ARHS

Arhaus saw a positive market reaction to its Q2 performance, as management credited growth to resilient demand from high-income customers and robust engagement across its channels. CEO John Reed highlighted that larger client projects, new product introductions, and a refreshed showroom experience drove higher average order values. The company pointed to broad-based strength in categories like upholstery, outdoor, and its vintage-inspired collections, while emphasizing the competitive advantage of domestic manufacturing and customization. CFO Michael Lee noted that strategic marketing investments and a rebound in store traffic were key contributors to the quarter's results. Is now the time to buy ARHS? Find out in our full research report (it’s free). Revenue: $384.9 million vs analyst estimates of $366.8 million (7.4% year-on-year growth, 4.9% beat) Adjusted EBITDA: $70.47 million vs analyst estimates of $46.67 million (18.3% margin, 51% beat) The company reconfirmed its revenue guidance for the full year of $1.45 billion at the midpoint EBITDA guidance for the full year is $165.5 million at the midpoint, above analyst estimates of $152.7 million Operating Margin: 14.1%, up from 13% in the same quarter last year Locations: 109 at quarter end, up from 103 in the same quarter last year Same-Store Sales rose 4% year on year (10.5% in the same quarter last year) Market Capitalization: $1.37 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Jonathan Matuszewski (Jefferies) asked about the drivers of Q2 demand, especially the balance between new and existing customers. CEO John Reed noted that average order values increased due to larger project sizes, while CFO Michael Lee added that traffic and high-value orders rebounded strongly versus Q1. Jacob Nivasch (Guggenheim Securities) questioned the performance and scaling of the trade program. Reed explained that flexible commission structures and comprehensive offerings attracted thousands of new trade members each month, positioning the program for long-term growth. Madeline Cech (Bank of America) sought clarity on comparable sales trends and promotional strategies. Lee highlighted a V-shaped recovery in Q2, with targeted promotions driving traffic and minimal margin impact, and Atwood and Reed emphasized the impact of new product launches and expanded catalog reach for the fall. Alexia Morgan (Piper Sandler) probed the sustainability of Q2’s momentum given conservative full-year guidance. Reed and Lee expressed optimism but cited external uncertainties, noting internal optimism within merchandising teams while remaining cautious in official forecasts. Peter Benedict (Baird) asked for detail on margin pressures and the impact of delivery fee increases and cost headwinds. Lee outlined that tariffs, fuel, and shipping costs would continue to pressure margins, but operational initiatives and higher delivery fees are expected to provide some relief in the second half. Looking ahead, the StockStory team will be monitoring (1) the impact of expanded catalog distribution and new product launches on traffic and conversion, (2) how ongoing technology upgrades to the point-of-sale and supply chain systems improve operational execution, and (3) whether margin pressures from tariffs and shipping costs are offset by pricing and efficiency initiatives. The performance of the trade program and showroom expansion will also be important indicators. Arhaus currently trades at $9.66, up from $8.23 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:30 a.m. ET Founder, Chairman, and Chief Executive Officer - John Reed Chief Financial Officer - Michael Lee Vice President and Head of Investor Relations - Tara Atwood-Saja Operator: Good morning, and welcome to the Arhaus Second Quarter 2026 Earnings Call. Please note that this call is being recorded and the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Tara Atwood-Saja, Vice President and Head of Investor Relations. Please go ahead. Tara Atwood: Good morning, and thank you for joining us for the Arhaus Second Quarter 2026 Earnings Call. Joining me on today's call for prepared remarks are John Reed, our Founder, Chairman, and Chief Executive Officer, and Michael Lee, our Chief Financial Officer. [Operator Instructions] We issued our earnings press release and Form 10-Q for the quarter ended June 30, 2026, before the market opened today. Those documents are available on our Investor Relations website at ir.arhaus.com. A replay of the call will be available on our website within 24 hours. I would like to remind everyone that our remarks today concerning future expectations, events, objectives, strategies, targets, trends, or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties. For a summary of these risk factors and additional information, please refer to this morning's press release and the cautionary statements and risk factors described in our most recent annual report on Form 10-K and subsequent 10-Qs as factors may be updated from time to time in our filings with the SEC. The forward-looking statements are made as of today's date and except as may be required by law, the company undertakes no obligation to update or revise these statements. We will also refer to certain non-GAAP financial measures, and this morning's press release includes the relevant non-GAAP reconciliations. Now, I will turn the call over to John. John, over to you. John Reed: Thanks, Tara. Good morning, everyone, and thank you for joining us. This morning, we reported second quarter results that reflect the continued strength of the Arhaus brand and the resilience of our business. We generated record net revenue and strong comparable written sales, reflecting continued client engagement and momentum across our 3 customer demand channels, which is a testament to the strength of our differentiated model. While the broader environment remains dynamic, the high-end consumer continues to demonstrate resilience supported by a relatively healthy U.S. economy, solid consumer spending, and the positive wealth effects of higher stock prices. We delivered record net revenue of $385 million, above the high end of our guidance range. Comparable written sales increased 12.5% in the quarter, bringing year-to-date comparable written sales to 2.8%. Our clients remain highly engaged and continue to prioritize investments in their home, driving strong demand for our differentiated product assortment and the elevated experience Arhaus provides. Turning to products. For 40 years, Arhaus has been built on the belief that furniture and decor should be responsibly sourced, lovingly made, and built to last for generations. That philosophy continues to differentiate our brand and remains one of our strongest drivers of client demand. During the quarter, we saw strength across our assortment and collections. Clients responded to our distinctive mix of heirloom quality furnishings, globally curated designs, and handcrafted pieces made with natural materials and time-honored techniques. Strong written sales reflected continued interest in new product introductions alongside our extensive customization capabilities, giving clients the opportunity to create spaces that feel uniquely their own. This balance of timeless design and thoughtful innovation continues to resonate with both our new and existing clients. Demand was broad-based across categories, including upholstery, outdoor, and The Collected Home, our vintage-inspired collection celebrating craftsmanship, heritage, and enduring designs. Our domestic upholstery manufacturing capabilities in North Carolina remain an important competitive advantage, allowing us to deliver exceptional quality, customization, and service while providing greater flexibility and control over production. We remain committed to keeping our assortment fresh while staying true to the aesthetics that define Arhaus. We believe the strength of our product strategy lies in offering distinctive furnishings that are difficult to replicate, supported by disciplined merchandising, continuous product innovation, and meaningful investments in our product pipeline. Looking ahead, we have several important events in the coming weeks to engage with our clients. We will launch our special 40th Anniversary Fall Catalog, reaching more than double the number of households compared to our Spring Catalog, including a focus on high-potential prospective clients, followed by our September semi-annual store-wide sale. Combined with compelling new product introductions and a strong in-stock position, we believe this positions us well for the important fall selling season. Better inventory availability allows us to offer clients more of what they want, when they want it, supporting higher conversion, stronger delivered sales, and an even better client experience. I want to thank our product team and artisan partners around the world. Their passion for great design, commitment to craftsmanship, and ability to anticipate emerging trends continue to differentiate the Arhaus brand and bring our vision to life for our clients. Turning to our clients, the second quarter reinforced the breadth and quality of demand across all 3 demand channels: our core customers, Arhaus Interior Design, and trade. Throughout the quarter, we continued to see clients investing in home through larger, higher-value projects, reflecting healthy engagement with our premium assortment and no meaningful evidence of trade down. We believe this speaks to the resilience of our client base, the differentiated value of the Arhaus brand, and the enduring appeal of our product offering. Interior Design continued to be an important driver for client engagement, as more clients use our complementary design services to bring larger, whole-home projects to life. These relationships not only create a highly personalized experience but also creates a deeper client loyalty and long-term engagement with Arhaus. We have also been encouraged by the early response to the enhanced trade program, which relaunched earlier this year. Supported by the dedicated team focused on expanding relationships with design professionals, we believe the program represents a meaningful, long-term opportunity to broaden our reach, to cultivate a growing base of recurring project-driven business. Overall, the continued strength across our core customer, interior design, and trade channels highlights the multiple ways clients choose to engage with Arhaus. We believe this diversified demand model, combined with the differentiated product and elevated client experience, positions us to continue building lasting customer relations and supporting sustainable long-term growth. Turning to showrooms. Our showrooms are the front door of the Arhaus brand and one of the most important drivers of awareness, engagement, conversion. They bring product to life, support our interior design and trade channels, and provide an immersive client experience that differentiates Arhaus. Demand across the showroom portfolio was broad-based during the quarter. We generated strong written sale growth across every region and all of our showroom formats, including our traditional and Design Studio showrooms. This breadth gives us confidence that demand is not dependent on a single geography or market and that our product and brand resonates with clients from coast to coast. We continue to see significant white space for expansion while maintaining a disciplined approach to grow. During the second quarter, we opened a nearly 20,000-square-foot traditional showroom in Ashburn, Virginia. We relocated our Westlake, Ohio, showroom and expanded our Park Meadows showroom in Lone Tree, Colorado. And just last week, we opened our newly relocated Charlotte, North Carolina, showroom at the Village at SouthPark. At approximately 35,000 square feet, it is our second largest traditional showroom after our Pasadena, California, showroom and provides an elevated immersive destination for our clients in an important market for us. The opening also reflects our long-standing connection to North Carolina, where skilled artisans craft many of our signature upholstery pieces. For 2026, we continue to expect approximately 10 to 14 total showroom projects, including 4 to 6 new openings, 6 to 8 relocations, renovations, and expansions. We maintain a disciplined approach to evaluating projects against our targeted return criteria. And recent openings have continued to perform in line with our expectations. A key reason for our showrooms to perform well is our people. Ashburn demonstrates the importance of combining the right location with the experienced team. We placed established leaders from nearby showrooms at the location and hired and trained the broader team well ahead of the opening. As a result, Ashburn opened with a team that understood our product, client, design services, and service model and the showroom has performed ahead of our expectations since opening. We continue to believe that our physical presence remains an important competitive advantage and a meaningful driver of awareness, client engagement, and conversion. As we look ahead, we remain focused on executing the strategy that has served us well for 4 decades: creating exceptional products, delivering an elevated client experience, and investing thoughtfully in the long-term growth of the Arhaus brand. We believe we are well positioned for the important fall selling season and remain confident in the signature opportunities ahead. I want to thank our team members and artisans around the world for their passion, craftsmanship, and commitment to excellence. Their dedication is what makes Arhaus special and continues to strengthen the relationship we have with our clients. With that, I'll turn the call over to Mike. Michael Lee: Thanks, John, and good morning, everyone. Our second quarter performance reflected disciplined execution against our most difficult year-over-year comparison of 2026. We delivered results above the high end of our guidance range across all our key financial metrics and generated strong comparable written sales, reinforcing our confidence in the full-year outlook. This marked our seventh consecutive quarter of delivering results at or above our guidance. Before I turn to our results, I want to address an unplanned benefit related to IEEPA tariffs that was recognized in the quarter and not included in our previous financial guidance. Arhaus requested refunds of $37.8 million for IEEPA tariffs previously paid. As of June 30, 2026, we recognized a receivable of $32.7 million, which is included in prepaid and other current assets within the balance sheet, and we received $5.1 million in cash refunds. During the quarter, we recognized a benefit in cost of goods sold of $23.8 million for the recovery of IEEPA tariffs paid, of which $15.5 million is related to inventory sold prior to April 2026, and $8.3 million is related to inventory sold in the quarter. Additionally, we reported $14 million primarily related to a reduction in inventory costs in merchandise inventory, net, within the balance sheet. As of today, we have received a full tariff refund in cash. Moving on to our results for the quarter. Net revenue was approximately $385 million in the second quarter, up 7.4% year-over-year, marking the highest net revenue in our 40-year history. This performance is particularly notable as we lapped a prior-year period that benefited greatly from the accelerated ramp following the insourcing of our Dallas Distribution Center. We grew over that comparison, and year-over-year comparisons ease through the balance of 2026. Gross profit was $172 million, up 16.1% versus last year. This increase included a recognized $23.8 million benefit from the recovery of previously paid IEEPA tariffs, of which $15.5 million related to inventory sold prior to April 2026. Excluding this benefit and to better reflect a more normalized gross profit for the quarter, gross profit would have been $157 million, up 5.6% versus last year, primarily due to higher net revenue. Gross margin was 44.7%, an increase of 330 basis points versus last year. This increase included 400 basis points of benefits related to the IEEPA tariff recoveries associated with the inventory sold prior to April 2026. Excluding this benefit, gross margin would have been 40.7%, down 70 basis points versus last year, driven largely by higher fuel and shipping costs. Notably, we increased our delivery fee in June to help offset these inflationary pressures, and this will start to flow through in the third quarter. Selling, general, and administrative expenses were $118 million, up 16.1% versus last year. The increase was primarily driven by an $8.4 million increase in general and administrative costs, including approximately $3 million of strategic investments related to technology licensing and other costs incurred to support our business transformation. We also saw a $7.9 million increase in selling expenses, primarily related to new showrooms and increased demand for our products. As a result, SG&A load increased 230 basis points to 30.6%. While our strategic investments create some near-term expense pressure, we believe they are important to strengthening the client experience, improving scalability, and supporting long-term profitable growth. Net income was $40 million, up 13.1% versus last year, and adjusted EBITDA was $70 million, up 16.8% versus last year, both above the high end of our guidance range. Excluding the $15.5 million tariff refund benefit associated with inventory sold prior to April 2026, adjusted EBITDA would have been $55 million, down 8.9% versus last year, primarily reflecting higher fuel and shipping costs, increased selling expenses associated with new showrooms, and strategic investments to support long-term growth of the business. Adjusted EBITDA margin was 18.3%, an increase of 150 basis points versus last year. Excluding the 400-basis-point tariff refund benefit associated with inventory sold prior to April 2026, adjusted EBITDA margin would have been 14.3%, down 250 basis points versus last year, driven largely by higher fuel and shipping costs, increased selling expenses associated with new showrooms, and strategic investments to support the long-term growth of the business. Turning to our comparable metrics. Comparable delivered sales increased 4% in the second quarter, exceeding the high end of our guidance range against our most difficult delivered sales comparison for the year. Year-to-date, comparable delivered sales were 1.4%, consistent with our full-year outlook of flat to positive 3%. Comparable written sales increased 12.5%, bringing year-to-date comparable written sales to positive 2.8%. We believe the second quarter acceleration reflected a combination of factors. As John mentioned, we saw broad-based strength across our product assortment, including newness, upholstery, customization, outdoor, and the collected home assortment. In addition, our interior design team continued to generate strong momentum by inspiring clients, deepening engagement with the brand, and helping convert larger, more complex projects. We also benefited from increased marketing activity designed to drive engagement, conversion, and brand awareness. These efforts included incremental investment in paid search and digital optimization, as well as our planned catalog expansion to additional households. As we have seen historically, periods of temporary softness can be followed by stronger demand as clients re-engage. And overall, we believe this second quarter performance reflects a combination of some recovered demand from the first quarter and healthy underlying momentum across the Arhaus brand. Before turning to our balance sheet and outlook, I would like to provide additional context around our long-term financial framework and how we are positioning Arhaus for sustainable growth. While quarterly results can vary based on the timing of written to delivered conversion, our promotional cadence, investment timing, and the broader macroeconomic environment, our long-term strategy remains consistent. We are focused on building a larger, more profitable business by balancing market-leading revenue growth with expanding profitability over time. This is summarized by our 3 strategic imperatives as follows. First, achieving market-leading sales growth. We continue to see meaningful opportunities to grow the Arhaus brand by simplifying the selling experience across our channels, creating a more seamless, omni-luxury journey for our clients, expanding our showroom footprint, growing our interior design, trade, and contract businesses, broadening brand awareness, and strengthening our digital and e-commerce capabilities. Together, we believe these initiatives deepen client engagement, expand our market share, and support sustainable long-term growth. Second, strengthening our product leadership. Our product remains our greatest point of differentiation and the foundation of the Arhaus brand. We continue to invest in innovation and newness while preserving the timeless design aesthetic that defines us. Our focus remains on extending our leadership in luxury upholstery, building on the strength of our best-selling collections, and attracting luxury customers through fresh, relevant assortments. Third, advancing operational excellence and perfecting the client experience. As we grow, we remain focused on building a more efficient and scalable operating model by accelerating product flow from concept to showroom, enhancing execution across the business, and digitally enabling the enterprise. Technology is a key enabler of this strategy. And during the second quarter, we successfully launched TMS, and our ERP and OMS implementations remain on track for a February 2027 go-live. In addition, we are opportunistically pulling forward the implementation of our new modern POS platform into the fourth quarter of this year, ahead of our original timeline. This pull-forward simplifies our overall technology roadmap, accelerates our transition from legacy systems, and equips our showroom teams with a more modern and intuitive selling platform. Over time, we believe these investments will create a more seamless, connected experience across our customer demand channels, improve operational efficiency, and further elevate the client experience. Turning to our balance sheet and liquidity, we ended the quarter with $226 million in cash and cash equivalents, maintaining our strong liquidity position. Net merchandise inventory totaled $354 million, up 4.3% from December 31 of 2025. The composition of our inventory remains healthy, with aged inventory down both sequentially and year-over-year. Importantly, best-seller inventory improved during the quarter, and we exited June with strong in-stock levels across our network. Overall, we believe we are well positioned in inventory to support current demand, continued product newness, and the conversion of written orders into net revenue. Client deposits ended the quarter at approximately $264 million, up 11.8% year-over-year, reflecting the strength of second quarter written demand. Turning to tariffs and sourcing. Following the recent implementation of the new Section 301 tariff framework, we estimate our 2026 tariff impact to be approximately $30 million to $40 million. We continue to address this headwind through our diversified global sourcing strategy, vendor negotiations, pricing actions, and ongoing operational efficiencies. These initiatives provide us with many levers to help mitigate tariff-related costs while maintaining our focus on product quality, value, and long-term profitability. While the tariff environment remains dynamic, our diversified sourcing model and disciplined operating approach position us well to adapt as policies evolve. We will continue to monitor developments and adjust our sourcing and pricing strategies as appropriate. Turning now to our outlook. As I mentioned earlier, the second quarter marked our seventh consecutive quarter of delivering results at or above our guidance. This consistency reflects our understanding of the business, our disciplined execution, and our measured approach to forecasting in an environment that remains dynamic. We were very pleased with our second quarter results and the meaningful acceleration in comparable written sales. The quarter strengthened our confidence in the full-year outlook. At the same time, we believe it remains appropriate to maintain a prudent net revenue range that reflects multiple potential scenarios for the consumer environment. For the full year, we continue to expect net revenue between $1.43 billion and $1.47 billion, representing year-over-year revenue growth of between 3.7% and 6.6%. We continue to expect comparable delivered sales of flat to positive 3%. We are updating our full-year profitability guidance to reflect the benefit recognized from the recovery of previously paid IEEPA tariffs, and we now expect net income of $71 million to $80 million and adjusted EBITDA of between $160 million and $171 million. As we've discussed, we view the IEEPA tariff recovery as a discrete one-time benefit that is being allocated as follows. First, and consistent with our long-term capital allocation philosophy, we are reinvesting a portion of these recoveries back into the business to support strategic growth imperatives. These investments include more than doubling the distribution of our fall catalog and increasing our spring 2027 catalog circulation in a similar manner, as well as expanding our marketing and digital investments, and pulling forward the implementation of our new POS system. These incremental investments, which are reflected in our updated guide, are expected to total between $7 million and $10 million during fiscal 2026. Second, the recovery helps offset meaningful cost pressures we continue to face across the business, including approximately $10 million of elevated fuel expense and $10 million of higher shipping costs for the year, driven by disruption in the Middle East, as well as ongoing labor and inflationary pressures, while preserving the economic flexibility as the tariff environment continues to evolve. And finally, after funding these strategic investments and offsetting the incremental costs, the remaining benefit of approximately $10 million flows through to adjusted EBITDA and is reflected in our updated full-year profitability guidance range. Importantly, our outlook does not assume a meaningful improvement in housing turnover, consumer confidence, or the broader macroeconomic environment. Turning to the third quarter, we expect continued business momentum balanced against ongoing macroeconomic uncertainty and variability in the timing of written sales conversion to delivered sales. Our outlook is supported by healthy product availability, continued strength across our interior design and trade channels, compelling new product introductions, our 40th anniversary fall catalog, and our September semi-annual store-wide sale. From a profitability perspective, we expect the third quarter to reflect the continued impact of tariffs, elevated fuel and shipping costs, and planned investments in technology and marketing. These pressures are expected to be partially offset by the growing benefit of our June delivery fee increase, pricing actions we've taken, and transportation productivity initiatives, including the initial TMS benefits, as well as continued disciplined expense management. For the third quarter of 2026, we expect net revenue between $355 million and $375 million, representing year-over-year growth of between 3% and 8.8%. We expect comparable delivered sales of minus 1% to positive 5%, net income of between $8 million and $13 million, and adjusted EBITDA of between $26 million and $34 million. We are pleased with our second quarter results and the progress we have made across Arhaus. We delivered results above the high end of our guidance. We saw a meaningful acceleration in written sales, and we continue to execute against the operational and strategic priorities supporting long-term growth. While the environment remains dynamic, we are focused on the factors within our control, which include driving demand, improving conversion, managing our costs with discipline, and building a stronger, more scalable, and more profitable business. I want to thank our teams across Arhaus for their continued focus and execution and our shareholders for their ongoing support. With that, I turn the call over to the operator. We are happy to take your questions. Operator: Thank you. [Operator Instructions] Our first question will come from Jonathan Matuszewski with Jefferies. Jonathan Matuszewski: John and Mike, nice results here. Your results confirm a narrative that's kind of building around a widening divergence in affluent consumer spend on this category relative to maybe a mass consumer. So, can you add some more context around your 2Q demand trend? As we think about the acceleration, how much of that has been driven by an uptick in new customers entering your file? How much did discrete pricing adjustments contribute? And it sounds like mix is playing a role as well with consumers maybe leaning towards higher value complex projects. So, how did your 2Q demand break down across some of those drivers? Thank you. John Reed: Sure, Jonathan, I can try to answer the first part of that. So, first of all, across the board, we didn't see any meaningful change in new customers versus existing customers. It stayed pretty much as it has been. The product assortment has gotten so much better that we're seeing basically larger sales per customer. A lot of people are renovating, some new home builds, but a lot of people are putting money back into their homes as they decided maybe not to move. And so we're seeing a really nice increase in people coming in, being very serious about renovating a room or entire house. And that certainly has helped our business. Anything to add, Mike? Michael Lee: Sure, I can build on that. Jonathan, I'd say just looking at overall traffic in the quarter, we were very happy with traffic. It was a big rebound versus Q1. And when you break down the fundamentals of existing versus new customers, I agree with John, it was very consistent, but in total up versus where we were in Q1. Looking at things like order, average order value, units per transaction, those all continue to perform quite strong. And then even looking at order sizes and order counts for large sales, we were very happy with Q2 looking at orders above $10,000, orders above $25,000, orders above $100,000. It was quite strong. So, we are very happy with what we're seeing from our customer base and would concur that the high-end consumer continues to perform well. Operator: And our next question will come from Steven Forbes with Guggenheim Securities. Jacob Nivasch: This is Jake Nivasch on for Steve. So, John, just a question on the trade program. So, given the strength in written demand trends, curious if you can expand upon the trade program, how it's performing, and maybe give us some high-level commentary on the size of that business today if you're able to quantify what key initiatives you're leaning into to scale it here. John Reed: Sure, Jake. I'd be glad to. So, the trade program is one that we've focused as we've been talking about. A few things we've done. We've adjusted or given an option on how the trade folks can earn money on buying our products. We had been paying a commission-based thing. Now we're doing a discount as well. So, we're letting the trade members decide which way they want to go, which has been extremely successful. We've been adding thousands of new trade members each month, actually, since we started that. And that just launched a few months ago. With that, we've also added a significant amount to the team, folks that are living all over the country that are, were in the trade business or are in the trade business that are helping us attract new trade design firms to come and work with us because we offer everything. They can come in and do everything from the lighting to the rugs to the upholstery. It's a full-service shop, whereas most trade members have to go through catalogs and order things from all these different companies. And we make it simple. We warehouse it for them. We stand behind it. We repair it if something happens to it. And the trade members are loving that. So, we think it's a huge opportunity. We're just really getting started with it. And the future should be amazing. Operator: And moving next to Madeline Cech with Bank of America. Madeline Cech: Could you provide a little more color on how comps progressed through the quarter, including the exit rate in June and what trends you saw in July that keep you confident in your full-year outlook? Michael Lee: Hi, Madeline, it's Mike here. Yes, we don't get into monthly disclosures anymore, but I will tell you that we were happy with the quarter overall. We alluded to the fact on our last call, I think we referred it to kind of a V-shaped recovery as we were getting into like the second half of the April timeframe. And I'd say overall for the quarter, we were quite happy with the performance. Normal seasonality ebbs and flows with the flow of our promotions, but quite happy. The other thing, just to build on that, Madeline, in terms of promotions, one of the things that we started doing in the quarter that we really plan to continue over the next 6 months is the promotion strategy that we implemented around some of these up to 50% off discounts. We're really focused on some of our long-dated inventory. We found that it proved to be a really good traffic driver, created a lot of excitement in the showrooms, and also allowed us to move through some of that long-dated inventory. And when you look at the margin impacts of that, it was quite modest because those up to discount offers were really limited to mid-single-digit mix of sales overall. So, it didn't have a lot of impact in terms of the financials, didn't have a lot of impact in terms of mix of sales, but allowed us to move through that inventory. So, we're coming out of Q2 pretty jazzed about our results. And Q3 is, again, shaping up to look pretty well. So, consumer continues to be happy. As John mentioned, we're in a great position from a product perspective; we're in a better position from an in-stock status than we've been in for many months, really since I got here 14 months ago. So, we're very encouraged about where the business is and where it's headed. Tara Atwood: And I'll just add to that quickly too, and John jump in when we think about coming into the fall, Maddie, we talked about that 40-year anniversary catalog. We're incredibly excited about that. It's doubling in terms of the household that we're getting that to, a newness we alluded to as well, just the incredible designs and also that semi-annual sale. So, that will certainly provide strength in demand and people coming in and just engagement. And John, I don't know if you want to add anything about the product and newness we're seeing for the fall. John Reed: Yes, that's the most exciting part in our business is the new product has just truly been killing it. And we're just getting started with it. We rolled out a lot of newness products come the first quarter. We tested it in a fair amount of stores. And now that we've seen what is working, we are rushing to get it to all stores in many cases. And when we launch the September catalog, we think it's by far the best ever. I mean, the best-looking catalog, but absolutely the best lineup of new products we truly have ever had. And we think it's going to carry us through certainly the third, fourth quarter into next year for sure. And we'll keep going with that. And yes, it's going to be an exciting second half of the year. Michael Lee: Some of the leading indicators, Madeline, on newness for the fall, we're starting to get some early indicators from customers that we're going to blow away newness relative to last year as well. So, really excited about the newness that's coming out. Operator: And our next question will come from Peter Keith with Piper Sandler. Alexia Morgan: This is Alexia Morgan on for Peter Keith. We were wondering if you could elaborate more on assumptions around the sustainability of the Q2 momentum for full-year guidance, just since it seems like the full-year demand comp guidance assumes some deceleration in the second half. John Reed: Yes, again, I think our business is going to be strong. We certainly are cautious with external things going on in the world, certainly trade costs and wars and all kinds of things like that we can't forget about. So, we're rather conservative in our thinking, but we think it's going to be strong. Knock on wood, if everything stays the way it is now, it should be pretty strong, and we're very happy with it. Michael Lee: Alexia, if I could just offer -- internally when we're forecasting our business, we've always got sensitivities around the forecast between high-side, low-side forecast when we get into our merch plans. And I can tell you that there is a lot of optimism today within our merch teams on the second half possibilities. And we are protecting against some of the high-side forecasts that we're seeing just to make sure that if the performance continues at Q2 levels that we're well positioned to support that business. So, that does nothing in terms of the guidance we're providing, but it gives you a little bit of a peek on internal sentiment on the business. Operator: And we'll hear next from Peter Benedict with Baird. Peter Benedict: So, question on kind of product margins down 190 basis points in the quarter. If you could dig in a little bit further on what the drivers were there, maybe bucket those, and then how you think about that over the back half of this year, thinking 4Q in particular as you lap the inventory impairment and related to all that, the delivery fee increase from June 1, how's that kind of impacting the guidance over the back half of the year? Thank you. Michael Lee: Yes, thanks, Peter. Good question. I can cover some of the key drivers of margin, though we don't get into quarterly guidance on gross margin per se. But I'd say the #1 driver on margin is tariff assumptions, and we continue to expect $30 million to $40 million of tariff impact for the year. I think last quarter, we had mentioned that we were coming in at the lower end of that range. I think with the latest on tariff announcements, we're coming in closer to that midpoint, slightly above the midpoint on that range. But that $30 million to $40 million range continues to be valid. On fuel, look, this is a tough one to forecast, but we do expect fuel surcharges to remain elevated into Q3 and Q4 at similar levels of what we expected in Q2. But depending on the news of the day, right? This could change wildly. But our current forecast is assuming about a $10 million impact for the year. $4 million of that's behind us. And you guys know that $4 million is really Q2 in nature because in Q1 fuel prices didn't have a big impact. So, expecting about a $5 million to $6 million impact balance of year. But again, that's really subject to change based on oil markets and the Iranian war and all of that. From a shipping supply chain perspective I think Tara did a nice job in the Investor Relations investor deck laying some of this out in more detail. But we've got about $10 million of impacts factored in our guide on, I'll call it, just shipping/supply chain/manufacturing headwinds. And the reality is that from a shipping perspective, even though we are largely hedged on shipping because our containers are under contract, when we go to the spot market for additional containers, we're exposed to the spot market prices, and spot market prices have really spiked over the last 60 to 90 days. And we're navigating through it. Our logistics team is doing an amazing job trying to avoid those spot prices where we can, but the reality is we are out there on spot buys. So, that's something we're keeping an eye on, something to be mindful of when you're modeling out the second half. From a manufacturing perspective, this isn't something that's probably obvious to people outside the company, but when you talk about fuel prices, there are fuel inputs that go into things like foam, and our foam costs have gone up in manufacturing. So, that's factored into this as well. But a lot of this comes down to the Middle East conflict and how sticky some of these input prices will be post the war winding down. So, we've been admittedly a little bit cautious on some of these cost headwinds. We don't see these as long-term durable cost headwinds. These are really driven by some of the shocks that we've experienced over the last 3 to 4 months. From a delivery fee perspective, really happy with the move that we made. We implemented new delivery fees in June. This is the first time we've taken a fee increase, really, in 3 to 4 years, and there's been almost zero impact. We're not hearing much from customers, if anything. We're not hearing much from our internal selling team. So, really happy with the move that we made. That's worth about $5 million to $6 million annually in terms of run rate, and we would expect that run rate to start to flow through as a benefit in Q3. Not a full Q3 benefit, but most of a run rate benefit, just because of the lag effect. The other thing that we're building into our margin forecast for balance of year are the benefits of the TMS, the Transportation Management System. We've talked about the benefits of this extensively. You guys know what we're spending on this and what the benefits are. We're projecting $4 million to $5 million of annualized run rate savings when this thing gets going. And we are forecasting to see some of that flow through in Q3 and Q4. So, really happy with what we're seeing there. The other thing to be mindful of is just occupancy costs. We continue to open new showrooms, and that does serve as a drag on gross margin as those showrooms scale. So, in Q3, I think the Q3 versus Q2 occupancy costs are similar in nature, and then it starts to moderate in Q4. So, to the extent that you're modeling occupancy, that's something to be mindful of. And then finally, the tariff refunds that I talked about a few minutes ago in my prepared remarks there will be additional flow-through of the tariff refunds in Q3 and Q4. And we're expecting $5 million to $7 million in a flow-through benefit in Q3 and a similar amount in Q4. It could be a little spiky. It's hard to forecast what's going to flow through and what items have different tariffs attached to it. So, there's a little bit of variability there, but I think that would be a good range to take into account. So, those are kind of the key drivers that I would be thinking about. But back to your point, Peter, we did take an impairment on some inventory in Q4 last year. So, our margin, I think in Q4 was just above 38%. And I think in Q3, we're around 38.7%. As we look out in the second half, we do expect to come in north of that in our forecasting, despite all the headwinds and tailwinds I went through. We think we're going to see benefits year-over-year from a margin perspective. So, hopefully that's a good build for you, and we can always talk later if you have more questions. Operator: And our next question will come from Simeon Gutman with Morgan Stanley. Simeon Gutman: A couple of questions and one quick clarification. That the higher delivery cost, does that get it, that $5 million to $6 million, does that flow through the comp? And then my real questions are twofold. First, John, when you talk about the excitement around new product, we look at the showroom expansion, you have a pretty good runway here. I guess when does this business get to, I don't know, maybe mid-single-digit comp on a sustainable basis? It feels like it's getting close, but curious if you underwrite that for '27. And then the other follow-up, this is more for you, Michael. If we look at the second quarter composition, the SG&A dollars rose a lot. I missed some of the prepared if there was some stuff related to tariff in there, but if you take out the gross margin benefit from refunds, it looks like core SG&A would have been well above average, such that the flow-through wasn't so great. So, I wanted to just get clarification on second quarter, how noisy it was and things that I'm missing in there. John Reed: Sure. I can speak about the sales and the products. Yes, I mean looking forward to the third, fourth quarter and into next year. As I said before, our product is really, really resonating with our clients, and it's really in all categories. We're seeing some really nice increases everywhere. We're about to launch some of our newest product the freshest products, largest collections that we've ever done coming up in September and so forth. So, I think the product is definitely on track. We've got an incredible team, incredible supply chain out there that's really working with us, shipping on time and so forth, great quality, and we're learning every day on what's going to be hot and we're moving really fast to get that stuff out to the stores and promote it and so forth. Really new trends out there that we just absolutely love that are dead on who we are. We've never been an ultra-modern company, much more eclectic, warmer, and incredible woods and stones and so forth. So, we're taking some categories, really, really growing them. Upholstery, of course, is our biggest category, and we're launching some new product that's just amazing and new collections that fit a new customer as well. We're really going after more of a broad depth of a client that certainly hits our demographics, but in taste-wise, we're hitting a much broader client than we've ever hit and offering a better selection, things from taking relics and beautiful antiques and replicating them into today's world to doing some more modern product as well. So, we're going both directions. Pricing, some higher pricing, some sharper price point product to hit a younger customer. So, we think we're hitting on all cylinders right now, and I'm sure that's going to continue into the fall and into next year. Michael Lee: Simeon, I'll jump in. Just 1 build to John's comment, getting to that mid-single-digit sustainable comp growth rate, a big part of that's e-com too. We've talked a little bit about our aspirations on e-com. If you look at our e-com performance year-to-date, we're 1%, 1.5%. And we think that should be a growth business for us. And we made an announcement last month about our desire to really improve the focus on this channel over time. But e-com plays a critical role there. Getting back to your other questions, the delivery fee is not in the comp, so just be mindful of that. And then second quarter SG&A, yes, it was a little elevated and just be mindful of 2 things. Number 1, with the strategic investments that we're making, our IT costs are elevated as we're going through this investment cycle for the year, so that's 1 note. The other note is our selling costs were a little bit elevated, and be mindful that some of our selling costs is driven by written sales. So, if you have a big written sales month relative to delivered sales, you get a little bit of a deleveraging because of that timing. So, that will reverse out a little bit as written sales and delivered converge over time. SG&A overall for the year will be elevated. We've been really clear on that. We factored that into our guide. As we sit here today, we think SG&A is going to land around 100 basis points higher on a percent of revenue basis than prior year, is just a good anchoring point. And you can triangulate that back and say, okay, where are those investments going? It's really the catalog that John highlighted. We're making a big bet on doubling the fall circ. We're going to increase the spring circ, which we pay for this year as well. Those are two very prudent investments that help us get to that mid-single-digit comp growth that you're talking about. We're also investing in the POS pull-forward project as well as the digital transformation, so that's in the SG&A outlook. So, there's definitely an investment cycle going on here, but we look forward to the returns on investment that are going to come from that and allow us to sustainably grow this business and expand margins over time. So, it's a very necessary investment that we're making right now. Operator: And we'll go next to Seth Sigman from Barclays. Seth Sigman: I want to ask about pricing. You've raised prices periodically over the last year. Could you just update us on the strategy from here? And specifically as it relates to the tariff refunds, it doesn't seem like you're investing in price, seems more focused on some of the longer-term drivers that you talked about. But can you just speak to that and what you're seeing across the industry as it relates to pricing and how folks are using those tariff refunds? And then just a follow-up on that last point around the investment cycle. Is it fair to say that you're including the costs here related to that $7 million to $10 million, but not necessarily including the sales benefit since you kept the full-year sales unchanged? Thanks so much. John Reed: Sure, Seth. Yes, pricing -- we're not doing anything significantly different than we have been for this spring and summer. Obviously, there are some headwinds with more delivery costs or container costs and so forth. But we've worked with our vendors, who are incredible partners with us. We're going to hold pricing right now. We don't see that we have to raise prices, they don't see we have to lower prices as well. So, it's kind of a steady point right now for this year and have no plans to change it. Michael Lee: I can jump in and I think I followed the question. Okay. But let me just quickly remind everybody the reinvestments that we're making along with the tariff refunds. So, just overall tariff refunds were the $38 million, recognizing $24 million in Q2 and forecasting $5 million to $7 million of additional benefit in Q3 and Q4 respectively. We're going to reinvest about $5 million back into marketing, really to accelerate growth further. We're really big believers in the catalogs and believe we've got better catalogs than we've ever had. So, we're going to double the circulation for the fall and we're going to increase the circulation in the spring. Those 2 investments around $5 million, both of which will hit our P&L this year. On the technology side, $4 million to $6 million of incremental spend relative to what we talked about at the beginning of the year in terms of the digital transformation. And it's really driven by the decision to pull forward our new POS system, which was always in our long-term technology roadmap, but was previously planned to follow the ERP, OMS, TMS wave of investments. But in light of the tariff refunds and also in light of the fact that we've learned that by pulling this forward, we can actually wean ourselves off of legacy systems faster and also de-risk the deployment of these technologies, we felt it was a very prudent decision. And that is now underway. So, that POS pull-forward is going to be $2 million to $3 million of P&L this year. And from a cash perspective, that POS is now overlaid into the investor deck that you guys can see for our digital transformation. It's about $20 million over 5 years, with $2 million to $3 million being this year. And again, this is a major, major capability win for Arhaus. It will absolutely change the game for the 1,100 sales folks that we have across the organization. We're also deploying $2 million to $3 million into IT for additional resources to attack our backlog of initiatives, moving really fast right now to really modernize all of our capabilities. And in some ways they're ahead of schedule on certain things and are looking for more funding to go after the backlog of projects. So, we think that's a prudent use of tariff reimbursements. And then we talked about some of these cost headwinds between fuel surcharges and shipping sourcing costs that we won't belabor here, and then the rest drops to the adjusted EBITDA. So, hopefully that makes sense. In terms of your other question around does the SG&A reflect these investments? It absolutely does. There is a burn rate on these investments that do not go into CapEx that are OpEx in nature. They cannot be capitalized. So, that is in our P&L today, and there is no revenue attached to it because these are all in-flight services projects that have not gone live yet. We are definitely in an investment cycle, and we're being very prudent about the projects that we take on. We're being very prudent about making sure we stay on track, on scope, on budget. And as we sit here today, we're on schedule for a Q1 go-live of this technology. So, it's a really exciting time for Arhaus, and we'll continue to provide updates on a quarterly basis. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to Tara Atwood-Saja for closing comments. Tara Atwood: Thank you, everyone, for joining us. John Reed: Thanks, you guys. Appreciate it. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day. Before you buy stock in Arhaus, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Arhaus wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Arhaus. The Motley Fool has a disclosure policy. Arhaus (ARHS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Arhaus, Inc. ARHS delivered an impressive second-quarter 2026 performance, benefiting from strong customer demand, higher comparable sales and disciplined execution across its showroom network. The premium home furnishings retailer reported earnings and revenues that beat the Zacks Consensus Estimate and improved year over year. Encouraged by the stronger-than-expected performance and the benefit from previously paid IEEPA tariff recoveries, management raised its 2026 profitability outlook while maintaining its revenue guidance. The results, coupled with healthy comparable sales trends and improved earnings expectations, sent ARHS shares up about 18% in yesterday's trading session. Arhaus, Inc. price-consensus-eps-surprise-chart | Arhaus, Inc. Quote The company reported earnings of 28 cents per share, beating the Zacks Consensus Estimate of 20 cents by 40%. The bottom line increased 12% from 25 cents reported in the prior-year quarter.Net revenues rose 7.4% year over year to $384.9 million, marking the highest quarterly revenues in Arhaus' 40-year history and surpassing the Zacks Consensus Estimate of $343 million by 12.2%. The growth was particularly noteworthy as the company lapped a strong prior-year comparison that benefited from the accelerated ramp-up following the insourcing of its Dallas Distribution Center. Management also noted that year-over-year comparisons are expected to become more favorable through the remainder of 2026.Retail revenues increased 7.4% year over year to $320.2 million from $298.2 million and surpassed the Zacks Consensus Estimate of $300 million by 6.7%. eCommerce revenues rose 7.4% year over year to $64.7 million from $60.2 million but missed the Zacks Consensus Estimate of $67.1 million by 3.6%. Comparable delivered sales increased 4%, while comparable written sales climbed 12.5%, driven by strong demand across all three customer channels and broad-based strength across product categories. Management noted continued momentum in custom upholstery, outdoor and home decor offerings, supported by resilient demand from its premium customer base.At the end of the second quarter, the company operated 109 showrooms across 31 states. The company completed four showroom projects, including new showroom openings in Ashburn, VA, and Ontario, CA, along with a relocation in Westlake, OH, and an expansion in Lone Tree, CO. Management also highlighted healthy demand across all geographic regions and continued strength in traditional showrooms and design studios. Gross profit increased 16.1% year over year to $172.1 million from $148.2 million, while gross margin expanded 330 basis points to 44.7% from 41.4% in the prior-year quarter. The improvement reflected a $23.8 million benefit from IEEPA tariff recoveries, of which $15.5 million related to inventory sold prior to April 2026. Excluding the tariff recovery benefit, gross margin was 40.7%, reflecting continued pressure from higher fuel and shipping costs.Selling, general and administrative (SG&A) expenses rose 16.1% to $117.8 million from $101.5 million, primarily reflecting strategic technology investments, higher selling expenses associated with new showroom projects and other growth initiatives. As a percentage of net revenues, SG&A increased 230 basis points to 30.6% from 28.3% in the prior-year quarter.Operating income increased 16% year over year to $54.3 million from $46.8 million, supported by higher revenues and tariff recoveries that more than offset increased operating expenses.Adjusted EBITDA increased 16.8% year over year to $70 million from $59.9 million, while adjusted EBITDA margin expanded 150 basis points to 18.3% from 16.8%. Excluding the benefit from tariff recoveries, adjusted EBITDA would have been $55 million and adjusted EBITDA margin 14.3%, reflecting higher fuel and shipping costs, increased showroom investments and strategic growth initiatives. Arhaus ended the quarter with cash and cash equivalents of $226.4 million and remained debt free. Cash declined sequentially, reflecting the payment of a $49 million special cash dividend in March.Net merchandise inventory increased 4.3% to $353.5 million, while client deposits rose 11.8% to $263.8 million from year-end 2025. Net cash provided by operating activities totaled $59.8 million during the first six months of 2026, while net cash used in investing activities was $36.9 million, including $29 million in company-funded capital expenditures and $8 million in landlord contributions. As of June 30, 2026, the company had recognized $32.7 million of tariff refund receivables and had already received $5.1 million in cash, supporting its improved profitability outlook. The company maintained its 2026 net revenue outlook of $1.43-$1.47 billion, representing year-over-year growth of 3.7% to 6.6%, and continued to expect comparable delivered sales between flat and up 3%. However, management raised its profitability outlook to reflect the benefit from previously paid IEEPA tariff recoveries. The company expects net income of $71-$80 million, up from the prior outlook of $66-$75 million, and adjusted EBITDA of $160-$171 million compared with the earlier range of $150-$161 million.For 2026, Arhaus continues to expect approximately 10 to 14 showroom projects, including four to six new showroom openings and six to eight relocations, renovations or expansions, representing mid-single-digit net unit growth for the year.For the third quarter of 2026, the company expects net revenues to be between $355 million and $375 million, representing year-over-year growth of 3% to 8.8%. Comparable delivered sales are projected to range from a decline of 1% to growth of 5%, while net income is expected to be between $8 million and $13 million and adjusted EBITDA between $26 million and $34 million. Management noted that the outlook continues to reflect uncertainty related to the consumer environment, geopolitical conditions and the timing of written sales converting into delivered sales. ARHS Stock Past Three-Month Performance Image Source: Zacks Investment Research Shares of this Zacks Rank #2 (Buy) company have risen 48.8% over the past three months compared with the industry’s 1.2% growth. Abercrombie & Fitch Co. ANF operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. The company carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1  Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales suggests growth of 6.1% and 4.9%, respectively, from the year-ago actuals. ANF delivered a trailing four-quarter average earnings surprise of 8.1%.American Eagle Outfitters Inc. AEO is a specialty retailer of casual apparel, accessories and footwear for men and women. The company also holds a Zacks Rank #2 at present. The Zacks Consensus Estimate for American Eagle's current fiscal-year earnings and sales suggests growth of 17.3% and 8.8%, respectively, from the year-ago actuals. AEO delivered a trailing four-quarter average earnings surprise of 48.5%.Designer Brands Inc. DBI designs, produces and retails footwear and accessories. It offers shoes, boots, sandals, sneakers, socks, handbags and accessories. It also carries a Zacks Rank #2.The Zacks Consensus Estimate for Designer Brands’ current fiscal-year earnings and sales suggests growth of 137.5% and 0.5%, respectively, from the year-ago actuals. DBI delivered a trailing four-quarter average earnings surprise of 112.8%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arhaus, Inc. (ARHS) : Free Stock Analysis Report Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report Designer Brands Inc. (DBI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Arhaus, Inc.? Here are five stocks we like better. Record Q2 performance: Net revenue rose 7.4% to approximately $385 million, while comparable written sales increased 12.5%, supported by demand for larger home projects, upholstery, outdoor products and customized offerings. Tariff refund materially boosted profitability: Arhaus recognized a $23.8 million tariff-recovery benefit, lifting gross margin to 44.7% and adjusted EBITDA to $70 million; excluding the benefit tied to prior-period inventory, adjusted EBITDA would have declined 8.9% year over year. Full-year revenue outlook maintained, profit guidance raised: Arhaus continues to forecast 2026 revenue of $1.43 billion to $1.47 billion but increased adjusted EBITDA guidance to $160 million–$171 million. The company is expanding showrooms, accelerating its point-of-sale rollout and pursuing cost savings to offset tariffs, fuel and shipping expenses. RH’s Strong Q1 Still Leaves Investors With One Big Question Arhaus (NASDAQ:ARHS) reported record second-quarter net revenue of approximately $385 million, up 7.4% from a year earlier and above the high end of its guidance range, as the luxury furniture retailer cited broad-based demand across products, customer channels and showroom formats. Comparable written sales rose 12.5% during the quarter, bringing the year-to-date increase to 2.8%, while comparable delivered sales increased 4%. Founder, Chairman and Chief Executive Officer John Reed said clients continued to invest in larger home projects and showed no meaningful evidence of trading down. → 3 Drone Stocks That Should Soar After the Summer Slump MarketBeat Week in Review – 05/18 - 05/22 “We generated record net revenue and strong comparable written sales, reflecting continued client engagement and momentum across our three customer demand channels,” Reed said. He pointed to demand for upholstery, outdoor products and The Collected Home assortment, as well as the company’s customization capabilities and new product introductions. Arhaus said its results included an unplanned benefit from refunds of tariffs paid under the International Emergency Economic Powers Act. The company requested $37.8 million in refunds, recognized a $32.7 million receivable as of June 30, and had received $5.1 million in cash refunds at quarter-end. Chief Financial Officer Michael Lee said the company has since received the full refund in cash. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Arhaus Stock Drops to 52-Week Low After Q1 Earnings During the quarter, the company recognized a $23.8 million benefit in cost of goods sold from the tariff recovery. Of that amount, $15.5 million was related to inventory sold before April 2026, while $8.3 million related to inventory sold during the second quarter. Arhaus also recorded $14 million, primarily from lower inventory costs, within merchandise inventory. Gross profit increased 16.1% to $172 million, and gross margin rose 330 basis points to 44.7%. Excluding the $15.5 million benefit tied to inventory sold before April, gross profit would have risen 5.6% to $157 million and gross margin would have been 40.7%, down 70 basis points from the prior year. Lee attributed the normalized margin decline largely to higher fuel and shipping expenses. → Jersey Mike's Serves Fresh Gains After IPO Stumble Net income increased 13.1% to $40 million, while adjusted EBITDA rose 16.8% to $70 million. Excluding the $15.5 million tariff benefit associated with inventory sold before April, adjusted EBITDA would have been $55 million, down 8.9% from the year-earlier period, reflecting elevated fuel and shipping costs, higher selling expenses tied to new showrooms, and strategic investments. Selling, general and administrative expenses rose 16.1% to $118 million. The increase included an $8.4 million rise in general and administrative costs, including about $3 million of technology licensing and other business-transformation investments, and a $7.9 million increase in selling expenses. Management said second-quarter demand was supported by strong traffic, higher-value orders and larger projects. Reed said the mix of new and existing customers was largely unchanged, but the company saw larger sales per customer as consumers renovated rooms and homes. Lee said Arhaus saw strength in average order value, units per transaction, and orders above $10,000, $25,000 and $100,000. The company also increased marketing activity, including paid search, digital optimization and catalog distribution. Arhaus plans to launch a 40th anniversary fall catalog that will reach more than twice as many households as its spring catalog, including high-potential prospective clients. The company also expects its September semiannual storewide sale, new product offerings and stronger in-stock inventory levels to support fall demand. The company opened a nearly 20,000-square-foot traditional showroom in Ashburn, Virginia, during the second quarter, relocated its Westlake, Ohio, showroom, and expanded its Park Meadows location in Lone Tree, Colorado. It also recently opened a relocated Charlotte, North Carolina, showroom measuring about 35,000 square feet. For 2026, Arhaus continues to expect approximately 10 to 14 showroom projects, including four to six new openings and six to eight relocations, renovations or expansions. Reed said the Ashburn showroom has performed ahead of expectations since opening. The company also highlighted its enhanced trade program, which offers design professionals a choice between a commission-based arrangement and a discount structure. Reed said Arhaus has added thousands of new trade members each month since the program’s launch a few months ago. Arhaus said it successfully launched its transportation management system during the second quarter. Its enterprise resource planning and order management system implementations remain scheduled for a February 2027 launch. The company is also accelerating deployment of a new point-of-sale platform into the fourth quarter, ahead of its original timetable. Lee said the company expects the project to simplify its technology roadmap, reduce reliance on legacy systems and provide its showroom sales teams with a more modern selling platform. Arhaus ended the quarter with $226 million in cash and cash equivalents. Net merchandise inventory totaled $354 million, up 4.3% from Dec. 31, while client deposits rose 11.8% year over year to about $264 million. Management said aged inventory declined both sequentially and from a year earlier, while best-seller inventory and in-stock availability improved. The company estimates that its 2026 tariff impact under the new Section 301 tariff framework will be between $30 million and $40 million. Arhaus said it is addressing that pressure through diversified sourcing, vendor negotiations, pricing actions and operational efficiencies. Lee also cited approximately $10 million each of elevated annual fuel expense and higher shipping costs, driven in part by disruption in the Middle East. Arhaus raised its delivery fee in June, which Lee said is expected to contribute $5 million to $6 million of annualized run-rate benefit, with most of that benefit beginning to flow through in the third quarter. The company also expects its transportation management system to generate $4 million to $5 million in annualized run-rate savings as it ramps. For the full year, Arhaus maintained its net revenue outlook of $1.43 billion to $1.47 billion, representing growth of 3.7% to 6.6%, and continued to expect comparable delivered sales ranging from flat to up 3%. The company updated profitability guidance to reflect the tariff recovery, now forecasting net income of $71 million to $80 million and adjusted EBITDA of $160 million to $171 million. Arhaus expects to reinvest $7 million to $10 million of the recovery during 2026, including expanded fall and spring catalog circulation, increased marketing and digital spending, and the accelerated point-of-sale project. For the third quarter, Arhaus expects net revenue of $355 million to $375 million, comparable delivered sales of down 1% to up 5%, net income of $8 million to $13 million, and adjusted EBITDA of $26 million to $34 million. Management said its outlook does not assume a meaningful improvement in housing turnover, consumer confidence or broader macroeconomic conditions. Reed said the company remains cautious about external factors but believes its product assortment, inventory position and fall initiatives position it for a strong second half. Arhaus (NASDAQ:ARHS) is a U.S.-based retailer specializing in high-end home furnishings and décor. Since its founding in 1986 in northeastern Ohio, the company has built a reputation for curating unique, design-forward products that blend contemporary aesthetics with artisanal craftsmanship. Headquartered in Boston Heights, Ohio, Arhaus operates a network of brick-and-mortar galleries across the United States alongside a robust e-commerce platform, serving customers from coastal metropolitan areas to interior regions. The company’s product portfolio encompasses a wide range of furniture categories—including sofas, dining tables, bedroom pieces and storage solutions—complemented by lighting fixtures, rugs, pillows, wall art and decorative accessories. 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BOSTON HEIGHTS, Ohio, Aug. 06, 2026 (GLOBE NEWSWIRE) -- Arhaus, Inc. (“Arhaus” or the “Company”) (NASDAQ: ARHS), a premium home furnishing brand known for responsibly sourced, artisan-crafted products and heirloom-quality design, reported second quarter results for the period ended June 30, 2026. Second Quarter 2026 Highlights Compared to the second quarter of 2025: Net revenue increased 7.4% to $385 million Gross margin increased 16.1% to $172 million and included a $23.8 million benefit from IEEPA tariff recoveries, of which $15.5 million related to inventory sold prior to April 2026 Selling, general and administrative expenses increased 16.1% to $118 million Net and comprehensive income increased 13.1% to $40 million Adjusted EBITDA increased 16.8% to $70 million and reflected the $23.8 million benefit from IEEPA tariff recoveries, of which $15.5 million related to inventory sold prior to April 2026 Comparable Delivered Sales(1) increased 4.0% Comparable Written Sales(2) increased 12.5% John Reed, Co-Founder and Chief Executive Officer, said: “Exceptional product has been the foundation of Arhaus for 40 years, and our second-quarter performance reinforces how deeply clients value quality, craftsmanship, and personalization. Our newest collections are resonating, customization continues to gain momentum, and clients are engaging across our product categories. With an exciting product pipeline and compelling storytelling ahead, we believe we are well positioned to inspire more clients and continue our industry leading growth.” Michael Lee, Chief Financial Officer, said: “Our second-quarter performance reflected disciplined execution across the business. We delivered results above the high end of our guidance range across our key financial metrics, generated strong Comparable Written Sales, and continued making meaningful progress on our digital transformation initiatives that support the next phase of Arhaus’ growth. As we look ahead, we remain focused on disciplined execution, investing thoughtfully in the capabilities that support long-term growth, improving operational efficiency, and creating long-term value for our shareholders.” Business Highlights Second quarter net revenue was $385 million, an increase of 7.4% year-over-year and above the high end of the Company’s guidance range. Comparable Delivered Sales(1) increased 4.0% in the second-quarter, also exceeding the high end of the Company’s guidance range, bringing year-to-date Comparable Delivered Sales(1) to 1.4%. Comparable Written Sales(2) increased 12.5% in the second-quarter, bringing year-to-date Comparable Written Sales(2) to 2.8%. Showroom Highlights At the end of the second quarter of 2026, Arhaus operated 109 Showrooms across 31 states. During the quarter, the Company completed 4 Total Showroom Projects(3), including 2 new Showrooms, with a Traditional Showroom in Ashburn, Virginia, and a Loft location in Ontario, California, 1 relocation in Westlake, Ohio, and 1 expansion in Lone Tree, Colorado. Notable updates include: Ashburn, Virginia – The Company opened a Traditional Showroom spanning nearly 20,000 square feet in a premium lifestyle destination. The Showroom features Arhaus’ full product assortment, extensive custom upholstery offerings, and a best-in-class design team. Westlake, Ohio – The Company completed the relocation of its Crocker Park showroom in Westlake, Ohio. Located in the Company’s hometown market, Crocker Park is a premier mixed-use lifestyle destination with strong demographics and a complementary luxury retail environment. For 2026, the Company continues to expect to complete approximately 10 to 14 Total Showroom Projects(3), consisting of 4 to 6 new openings and 6 to 8 relocations, renovations, or expansions, representing Net Unit Growth(4) of mid-single-digits for the year. Balance Sheet and Liquidity As of June 30, 2026, the Company reported the following: No long-term debt. Cash and cash equivalents totaled $226 million, a 10.6% decrease from December 31, 2025 to June 30, 2026. This primarily reflects the $49 million special cash dividend paid in March. Net merchandise inventory of $354 million, a 4.3% increase from December 31, 2025 to June 30, 2026. Client deposits of $264 million, a 11.8% increase from December 31, 2025 to June 30, 2026. Net cash provided by operating activities totaled $60 million for the six months ended June 30, 2026. Net cash used in investing activities was $37 million for the six months ended June 30, 2026. Company-funded capital expenditures(5) were $29 million and landlord contributions were $8 million. IEEPA Tariff Recoveries In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). Subsequently, the U.S. Court of International Trade ruled that tariffs paid under the IEEPA must be refunded in accordance with the law. As a result, the U.S. Customs and Border Protection Agency launched a special tariff refund program to facilitate such refunds. The Company has requested refunds of $37.8 million for IEEPA tariffs previously paid and believes recovery is probable. As of June 30, 2026, the Company recognized a receivable of $32.7 million, which is included in prepaid and other current assets within the condensed consolidated balance sheets. As of June 30, 2026, the Company received $5.1 million in cash for the refunds. During the six and three months ended June 30, 2026, the Company recognized a benefit of $23.8 million for the recovery of IEEPA tariffs paid, of which $15.5 million related to inventory sold prior to April 2026 and $8.3 million related to inventory sold during the quarter, in cost of goods sold within the condensed consolidated statements of comprehensive income. As of June 30, 2026, the Company recorded $14.0 million primarily related to the reductions in inventory costs in merchandise inventory, net within the condensed consolidated balance sheets. As of August 6, 2026, the Company has received $37.8 million in tariff refunds and $1.3 million in interest. Outlook The Company is maintaining its full-year Net revenue and Comparable Delivered Sales outlook. The outlook continues to reflect uncertainty related to the consumer environment, geopolitical conditions, and the timing of written sales conversion to delivered sales. The Company is updating its full-year Net income and Adjusted EBITDA outlook to reflect the benefit recognized from the recovery of previously paid IEEPA tariffs. Consistent with its long-term capital allocation philosophy, the Company expects to reinvest a portion of these recoveries into strategic growth initiatives while also offsetting elevated operating costs, with the remaining benefit reflected in updated profitability guidance. (1) Comparable Delivered Sales previously referred to as “Comparable Growth” is a key performance indicator and is defined as the year-over-year percentage change of the dollar value of orders delivered (based on purchase price), net of the dollar value of returns (based on amount credited to client), from our comparable Showrooms and eCommerce, including through our catalogs and other mailings.(2) Comparable Written Sales previously referred to as “Demand Comparable Growth” is a key performance indicator and is defined as the year-over-year percentage change of written sales from our comparable Showrooms and eCommerce, including through our catalogs and other mailings.(3) Total Showroom Projects is defined as the number of Showroom projects completed during the period, including new Showroom openings, relocations, remodels, and expansions. The Company considers all Showroom projects integral to its long-term growth strategy, with each evaluated based on strategic relevance and expected return on investment.(4) Net Unit Growth reflects the percentage change in total Showroom count during the period, calculated as new Showroom openings net of Showroom closures or relocations that do not increase total unit count.(5) Company-funded capital expenditures is defined as total net cash used in investing activities less landlord contributions.(6) U.S. GAAP net income (loss).(7) We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we do not provide guidance for the various reconciling items. These items include, but are not limited to, future share-based compensation expense, income taxes, interest income, and transaction costs. We are unable to provide guidance for these reconciling items because we cannot determine their probable significance, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly from period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort Conference Call You are invited to listen to Arhaus’ conference call to discuss the second quarter 2026 financial results scheduled for today, August 6, 2026, at 8:30 a.m. Eastern Time. The call will be available over the Internet on our website (http://ir.arhaus.com) or by dialing (877) 407-3982 within the U.S., or 1 (201) 493-6780, outside the U.S. The conference ID number is 13758507. A recorded replay of the conference call will be available within approximately three hours of the conclusion of the call and can be accessed online at http://ir.arhaus.com for approximately twelve months. About Arhaus Founded in 1986 by Chief Executive Officer John Reed and his father, Arhaus is a premium home furnishings brand built on a simple idea: furniture and décor should be responsibly sourced, lovingly made, and built to last. Arhaus operates a vertically integrated model, designing and sourcing products directly from skilled artisans and carefully selected manufacturing partners around the world, including domestic upholstery production at its own North Carolina manufacturing facility. This approach enables Arhaus to offer a highly exclusive and customizable assortment of heirloom-quality furniture and décor designed to be used and enjoyed for generations. With more than 100 Showroom locations across the United States, Arhaus’ integrated omni-channel model connects every client touchpoint, from Showroom and interior design to eCommerce and catalog, allowing Arhaus to meet clients wherever and however they choose to shop while delivering a highly personalized client-first experience from discovery through delivery. For more information, please visit www.arhaus.com. Investor Contact: Tara Atwood SajaVice President, Investor Relations(440) 439-7700 [email protected] Non-GAAP Financial Measures In addition to the results provided in accordance with U.S. GAAP, this press release and related tables include adjusted EBITDA, adjusted EBITDA as a percentage of net revenue, and Free Cash Flow, which present operating results on an adjusted basis. We use non-GAAP measures to help assess the performance of our business, identify trends affecting our business, formulate business plans and make strategic decisions. In addition to our results determined in accordance with U.S. GAAP, we believe that providing these non-GAAP financial measures is useful to our investors as they present an informative supplemental view of our results from period to period by removing the effect of non-recurring items. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent or will not recur. These non-U.S. GAAP measures are not a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. These measures should only be read together with the corresponding U.S. GAAP measures. Please refer to the reconciliations of adjusted EBITDA and Free Cash Flow to the most directly comparable financial measures prepared in accordance with U.S. GAAP below. Forward-Looking Statements Certain statements contained herein, including statements under the heading “Outlook” are not based on historical fact and are “forward-looking statements” within the meaning of applicable securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,” or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our ability to manage and maintain the growth rate of our business; our ability to obtain quality merchandise in sufficient quantities; challenges with the planning or implementation of our technology upgrades, including a new enterprise resource planning system; disruption in our receiving and distribution system, including delays in the integration of our distribution centers and the possibility that we may not realize the anticipated benefits of multiple distribution centers; effects of new or proposed tariffs and changes to international trade policies and agreements; the possibility of cyberattacks and our ability to maintain adequate cybersecurity systems and procedures; loss, corruption and misappropriation of data and information relating to clients and employees; changes in and compliance with applicable data privacy rules and regulations; risks as a result of constraints in our supply chain or disruptions due to geopolitical events such as acts of war and/or terrorism or other hostilities; a failure of our vendors to meet our quality standards; declines in general economic conditions that affect consumer confidence and consumer spending that could adversely affect our revenue; our ability to anticipate changes in consumer preferences; risks related to maintaining and increasing Showroom traffic and sales; our ability to compete in our market; our ability to adequately protect our intellectual property; compliance with applicable governmental regulations; effectively managing our eCommerce sales channel and digital marketing efforts; our reliance on third-party transportation carriers and risks associated with freight and transportation costs; and compliance with SEC rules and regulations as a public reporting company. These factors should not be construed as exhaustive. Further information on potential factors that could affect the financial results of the Company and its forward-looking statements is included in the Company’s filings with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statement, except as may be required by law. These forward-looking statements speak only as of the date of this release. All forward-looking statements are qualified in their entirety by this cautionary statement. (1) Other expenses represent costs and investments not indicative of ongoing business performance, such as loss on disposal of assets. Free Cash Flow is defined as net cash provided by operating activities less net cash used in investing activities. Supplemental Comparable Metrics Schedules Comparable Written Sales(2) by Quarter and Year-to-Date The table below represents Comparable Written Sales(2) on a quarterly and year-to-date basis for fiscal year 2026. Comparable Written Sales(2) reflects written sales trends during the period and is measured using a 13-month comparable Showroom definition, consistent with historical disclosure. Comparable Delivered Sales(1) by Quarter and Year-to-Date The table below represents Comparable Delivered Sales(1) on a quarterly and year-to-date basis for fiscal year 2026. Comparable Delivered Sales(1) reflects revenue recognized during the period and is measured using a 15-month comparable Showroom definition, consistent with historical disclosure. Due to differences in order timing, backlog, and revenue recognition, Comparable Written Sales(2) and Comparable Delivered Sales(1) use different comparable Showroom eligibility thresholds. Comparable Written Sales(2) metrics use a 13-month definition to reflect written sales trends, while Comparable Delivered Sales(1) metrics use a 15-month definition to reflect revenue recognition consistency. Supplemental Showroom Schedules Showroom Portfolio Composition The table below represents the composition of the Showroom Portfolio by format and operating footprint as of each period presented: Geographic Showroom Footprint The table below represents the number of Showrooms in each U.S. state in which the Company operates as of June 30, 2026. Showroom Maturity Mix The table below represents the composition of the Showroom portfolio by maturity as of the period presented. The elevated proportion of newer showrooms reflects increased openings and relocations over the past several years and supports embedded future revenue growth as locations mature. Maturity is measured from Showroom opening date or relocation reopening date; includes Traditional Showrooms, Design Studios, and Lofts; excludes temporary closures. Illustrative Unit Economics (Targets) The table below represents targeted Showroom unit economics at maturity, based on internal underwriting assumptions and historical performance. Company-funded capital expenditures represents the total net cash used in investing activities less landlord contributions. Targets reflect performance at full maturity. Assumptions are informed by historical performance, internal underwriting, and recent Showroom cohorts. Total Showroom Projects(3) The table below represents the total Showroom project pipeline for fiscal year 2026, consistent with the Company’s guidance. Total Showroom Projects(3) are expected to be within the Company’s full-year 2026 guidance range. For competitive reasons, the Company does not disclose the specific locations of planned Total Showroom Projects(3). The Company provides additional detail on Showroom activity following completion as part of its regular quarterly disclosures.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Record net revenue of $385 million was driven by broad-based demand across all three channels: core customers, interior design, and trade professionals. Comparable written sales accelerated to 12.5% in Q2, reflecting a 'V-shaped' recovery from Q1 softness and strong client engagement with new product introductions. Management observed no meaningful evidence of trade-down, noting that high-end consumers are increasingly investing in larger, higher-value whole-home projects. The interior design channel remains a critical driver of loyalty and project complexity, while the relaunched trade program is attracting thousands of new members monthly. Domestic upholstery manufacturing in North Carolina continues to provide a competitive advantage through superior customization capabilities and production flexibility. Showroom performance was strong across every region and format, confirming that the brand's aesthetic resonates nationally without geographic dependency. Full-year net revenue guidance of $1.43 billion to $1.47 billion assumes a prudent stance regarding housing turnover and macroeconomic uncertainty. The company is doubling the distribution of its 40th Anniversary Fall Catalog to capitalize on high-potential prospective clients and strong in-stock inventory levels. Management is pulling forward the implementation of a new POS platform to the fourth quarter of 2026. to accelerate the transition from legacy systems and improve the selling experience. Strategic investments of $7 million to $10 million are planned for fiscal 2026 to support technology transformation, marketing expansion, and digital capabilities. The ERP and OMS implementations remain on track for a February 2027 go-live, which is expected to improve operational scalability and efficiency. Recognized a $23.8 million benefit in cost of goods sold from the recovery of previously paid IEEPA tariffs, which is being treated as a discrete one-time item. Estimated 2026 tariff impact from the new Section 301 framework is $30 million to $40 million, which the company aims to mitigate through sourcing and pricing. Elevated fuel and shipping costs are expected to create a $20 million headwind for the full year, driven by Middle East disruptions and spot market volatility. A June delivery fee increase and the launch of a new Transportation Management System (TMS) are expected to partially offset inflationary logistics pressures in the second half. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management noted that the acceleration was driven by larger sales per customer and a rebound in traffic rather than a shift in the mix of new versus existing clients. Orders exceeding $10,000, $25,000, and $100,000 were specifically cited as areas of strength, reinforcing the resilience of the affluent demographic. The program's success is attributed to a new flexible compensation model (commission or discount) and a dedicated team of regional design professionals. Management views the trade business as a significant long-term opportunity because Arhaus acts as a 'one-stop shop' for designers, handling everything from sourcing to repairs. A targeted promotion of 'up to 50% off' was used to clear long-dated inventory; it successfully drove traffic with only a modest impact on overall margins. In-stock levels for best-sellers are currently at their strongest point in over a year, positioning the company well for the fall selling season. Management expressed optimism that new product collections and increased catalog circulation will support sustainable growth. E-commerce was identified as a key underutilized lever, with plans to improve focus on this channel to move beyond its current 1% to 1.5% growth rate.

This article first appeared on GuruFocus. Net Revenue: Record $385 million in Q2 2026, up 7.4% year-over-year. Comparable Written Sales: Increased 12.5% in Q2, bringing year-to-date to 2.8%. Comparable Delivered Sales: Increased 4% in Q2, exceeding guidance. Gross Profit: $172 million, up 16.1% year-over-year; excluding a $23.8 million IEPA tariff recovery benefit, gross profit was $157 million, up 5.6%. Gross Margin: 44.7%, up 330 basis points year-over-year; excluding the tariff benefit, gross margin was 40.7%, down 70 basis points. SG&A Expenses: $118 million, up 16.1% year-over-year, with SG&A load increasing 230 basis points to 30.6%. Net Income: $40 million, up 13.1% year-over-year. Adjusted EBITDA: $70 million, up 16.8% year-over-year; excluding the $15.5 million tariff refund benefit, adjusted EBITDA was $55 million, down 8.9%. Adjusted EBITDA Margin: 18.3%, up 150 basis points year-over-year; excluding the tariff benefit, margin was 14.3%, down 250 basis points. Cash and Cash Equivalents: $226 million at quarter end. Net Merchandise Inventory: $354 million, up 4.3% from December 31, 2025. Client Deposits: Approximately $264 million, up 11.8% year-over-year. Showroom Expansion: Opened a new showroom in Ashburn, Virginia; relocated Westlake, Ohio showroom; expanded Park Meadows showroom in Lone Tree, Colorado; and opened relocated Charlotte, North Carolina showroom. Full-Year 2026 Guidance: Net revenue expected between $1.43 billion and $1.47 billion; net income expected between $71 million and $80 million; adjusted EBITDA expected between $160 million and $171 million. Q3 2026 Guidance: Net revenue expected between $355 million and $375 million; net income expected between $8 million and $13 million; adjusted EBITDA expected between $26 million and $34 million. Warning! GuruFocus has detected 4 Warning Sign with ARHS. Is ARHS fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Arhaus Inc (NASDAQ:ARHS) delivered record net revenue of $385 million in Q2 2026, exceeding the high end of its guidance range and marking its highest net revenue in company history. Comparable written sales surged 12.5% in the second quarter, a significant acceleration from the first quarter, driven by broad-based strength across product categories and all showroom formats. The company received a one-time $37.8 million refund on IEPA tariffs, which it is strategically reinvesting in marketing, technology, and offsetting cost pressures, while still boosting full-year profitability guidance. The relaunched trade program is gaining traction, adding thousands of new members monthly, and is seen as a significant long-term growth opportunity for recurring project-driven business. Arhaus Inc (NASDAQ:ARHS) maintains a strong balance sheet with $226 million in cash and a healthy inventory position, with bestseller in-stock levels improving and aged inventory down sequentially and year-over-year. The company is investing in growth initiatives, including doubling its fall catalog circulation and pulling forward its new POS system implementation, which management believes will drive future demand and operational efficiency. Excluding the one-time tariff refund benefit, adjusted EBITDA declined 8.9% year-over-year, and adjusted EBITDA margin contracted 250 basis points, reflecting significant cost pressures. The company faces elevated fuel and shipping costs, estimated at $10 million each for the year, driven by Middle East disruptions and inflationary pressures, which are pressuring margins. Gross margin, excluding the tariff benefit, decreased 70 basis points year-over-year, primarily due to higher fuel and shipping costs, despite a recent delivery fee increase. SG&A expenses increased 16.1% year-over-year, with SG&A load up 230 basis points, driven by strategic investments in technology, new showrooms, and increased selling expenses. The company's full-year net revenue guidance of $1.43 billion to $1.47 billion remains unchanged, implying a potential deceleration in demand in the second half of the year, reflecting management's cautious outlook. Arhaus Inc (NASDAQ:ARHS) continues to face a significant tariff impact of $30 million to $40 million for 2026, which it is actively trying to mitigate through sourcing strategies and pricing actions. Q: Can you add more context around your 2Q demand trend? How much of the acceleration was driven by new customers, pricing, or mix, especially with consumers leaning toward higher-value projects? A: John Reed (CEO): We didn't see any meaningful change in new versus existing customers. The product assortment has gotten much better, leading to larger sales per customer. Many people are renovating or putting money back into their homes instead of moving. Michael Lee (CFO) added that traffic rebounded strongly versus Q1, and metrics like average order value and units per transaction were strong. Orders above $10,000, $25,000, and $100,000 were particularly robust, confirming the high-end consumer continues to perform well. Q: Can you expand on the performance of the enhanced trade program and the key initiatives to scale it? A: John Reed (CEO): The relaunched trade program has been extremely successful. We now offer trade members a choice between commission or discount structures, which has driven thousands of new members each month. We've also added a dedicated national team to attract new design firms. Our full-service offeringfrom lighting to rugs to upholsterywith warehousing and support, is a major differentiator. We believe this is a huge long-term opportunity that is just getting started. Q: Could you provide more color on how comps progressed through the quarter, including the exit rate in June and trends in July? A: Michael Lee (CFO): We don't disclose monthly data, but we were happy with the overall quarter, describing it as a "V-shaped recovery" from April. We implemented a promotion strategy focused on long-dated inventory with up to 50% off discounts. This proved to be a great traffic driver with modest margin impact, as it was limited to a mid-single-digit mix of sales. We are coming out of Q2 with the best in-stock position in many months. John Reed (CEO) added that new product introductions are "killing it," and the upcoming 40th-anniversary fall catalog is the best ever, which should carry momentum into the second half. Q: Can you elaborate on the assumptions around the sustainability of Q2 momentum for the full-year guidance, given it implies some deceleration? A: John Reed (CEO): We are cautious about external factors like freight costs and global conflicts, so we prefer to be conservative in our outlook. However, if conditions remain stable, we expect a strong second half. Michael Lee (CFO) added that internally, there is a lot of optimism within the merchandising teams about second-half possibilities, and they are preparing for high-side forecasts to ensure they can support potential demand. Q: Can you dig into the drivers of the product margin decline and how you think about it in the back half, including the delivery fee increase? A: Michael Lee (CFO): Key margin drivers include tariff assumptions ($30M-$40M impact for the year), elevated fuel surcharges ($10M impact, with $4M behind us), and higher shipping costs ($10M) due to Middle East disruptions and spot market spikes. We are also seeing higher input costs like foam. However, we are optimistic about the new delivery fee increase implemented in June, which is worth $5M-$6M annually and will start flowing through in Q3. We also expect benefits from the new Transportation Management System (TMS) and additional tariff refund flow-through of $5M-$7M in Q3 and Q4. Despite headwinds, we expect year-over-year margin benefits in the second half. Q: When does the business get to a sustainable mid-single-digit comp, and can you clarify the Q2 SG&A dollar increase? A: John Reed (CEO): The product is resonating across all categories, and we are launching our largest collections ever in September. We are broadening our appeal with new styles and price points to attract younger customers. Michael Lee (CFO) added that e-commerce is a critical part of reaching that growth rate, and it is currently underperforming. Regarding SG&A, the increase is due to strategic investments in IT and marketing, including doubling the fall catalog circulation. Selling costs were also elevated due to the timing of strong written sales versus delivered sales. We expect SG&A to be about 100 basis points higher as a percentage of revenue for the full year. Q: Can you update us on the pricing strategy, especially regarding the tariff refunds, and confirm that the investment costs are included in guidance without the sales benefit? A: John Reed (CEO): We are holding pricing steady. We have worked with vendor partners to mitigate cost headwinds and see no need to raise or lower prices. Michael Lee (CFO) confirmed that the $7M-$10M in strategic investments (marketing and POS pull-forward) are included in the P&L guidance, but no associated revenue is attached since the projects are in-flight. The tariff refunds are being allocated to offset cost pressures, fund these investments, and the remainder flows to adjusted EBITDA. Q: How is the new trade program performing in terms of member acquisition and overall contribution? A: John Reed (CEO): The program is adding thousands of new trade members monthly since its relaunch. By offering a choice between commission and discount, we've made it more attractive. The dedicated team is successfully attracting new design firms, and our full-service model is a key advantage. We see this as a significant, recurring project-driven business opportunity. Q: What is the expected impact of the IEPA tariff refunds on the balance sheet and future quarters? A: Michael Lee (CFO): We recognized a receivable of $32.7 million and received $5.1 million in cash during Q2, with the full refund now received. We recognized a $23.8 million benefit in Q2 cost of goods sold. We expect an additional $5M-$7M of flow-through benefit in both Q3 and Q4, though it could be "spiky" due to varying tariff rates on different items. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Arhaus, Inc. (ARHS) came out with quarterly earnings of $0.28 per share, beating the Zacks Consensus Estimate of $0.16 per share. This compares to earnings of $0.25 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +75.00%. A quarter ago, it was expected that this company would post earnings of $0.02 per share when it actually produced earnings of $0.02, delivering no surprise. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Arhaus, Inc., which belongs to the Zacks Retail - Miscellaneous industry, posted revenues of $384.9 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.06%. This compares to year-ago revenues of $358.43 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Arhaus, Inc. shares have lost about 26.6% since the beginning of the year versus the S&P 500's gain of 12.8%. While Arhaus, Inc. has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Arhaus, Inc. was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.12 on $371.9 million in revenues for the coming quarter and $0.47 on $1.45 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Retail - Miscellaneous is currently in the bottom 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Petco Health & Wellness (WOOF), another stock in the same industry, has yet to report results for the quarter ended July 2026. This pet store chain is expected to post quarterly earnings of $0.06 per share in its upcoming report, which represents a year-over-year change of -25%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Petco Health & Wellness' revenues are expected to be $1.49 billion, up 0.3% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arhaus, Inc. (ARHS) : Free Stock Analysis Report Petco Health and Wellness Company, Inc. (WOOF) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research