Arhaus, Inc. Class A ((ARHS)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Arhaus delivered a nuanced first quarter, blending record revenue with mounting cost pressures and softer comparable sales to produce a cautiously optimistic tone. Executives stressed resilient demand, strong new product reception and operational progress, yet acknowledged that weather, tariffs and macro uncertainty are compressing margins and clouding near‑term visibility.
Record First Quarter Net Revenue
Arhaus reported net revenue of $314.0 million in the first quarter of 2026, a 0.9% year‑over‑year gain and the highest first‑quarter revenue in its history. The result exceeded the midpoint of management guidance, signaling resilient topline performance despite a challenging macro backdrop and disrupted store operations.
Product Momentum and Newness
New products accounted for roughly 12% of sales versus about 8% a year earlier, underscoring what management called one of the strongest innovation cycles in the company’s history. Consumers responded positively to Spring and outdoor collections, while an assortment spanning more than 700 fabrics and leathers is helping drive customization and differentiation.
Omnichannel and Showroom Expansion
The company now operates 108 showrooms and plans roughly 10 to 14 projects in 2026, including four to six new locations alongside relocations and remodels. Since 2019, Arhaus has expanded its footprint by more than 50%, with new and expanded showrooms contributing about 37% of net revenue growth over that period.
Strong Balance Sheet and Financial Flexibility
Arhaus ended the quarter debt‑free with $177 million in cash and cash equivalents, positioning the company to keep investing through volatility. Management highlighted that balance sheet strength also enables selective capital returns, evidenced by a special cash dividend paid in March without compromising liquidity.
Operational and Technology Progress
Phase one of the new Transportation Management System went live in April and is nearing the end of its stabilization period, with expected long‑term savings of $4 million to $5 million annually. The Order Management and Enterprise Resource Planning systems remain on track, aiming to streamline distribution, enhance client experience and deliver incremental SG&A efficiency.
Manufacturing and Supply Advantages
Domestic upholstery capacity has been expanded with a second shift, helping Arhaus set new upholstery sales records during the quarter. Management emphasized that in‑house production supports faster special‑order fulfillment and bolsters the company’s ability to offer distinctive, customizable merchandise.
Maintained Full-Year Guidance
Despite a choppy first quarter, Arhaus reaffirmed its 2026 outlook for net revenue between $1.43 billion and $1.47 billion, implying 3.7% to 6.6% growth. The company maintained targets for flat to low‑single‑digit growth in comparable delivered sales, net income of $66 million to $75 million and adjusted EBITDA of $150 million to $161 million.
Positive Demand Momentum in April and May
Management reported what they described as a V‑shaped demand recovery heading into April and May, with trends running ahead of internal forecasts. Elevated promotional activity helped re‑engage customers and drive higher conversion, suggesting that demand may be recovering after a tough start to the year.
Pressure on Comparable Sales
Comparable written sales fell 5.7% in the quarter, while comparable delivered sales declined 1.7%, reflecting softer traffic and order intake. Executives cited weather‑related disruptions, delayed marketing materials and broader geopolitical caution as key factors weighing on both written and delivered comps.
Gross Margin Compression
Gross profit reached $114 million, but gross margin slipped by 70 basis points year over year to 36.4%, reflecting rising operating costs. Higher fuel expenses and increased showroom occupancy each contributed roughly 40 basis points of pressure, partially offset by operational gains elsewhere.
Profitability and Margin Headwinds
Adjusted EBITDA came in at $18 million, in line with guidance, but margin declined by about 30 basis points from the prior year. SG&A expenses rose 1.9% to $112 million, and the SG&A rate increased roughly 40 basis points as the company continued to fund strategic initiatives in technology and growth.
Cash Decline After Special Dividend
Cash and cash equivalents fell 30% from year‑end to $177 million, a drop primarily driven by the March special dividend totaling $49 million. Management framed the payout as a return of excess capital, noting that the company retains ample liquidity and no debt, even after the distribution.
Inventory Growth and Tariff Pressure
Net merchandise inventory climbed to $369 million, up 9% from the prior quarter and about 6% when excluding tariff impacts, reflecting higher in‑stock positions. Management expects tariffs to impose a $30 million to $40 million headwind in 2026 and flagged ongoing uncertainty around potential relief that is not assumed in current guidance.
Operational Disruption from Weather and Catalog Delay
More than half of Arhaus showrooms experienced temporary closures due to severe weather, including multiple multi‑day shutdowns early in the quarter, reducing selling days by an estimated 4%. A delay in the Spring catalog further shifted demand and dampened promotional efficiency, compounding the pressure on first‑quarter sales.
Near-Term Uncertainty and Wide Q2 Outlook
The company issued a broad second‑quarter outlook, guiding net revenue between $350 million and $370 million and comparable delivered sales ranging from a 5% decline to flat. Management cited macro, geopolitical and fuel price uncertainty, as well as tougher comparisons, as reasons for the wide range around Q2 performance.
Forward-Looking Guidance and Key Assumptions
To meet its full‑year outlook, Arhaus estimates it needs low single‑digit improvement in delivered comps over the remaining quarters, supported by better inventory availability and continued demand strength in design and trade channels. Guidance assumes a meaningful tariff drag, incremental savings from new logistics systems and ongoing showroom expansion, while excluding any benefit from potential tariff refunds.
Arhaus’ latest earnings call painted a picture of a retailer navigating near‑term turbulence with long‑term ambitions intact, balancing record revenue and product strength against compressed margins and macro uncertainty. For investors, the story hinges on whether improving spring trends and technology‑driven efficiencies can offset cost pressures and deliver the back‑half recovery management is counting on.