90M–$110M $90M–$110M Maintained
Depreciation & Amortization ($USD)FY 2025~$40M $47M–$52M Raised
Fully Diluted SharesFY 2025~141M ~141M Maintained
Effective Tax RateFY 2025~26% ~26% Maintained
Showroom OpeningsFY 20253–5 4–6 Raised
Total Showroom ProjectsFY 2025—12–15 Introduced/Raised
Net Revenue ($USD)Q2 2025—$320M–$350M Introduced
Comparable Growth (%)Q2 2025—(2)%–5% Introduced
Net Income ($USD)Q2 2025—$17M–$24M Introduced
Adjusted EBITDA ($USD)Q2 2025—$41M–$48M Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroPreparedness for tariffs; promotional environment continued; cautious but solid demand start to 2025 Explicit inclusion of tariff actions in guidance (170% China, 10% others; 25% steel/aluminum); ~$10M net P&L impact, mostly 2H; April demand comp -10% on market volatility Risk intensified; guidance reset
Supply Chain DiversificationGlobal sourcing; U.S. manufacturing as advantage; inventory build for outdoor season China receipts ~13% in April, targeted ~5% Q3 and ~1% Q4; vendor concessions to mitigate tariff costs Accelerating shift from China
Product/Client MixCatalog storytelling; design services driving 4x order values; promo architecture testing Record AOV; more orders >$5k & >$10k; flexible buy-more-save-more thresholds; pricing lever reserved Premium mix intact; disciplined pricing
Technology InitiativesWMS implemented; ERP and planning system slated for 2025 New payment platform (Tap to Pay, Apple/Google Pay) rolling out; inventory planning & upholstery ERP; $15–$20M SG&A investments mainly 2H Execution underway; margin potential longer-term
Showroom Strategy103 showrooms YE; 3–5 new in 2025; relocations continue Raised to 12–15 total projects, 4–6 new openings; pipeline through 2027; remain long-term focused Expansion elevated

Management Commentary

  • “We’re pleased with our first quarter performance… As we look ahead, we’re focused on what we can control: executing with discipline, investing strategically, and expanding our showroom footprint… we expect to reduce China sourcing to approximately 1% of Total Receipts in the fourth quarter” — John Reed, CEO .
  • “Gross margin decreased 190 bps to 37.1%… primarily driven by higher showroom occupancy costs (+120 bps) and a product margin decrease of 40 bps” — Ryan Brody, SVP Finance .
  • “April demand was softer than expected, with demand comparable growth down 10%, impacted by the shock of the tariff news and the stock market” — John Reed .
  • “Clients who engage with our design team generate order values 4x higher than average… we saw meaningful growth in orders above $5,000 and $10,000 along with record high average order value” — Jennifer Porter, CMO .

Q&A Highlights

  • Margin/outlook: Despite tariff headwinds (~$10M net, mostly 2H), management expects FY gross margin roughly flat YoY, with product margin improvement offsetting occupancy deleverage; targeted price increases not in guidance yet .
  • Demand/Deposits: April demand comp down ~10% on market shock; cancellations unchanged; higher client deposits reflect timing gap and are expected to flow into delivered revenue (Q2 comps guided up to +5%) .
  • Pricing/Promotions: Buy-more-save-more thresholds are flexible; higher thresholds drive trade-up behavior; strategy remains disciplined to protect brand and margin .
  • Showrooms: 12–15 total projects planned in 2025; long-term cadence continues through 2026–2027 given strong cash and pipeline; relocations/remodels deliver attractive ROI .
  • Sourcing: China exposure targeted to ~5% Q3 and ~1% Q4; vendor partnerships helping absorb tariff costs .

Estimates Context

  • Q1 2025 vs consensus: revenue $311.4M vs ~$314.9M* (miss), EPS $0.03 vs ~$0.06* (miss), EBITDA $16.9M vs ~$24.7M* (miss). Management cited occupancy deleverage, product costs, and April demand softness tied to macro/tariff headlines .
  • Prior quarters: Q4 2024 revenue ~$347.0M vs ~$350.9M* (slight miss), EPS $0.145 vs ~$0.122* (beat), EBITDA ~$38.6M vs ~$38.3M* (beat); Q3 2024 revenue ~$319.1M vs ~$328.9M* (miss), EPS $0.07 vs ~$0.08* (slight miss), EBITDA ~$20.9M vs ~$26.9M* (miss) .

Consensus values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term reset: FY25 guidance lowered across revenue, net income, and EBITDA; Q2 guide introduces delivered comp -2% to +5% and revenue $320–$350M, with deposit build supporting delivery flow-through — monitor demand normalization post-April .
  • Tariff path clear: Current guidance fully incorporates 170% China, 10% other-origin, and 25% steel/aluminum; ~$10M net 2025 impact mostly in 2H, with mitigation from sourcing shifts and vendor concessions — watch policy developments and pricing actions .
  • Mix quality intact: Record AOV and strength in higher-ticket orders, designer-led engagements (4x AOV) underscore premium demand resilience even as comps fluctuate .
  • Margin framework: Expect FY gross margin ~flat YoY despite Q1 deleverage; occupancy pressure should moderate with volume, while product margin improvement and operational initiatives (WMS, ERP, planning) aim to expand long-term margin potential .
  • Expansion continues: Raised 2025 showroom project plan (12–15, 4–6 new), pipeline through 2027; footprint strategy remains a core growth driver in affluent markets .
  • Balance sheet optionality: $214M cash, no long-term debt supports investments (~$15–$20M SG&A in 2H for systems) and growth, while preserving flexibility amid macro uncertainty .
  • Trading lens: Near-term sentiment likely tied to tariff headlines and demand volatility; watch for Q2 delivery conversion (client deposits up 19% QoQ) and comp stabilization as catalysts .

Additional References

  • Q1 2025 8-K/Press Release: core financials, guidance, liquidity .
  • Q1 2025 Earnings Call: tariff detail, margin drivers, April demand, showroom plan, tech investments .
  • Prior quarters: Q4 2024 and Q3 2024 press releases and call materials for trend context .