Arhaus, Inc. Q3 FY2025 earnings call

• John Reed reported a strong quarter with net revenue at $345M, up 8% y-o-y, highest Q3 net revenue in company history. Driven by showroom footprint growth and demand. - Fall 2025 Collection was the strongest launch, resonating with clients, blending modern and traditional silhouettes with natural materials. - Showroom expansion: Opened largest traditional showroom in Pasadena, CA in October and first Montana Showroom in Bozeman this month. - Sustainability commitment: Furniture should be responsibly sourced, lovingly made, built to last. - Key themes: People and culture are a driving force, unique sourcing model with artisans/vendors, growth strategy focused on disciplined profitability, operational strength and agility, and resilient high-end client base.

Net revenue for the quarter was $345 million, up 8% year-over-year, marking the highest third quarter net revenue in Arhaus' history. Comparable growth was 4.1%, and demand comparable growth was 7.4%. The Fall 2025 Collection was the strongest launch in company history. Upholstery delivered exceptional performance in September, with nearly 70% sourced domestically. Custom orders achieved record performance in September, and the in-home design program had record performance in September, with clients using it generating order values roughly 4x higher than those without. Revenue contribution from various product segments wasn't explicitly broken down by percentage, but the focus was on the overall net revenue growth and product-specific drivers.

• Updated 2025 outlook: Net revenue between $1.35 billion and $1.38 billion (6.2%-8.6% y-o-y growth), net income $58M-$68M, adjusted EBITDA $135M-$145M. - Q4 2025: Net revenue between $336 million and $366 million (down 3.3% to up 5.4% y-o-y), net income $6M-$16M, adjusted EBITDA $25M-$35M. The outlook reflects momentum in Q3 but cautiousness due to macro uncertainty.

• Tariff impacts: Estimated $12M net of mitigation in 2025, $50M-$60M in 2026. - Macro environment uncertainties affecting demand, including consumer sentiment and housing market conditions.

Q: Julio Marquez asks about the Bath collection feedback and store evolution.

A: John Reed says the Bath collection is doing well and they're working on the next wave, and John Reed and Michael Lee discuss store evolution, with Michael Lee mentioning benefits of new showrooms and trade business ramp-up.

Q: Andrew Carter asks about the October demand drop and underlying comparable demand.

A: Michael Lee and Jennifer Porter respond, talking about Q3 momentum, September record demand, promotional calendar shifts, and client engagement in Q4.

Q: Unknown Analyst asks about tariff impact and mitigation arrows.

A: Michael Lee and John Reed discuss the 3-point tariff mitigation plan, sourcing, productivity savings, and focus on not sacrificing quality, with John Reed emphasizing growing domestic upholstery business.

Q: Jeremy Hamblin asks about CapEx guide reduction and industry pricing.

A: Michael Lee talks about CapEx guide change due to management changes and showroom project timing, and Jennifer Porter discusses industry pricing, focusing on Arhaus' own strategy and product excitement.

Q: Mattie Chick asks about tariff costs in Q3 and 4Q systems investments.

A: Michael Lee discusses tariff impact flow-through and systems investment breakdown, highlighting technology initiative benefits and AI role.

Q: Seth Sigman asks about demand run rate and price changes.

A: Michael Lee and Jennifer Porter talk about demand volatility due to macro backdrop, deferred demand being normal, and price changes being item-by-item with focus on client value.