Sign in

You're signed outSign in or to get full access.

AI

Arhaus, Inc. (ARHS)·Q2 2025 Earnings Summary

Executive Summary

  • Record quarter: Net revenue rose 15.7% year over year to $358.4M, gross margin expanded 130 bps to 41.4%, net income surged 57.7% to $35.1M, and adjusted EBITDA jumped 51.2% to $60.3M; strength driven by faster-than-expected insourcing and ramp of the Dallas distribution center converting Q1 demand into deliveries .
  • Material beat vs Wall Street: Revenue, EPS, and EBITDA all exceeded consensus; revenue by ~$24.8M, EPS by ~$0.10, and EBITDA by ~$16.2M in Q2 2025, while Q1 was mixed and Q4 was close to in-line* (see Estimates Context) [Values retrieved from S&P Global].
  • Guidance: Full-year 2025 ranges reaffirmed (revenue $1.29–$1.38B; adj. EBITDA $123–$145M) and capex outlook cut by $10M to $80–$100M; introduced Q3 guidance (revenue $320–$350M; adj. EBITDA $23–$33M) reflecting seasonality and tariff headwinds .
  • Demand picture/choppiness: Q2 demand comparable growth declined 3.6% amid macro/geopolitical volatility, but July demand bounced sharply (+15.7%), with YTD (incl. July) at +2.2% .
  • Strategic catalyst: Launched 190-piece Arhaus Bath collection, one of the company’s most comprehensive category expansions, supporting brand extension and ticket depth .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly net revenue and strong profitability leverage: net revenue $358.4M (+15.7% YoY), gross margin $148.2M (+19.1% YoY), net income $35.1M (+57.7% YoY), adjusted EBITDA $60.3M (+51.2% YoY) .
  • Operational execution: Dallas distribution center insourced and ramped ahead of schedule, enabling conversion of Q1 backlog and higher volume deliveries; comparable growth delivered at +10.5% .
  • Positive management tone on product/brand: “We achieved the highest quarterly net revenue in Arhaus’ history… strength of our brand… exceptional execution” and Bath launch as “organic extension” of assortment .

What Went Wrong

  • Demand choppiness and macro headwinds: Q2 demand comparable growth was (3.6)%; April down amid tariff headlines/market volatility; June softened; company expects near-term fluctuations to persist .
  • Tariff headwinds: Management embeds ~$12M net tariff impact in 2025 H2 outlook (net of mitigation), contributing to cautious Q3 and implied Q4 framing; pricing not assumed as a lever in guidance .
  • SG&A and investment cadence: Strategic systems investments skew to H2 (notably Q4), implying SG&A load uplift and potential profit drag vs seasonal tailwinds .

Financial Results

Headline P&L vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Net Revenue ($USD)$347.0M $311.4M $358.4M
Gross Margin ($USD)$138.7M $115.6M $148.2M
Gross Margin (%)39.9% 37.1% 41.4%
SG&A ($USD)$111.3M $110.1M $101.5M
Operating Income ($USD)$28.6M $5.4M $46.8M
Net Income ($USD)$21.3M $4.9M $35.1M
Diluted EPS ($USD)$0.15 $0.03 $0.25
Adjusted EBITDA ($USD)$41.2M $18.6M $60.3M
Adjusted EBITDA Margin (%)11.9% 6.0% 16.8%

Year-over-Year Comparison (Q2 2025 vs Q2 2024)

MetricQ2 2024Q2 2025YoY Change
Net Revenue ($USD)$309.8M $358.4M +15.7%
Gross Margin ($USD)$124.4M $148.2M +19.1%
SG&A ($USD)$95.0M $101.5M +6.8%
Net Income ($USD)$22.2M $35.1M +57.7%
Diluted EPS ($USD)$0.16 $0.25 +$0.09
Adjusted EBITDA ($USD)$39.9M $60.3M +51.2%

Company KPIs and Balance Sheet

MetricQ4 2024Q1 2025Q2 2025
Comparable Growth (%)(6.4)% (1.5)% 10.5%
Demand Comparable Growth (%)5.7% 4.1% (3.6)%
Showrooms (end of period)103 103 103
Cash & Cash Equivalents ($USD)$197.5M $214.4M $234.8M
Client Deposits ($USD)$220.9M $263.2M $233.1M
Net Merchandise Inventory ($USD)$297.0M $301.4M $311.1M

Performance vs Wall Street (Consensus)*

MetricQ4 2024 EstimateQ4 2024 ActualQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 Actual
Revenue ($USD)$350.9M*$347.0M $314.9M*$311.4M $333.6M*$358.4M
Primary EPS ($USD)$0.12*$0.15 $0.06*$0.03 $0.15*$0.25
EBITDA ($USD)$38.3M*$38.6M $24.7M*$16.9M $41.8M*$58.4M

Footnote: *Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net RevenueFY 2025$1.36B–$1.40B (provided 2/26/25) $1.29B–$1.38B (updated 5/8/25; reaffirmed 8/7/25) Lowered (Q1), Maintained (Q2)
Comparable GrowthFY 20250% to 3% (5)% to 1.5% Lowered (Q1), Maintained (Q2)
Net Income (GAAP)FY 2025$63M–$73M $48M–$68M Lowered (Q1), Maintained (Q2)
Adjusted EBITDAFY 2025$140M–$150M $123M–$145M Lowered (Q1), Maintained (Q2)
Company-funded CapexFY 2025$90M–$110M $80M–$100M Lowered (Q2)
Net RevenueQ2 2025$320M–$350M (introduced 5/8/25) Actual $358.4M Beat guidance
Net Income (GAAP)Q2 2025$17M–$24M Actual $35.1M Beat guidance
Adjusted EBITDAQ2 2025$41M–$48M Actual $60.3M Beat guidance
Net RevenueQ3 2025N/A$320M–$350M New
Comparable GrowthQ3 2025N/A(4)% to 5% New
Net Income (GAAP)Q3 2025N/A$7M–$17M New
Adjusted EBITDAQ3 2025N/A$23M–$33M New

Earnings Call Themes & Trends

TopicQ4 2024 (Prior)Q1 2025 (Prior)Q2 2025 (Current)Trend
Supply chain & DC operationsFootprint/white space expansion; WMS upgrades; inventory build for outdoor Dallas DC insourcing plan; WMS rollouts; payments platform; inventory planning; ERP at NC upholstery Dallas DC insourced, ramped ahead; drove backlog conversion and record deliveries Operational execution improving
Tariffs/macroPromotional market persisted; outlook embeds tariff risk Q2 guide widened for tariff volatility; China receipts to ~5% in Q3, ~1% by Q4 ~$12M net tariff impact in 2025, largely H2; sourcing/vendor concessions mitigate; pricing not assumed Headwinds, managed with mitigation
Demand patternsQ4 demand comp +5.7% but softness mid-year; seasonality noted Q1 demand comp +4.1% with choppiness; April down; backlog building Q2 demand comp (3.6)%; July +15.7%; YTD (incl. July) +2.2% Volatile but resilient client
Technology stack & ERP2025 plans for ERP/manufacturing; systems to support scale Multiple systems being implemented; $15–$20M SG&A investments in 2025 CIO hired; ERP de-risk plan; target leverage/controls and data to drive scale Investment phase continues
Promotions & pricingTesting/learning message architecture; high-ticket & clearance traction Buy More, Save More program supporting higher basket sizes Program continued; clients trading up; margin aided by spring price updates and mix Value architecture working
Category/product expansionOutdoor strong; upholstery hallmarks Product newness; fabric/leather breadth Bath collection launched (190 pieces); fall preview campaign Assortment deepening
B2B/trade/designerHigh AOV via designer services (4x) Designer-led AOV strength; program growth New leader for Trade; awareness expansion; advocacy halo Building trade channel

Management Commentary

  • “We achieved the highest quarterly net revenue in Arhaus’ history, exceeding $358 million… strength of our brand… exceptional execution” (John Reed, CEO) .
  • “Dallas distribution center… brought in-house… ramped ahead of schedule… enabled us to convert strong first quarter demand into net revenue more efficiently” (John Reed) .
  • “Gross profit expansion of 130 basis points to 41.4%… showroom occupancy down 50 bps, product margin up 30 bps, transportation costs down 30 bps… adjusted EBITDA margin 16.8%” (Michael Lee, CFO) .
  • “Our outlook also accounts for… incremental 2025 tariffs currently estimated at $12 million net of mitigation… pricing remains a lever, no targeted increases are currently embedded” (Michael Lee) .
  • “Arhaus Bath… one of the most comprehensive category expansions… bringing our signature craftsmanship… into one of the most personal spaces in the home” (John Reed) .

Q&A Highlights

  • Guidance framing and choppiness: Management emphasized monthly “ups and downs” year-to-date and embedded uncertainty into Q3 and implied Q4; July demand +15.7% supports momentum but volatility persists .
  • KPI disclosures: CFO plans to revisit KPIs to reduce confusion between demand comp and delivered comp; aims to simplify and align disclosures with internal management practice .
  • Supply chain & tariffs: ~$12M tariff headwind net of mitigation in 2025 H2; sourcing diversification and concessions offset a “meaningful portion”; no pricing increases assumed in guidance .
  • Margin drivers: Product margin aided by spring price actions, geographic mix, vendor concessions; transportation leverage on higher volumes; occupancy leverage expected as new locations open .
  • Buy More, Save More: Program continues to drive higher order values and room/home projects; designer program amplifies AOV and engagement .
  • Market share: CEO believes Arhaus is gaining share given growth and differentiated proprietary product .

Estimates Context

  • Q2 2025 actual vs consensus: Revenue beat by ~$24.8M ($358.4M vs $333.6M*), EPS beat by ~$0.10 ($0.25 vs $0.15*), EBITDA beat by ~$16.2M ($58.4M vs $41.8M*) .
  • Trailing quarters: Q1 2025 was modest misses on revenue and EPS; Q4 2024 was roughly in-line to slight beats on EBITDA/EPS* .
  • Implications: Consensus likely to revise FY margins modestly higher on execution and cost mitigation, while H2 estimates should reflect embedded ~$12M tariff headwind and elevated SG&A investment cadence .

Footnote: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Delivery outperformance: Record Q2 revenue and broad margin expansion were driven by operational execution (Dallas DC insourcing) that accelerated conversion of Q1 demand into deliveries—key near-term stock catalyst .
  • Profitability leverage: Adjusted EBITDA margin of 16.8% reflects improved product mix, vendor concessions, and transportation leverage; runway for occupancy leverage as new stores open .
  • Demand volatility but resilient client: Affluent customer cohort remains engaged; July demand sharply rebounded; expect month-to-month choppiness near term .
  • H2 headwinds balanced by mitigation: ~$12M net tariff impact and stepped-up systems investments (Q4-weighted) temper H2 margins; sourcing shifts and concessions reduce pressure; pricing not assumed .
  • Strategic growth intact: FY25 guidance reaffirmed; capex cut by $10M reflects timing, not strategy; long-term footprint target ~165 traditional showrooms and 50 design studios under disciplined returns .
  • Category expansion: Bath collection broadens addressable spend and supports higher-ticket projects; continued product newness and designer-led services should sustain AOV strength .
  • Monitoring items: KPI disclosure changes later this year; Q3 delivery normalization and seasonal drivers; tariff/macro developments; progress on ERP and control remediation .

Sources

  • Q2 2025 press release: Arhaus Reports Second Quarter 2025 Financial Results .
  • Q2 2025 8-K: Reports Second Quarter 2025 Financial Results 8-K .
  • Q2 2025 earnings call transcript .
  • Bath collection press releases .
  • Q1 2025 press release and 8-K .
  • Q4 2024 press release and 8-K .
  • Wall Street consensus (S&P Global)*: See Estimates Context table. Footnote: *Values retrieved from S&P Global.