Arhaus (NASDAQ:ARHS) Posts Q4 Sales In Line With Estimates

Arhaus, Inc. (NASDAQ: ARHS), a growing lifestyle brand and omni-channel retailer of premium artisan-crafted home furnishings, reported fourth quarter and full year 2024 results that were largely in line with market estimates. The company's net revenue for the quarter was $347 million, while full-year revenue totaled $1,271 million. Gross margin decreased by 1.8% to $139 million in the fourth quarter and by 7.3% to $501 million for the full year. Selling, general, and administrative expenses increased by 11.1% to $111 million in the fourth quarter and by 10.5% to $415 million for the full year. Net and comprehensive income for the quarter was $21 million, with full-year income totaling $69 million. Adjusted EBITDA for the quarter was $41 million, with full-year adjusted EBITDA totaling $133 million. Comparable growth for the quarter was (6.4)%, while full-year comparable growth was (8.0)%. Demand comparable growth for the quarter was 5.7%, with full-year demand comparable growth at (2.2)%.



Arhaus' showroom expansion strategy has been a significant driver of its growth, with the company expanding its footprint to 103 locations across 30 states and all four geographic regions. The company plans to open an average of five to seven new Traditional Showrooms annually, along with additional Design Studios and showroom relocations, aiming for a total of 165 Traditional Showrooms. This expansion has allowed Arhaus to reach a larger customer base, enhance brand visibility, and attract new customers who may not have been aware of the company previously.



However, Arhaus' gross margin compression is a concern, as it has decreased by 7.3% for the full year. This margin compression is likely attributable to the company's accelerated expansion rather than fundamental deterioration. Arhaus' balance sheet strength, with $198 million in cash and zero debt, represents approximately 12% of its market cap and provides substantial flexibility to weather potential economic headwinds while continuing strategic investments. The company's long-term strategy remains focused on opening an average of five to seven new Traditional Showrooms annually, along with additional Design Studios and showroom relocations, aiming for a total of 165 Traditional Showrooms.

In conclusion, Arhaus' Q4 and full-year 2024 results were largely in line with market estimates, with the company's aggressive showroom expansion strategy driving growth. However, the company's gross margin compression is a concern, and Arhaus must address this issue to maintain its long-term profitability. With a strong balance sheet and a clear growth strategy, Arhaus is well-positioned to capitalize on growth opportunities in the premium home furnishings sector.