Arhaus, Inc. Class A ((ARHS)) has held its Q4 earnings call. Read on for the main highlights of the call.
Arhaus, Inc. Displays Cautious Optimism Amid Challenges in Latest Earnings Call
Arhaus, Inc. recently held its earnings call, revealing a generally optimistic sentiment despite facing several challenges. The company showcased strong showroom expansion and positive demand growth in the fourth quarter, supported by a robust financial position. However, Arhaus also experienced declining gross margins, net income, and adjusted EBITDA due to increased costs and macroeconomic headwinds. Overall, the positive developments slightly outweighed the negatives, suggesting a cautious optimism moving forward.
Showroom Expansion Milestone
Arhaus marked a significant milestone by opening its 100th showroom, expanding to 103 locations across 30 states. This expansion is the largest in nearly 40 years, with 11 new openings and 5 strategic relocations. The company’s commitment to increasing its physical presence underscores its growth strategy and dedication to reaching more customers nationwide.
Positive Demand Growth in Q4
The fourth quarter saw a demand comparable growth of 5.7%, driven by a strong product assortment and effective marketing initiatives. This positive growth in Q4 helped offset the full-year decline caused by softness in the second and third quarters, highlighting the company’s ability to adapt and thrive in challenging environments.
Strong Financial Position
Arhaus ended the year with a solid financial footing, boasting $198 million in cash and cash equivalents while remaining debt-free. This strong financial position allows the company to make strategic investments, further supporting its expansion and technological advancements.
Gross Margin Decline
Despite positive growth in other areas, Arhaus faced a decline in gross margin during the fourth quarter. The gross margin decreased by $2 million or 1.8% to $139 million, with a 100 basis point decline to 40.0%, primarily due to higher showroom occupancy costs.
Net Income and EBITDA Decline
For the full year, Arhaus reported a decrease in net income by $57 million or 45.3% to $69 million, while adjusted EBITDA declined by 34.5% to $133 million. These declines reflect the challenges the company faced in managing costs and navigating the macroeconomic environment.
Challenging Macroeconomic Environment
The company encountered macroeconomic uncertainty, which negatively impacted demand comparable growth by 2.2% for the full year. This challenging environment underscores the need for strategic adaptability and resilience in the face of external pressures.
Forward-Looking Guidance
Looking ahead, Arhaus provided guidance for 2025, projecting net revenue between $1.36 billion and $1.40 billion, with a comparable growth range of 0% to 3%. For the first quarter of 2025, the company anticipates net revenue between $303 million and $323 million, indicating a comparable growth range of -6% to 1%. Arhaus plans to continue its strategic investments, including showroom expansions and technological enhancements, while maintaining a debt-free balance sheet. The company aims to open 3 to 5 new showrooms in 2025, with a long-term goal of reaching 165 traditional showrooms.
In conclusion, Arhaus, Inc. demonstrated a cautiously optimistic outlook in its latest earnings call. While the company faces challenges such as declining margins and macroeconomic uncertainties, its strong showroom expansion, positive demand growth, and solid financial position provide a foundation for continued growth and strategic investments. Investors and stakeholders will be keenly watching how Arhaus navigates these challenges and capitalizes on its opportunities in the coming year.