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Arhaus, Inc. (ARHS)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3 revenue with modest beats: Net revenue was $344.57M, up 8.0% YoY and a new Q3 high; revenue and EPS came in above S&P Global consensus ($338.26M and $0.0798) with actuals $344.57M (+1.9%) and $0.09 (+12.8%)* .
  • Healthy demand and cost leverage: Comparable growth was 4.1% and demand comparable growth 7.4%; gross profit rose 8.4% to $133.42M; adjusted EBITDA grew 35.2% to $31.24M with margin expanding 180 bps YoY to 9.1% .
  • Guidance raised at the low end: FY25 outlook lifted on revenue ($1.35–$1.38B from $1.29–$1.38B), net income ($58–$68M from $48–$68M) and adj. EBITDA ($135–$145M from $123–$145M); FY25 capex trimmed to $65–$75M (from $80–$100M) .
  • Key catalysts and watch items: Momentum from the Fall 2025 collection and showroom expansion (Pasadena open; Bozeman opened Nov 7) vs. Q4 guide acknowledging promo timing and macro uncertainty; ongoing tariff mitigation and an 18‑month digital transformation program aimed at SG&A and logistics efficiencies .

What Went Well and What Went Wrong

What Went Well

  • Record Q3 revenue and strong profit flow-through: Net revenue +8.0% YoY to $344.57M; adjusted EBITDA +35.2% YoY to $31.24M; adj. EBITDA margin up to 9.1% (+180 bps) .
  • Demand strength from product newness and design services: Demand comparable growth was 7.4%, with September the highest total demand month in company history; “Clients who work with our interior designers generate order values roughly four times higher than those without” (CEO) .
  • Operational execution and cost leverage: Gross profit +8.4% YoY to $133.42M; SG&A grew just 4.1% to $117.01M, with Q3 SG&A load reduced to 34% of revenue (−120 bps YoY) (CFO) .

What Went Wrong

  • October moderation after strong September: Management cited pull-forward of demand from promo timing; October demand comparable growth was down 14.8% (CFO), tempering Q4 cadence .
  • Tariff headwinds: FY25 net tariff impact estimated at ~$12M, with FY26 annualized impact estimated at $50–$60M net of vendor/operations mitigation but before pricing actions (CFO) .
  • Capex deferral and program timing: FY25 capex cut to $65–$75M (from $80–$100M) on timing of systems and showroom projects; management changes earlier in the year delayed tech initiatives (CFO) .

Financial Results

Headline P&L vs prior periods and S&P Global consensus

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus*Surprise
Revenue ($M)$319.13 $358.44 $344.57 $338.26*+$6.31M / +1.9%
Diluted EPS ($)$0.07 $0.25 $0.09 $0.0798*+$0.010 / +12.8%
Gross Profit ($M)$123.07 $148.23 $133.42 N/AN/A
Adjusted EBITDA ($M)$23.11 $60.31 $31.24 N/AN/A
Adjusted EBITDA Margin (%)7.2% 16.8% 9.1% N/AN/A

*Values retrieved from S&P Global.

Notes: Management cited Q3 gross margin rate of 38.7% (+10 bps YoY) (CFO) .

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Comparable Growth (%)(1.5)% 10.5% 4.1%
Demand Comparable Growth (%)4.1% (3.6)% (July +15.7%) 7.4% (YTD +2.8%)
Showrooms (period-end)103 103 103
Client Deposits ($M)$263.21 $233.07 $253.97
Cash & Cash Equivalents ($M)$214.39 $234.80 $262.23

Guidance Changes

MetricPeriodPrevious Guidance (Q2 2025)Current Guidance (Q3 2025)Change
Net RevenueFY 2025$1.29B–$1.38B $1.35B–$1.38B Raised low end
Comparable GrowthFY 2025(5)%–1.5% 0%–2.5% Raised both ends
Net Income (GAAP)FY 2025$48M–$68M $58M–$68M Raised low end
Adjusted EBITDAFY 2025$123M–$145M $135M–$145M Raised low end
Company-funded CapexFY 2025$80M–$100M $65M–$75M Lowered
Net RevenueQ4 2025—$336M–$366M New
Comparable GrowthQ4 2025—(7)%–1% New
Net Income (GAAP)Q4 2025—$6M–$16M New
Adjusted EBITDAQ4 2025—$25M–$35M New

Management commentary: Q4 guide reflects promo timing and macro uncertainty; FY outlook raised at the low end while maintaining high end (discipline) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Tariffs / TradeQ1: reduce China sourcing to ~1% of Total Receipts by Q4’25 . Q2: FY25 outlook reflected implemented tariff actions .FY25 net tariff impact ~$12M; FY26 annualized $50–$60M net of vendor/ops savings but before pricing actions (plan to fully offset via pricing/ops/vendor) .Headwind rising; mitigation intensifying.
Pricing & PromotionsLimited explicit prior commentary in releases.Targeted price increases on select SKUs; promo calendar shift pulled demand into Sep and softened Oct (−14.8% demand comp) .Strategic, data-driven; sensitive to cadence.
Supply Chain / DistributionDallas DC brought in-house; ramped ahead of schedule (Q2) .Dallas DC continues to drive delivery improvements; diversified sourcing with ~70% upholstery domestic in Q3 .Network strengthening; domestic mix provides tariff buffer.
Product / NewnessQ2: Launched Bath collection .Fall 2025 called strongest launch in company history; September record demand; upholstery/customization strength .Product-led demand momentum.
Showrooms / Regional ExpansionQ1/Q2: 12–15 projects in 2025; 103 showrooms .Largest showroom opened in Pasadena (Oct 20); first Montana showroom opened in Bozeman (Nov 7) .Continued footprint expansion.
Technology / Digital TransformationN/A in prior PRs.18‑month program (~$30M through 2030) to modernize core systems; target ~50 bps SG&A improvement by 2030 and logistics benefits; AI-enabled implementation .Investment phase ramping.
Macro / HousingCautious stance since Q1 .Acknowledges uneven backdrop; guide reflects uncertainty; demand often deferred not lost .Choppy but resilient high-end client.

Management Commentary

  • “Net revenue of $345 million, up 8.0% year-over-year—marking the highest third‑quarter net revenue in our company’s history.” — John Reed, CEO .
  • “September marked the highest total demand month in Arhaus’s history.” — John Reed, CEO .
  • “Adjusted EBITDA was $31.2 million, up 35.2% versus last year… Adjusted EBITDA margin expanded 180 basis points versus last year to 9.1%.” — Michael Lee, CFO .
  • “As we work with all of our suppliers, we are looking at… sourcing, productivity savings… Our expectation is to cover 100% [of the $50–$60M FY26 tariff impact]… through operational savings, vendor concessions, or pricing actions.” — Michael Lee, CFO .
  • “We have officially begun what we believe to be an 18‑month‑long [digital transformation] project… We expect to see 50 basis points of SG&A improvement by 2030…” — Michael Lee, CFO .

Q&A Highlights

  • October demand softness explained: Management cited demand pull‑forward into September and promo timing shift (semiannual sale ended in late September this year vs early October last year) leading to October demand comp −14.8% .
  • Tariff roadmap and pricing: FY25 net tariff impact ~$12M; FY26 $50–$60M annualized net of vendor/ops savings, with an expectation to fully offset through a mix of pricing, vendor concessions, and operational efficiencies .
  • Showroom strategy: New flagship Pasadena (nearly 40k sq ft) and Bozeman opening; densifying West Coast and building trade business to accelerate ramp .
  • Capex cadence: FY25 capex cut vs prior due to tech program timing and project schedules; long‑term plan remains ~5–7 new showrooms per year; 12–15 total projects in 2025 .
  • Technology benefits and AI: ~$30M cash investment through 2030 with expected SG&A and logistics benefits; AI‑enabled implementation to accelerate deployment; also supports remediation of disclosed material weaknesses in internal controls (per CFO) .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Revenue $344.57M vs $338.26M (+1.9%); EPS $0.09 vs $0.0798 (+12.8%)* .
  • Trailing quarters vs consensus: Q2 beat on both revenue ($358.44M vs $333.64M) and EPS ($0.25 vs $0.1496); Q1 slight revenue miss ($311.37M vs $314.95M) and EPS miss ($0.03 vs $0.0613)* .
  • FY25 consensus context: FY25 revenue consensus $1.3649B* sits near the midpoint of management’s updated $1.35–$1.38B guide; consensus EPS $0.461* vs guide given in net income and adj. EBITDA terms .

Table – Actuals vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M) Actual$311.37 $358.44 $344.57
Revenue ($M) Consensus*$314.95*$333.64*$338.26*
EPS (Diluted) Actual ($)$0.03 $0.25 $0.09
EPS Consensus* ($)$0.0613*$0.1496*$0.0798*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Solid execution with modest beat: Q3 delivered above‑consensus revenue and EPS with YoY profit and margin expansion; adj. EBITDA margin rose to 9.1% (vs 7.2% LY) .
  • Product engine is working: Record September demand and strongest Fall collection launch support sustained newness and customization-led engagement .
  • Guidance credibly reset higher: FY25 low end raised for revenue, net income, and adj. EBITDA; Q4 guide embeds caution on promo cadence and macro backdrop .
  • Tariffs are manageable with a plan: FY25 ~$12M impact and FY26 $50–$60M net headwind to be offset via vendor/ops/pricing; domestic upholstery (~70% of upholstery receipts) provides buffer .
  • Capital discipline and strategic investment: Capex reduced on timing; 18‑month digital transformation should yield SG&A/logistics benefits and improve controls—supportive of medium‑term margin trajectory .
  • Near‑term trading setup: Watch November/December demand cadence post-October moderation and Black Friday timing; Q4 comp guide (−7% to +1%) suggests choppiness but ongoing engagement from high‑end client base .
  • Medium‑term thesis: Brand strength, showrooms densification, design services flywheel, and tech modernization underpin scalable growth with improving operating leverage, offsetting trade policy volatility .

Appendix: Additional Operating and Balance Sheet Details

  • Showroom footprint: 103 showrooms across 30 states at Q3 end; Pasadena opened Oct 20; Bozeman opened Nov 7 .
  • Liquidity: $262.23M cash; debt-free; client deposits $253.97M (+15.0% vs 12/31/24) .