Arhaus Q1 2025: Contradictions in Showroom Strategy, Margins, and Customer Demand

Showroom strategy and expansion, gross margin and promotional strategy, customer engagement and behavior, tariff impact and strategic sourcing, product demand and sales performance are the key contradictions discussed in Arhaus' latest 2025Q1 earnings call.



Revenue Growth and Market Share:
- Arhaus reported a 5.5% increase in net revenue to $311 million for the first quarter of 2025, aligning with expectations.
- The growth was driven by increased demand across both retail and e-commerce channels, supported by showroom expansion.

Supply Chain Agility and Sourcing Strategy:
- Arhaus reduced its reliance on China, with China receipts expected to decline to approximately 5% in Q3 and 1% in Q4.
- This agile sourcing strategy enabled by diversified global vendor relationships and strategic investments in domestic manufacturing.

Showroom Growth and Strategic Investments:
- The company completed five showroom projects in Q1 and plans to complete approximately 12 to 15 total showroom projects in 2025.
- Investments in infrastructure and technology, such as a new payment platform and inventory planning system, are expected to improve operational efficiency and elevate the client experience.

Tariff Mitigation and Financial Impact:
- Arhaus estimates the total potential P&L impact from 2025 tariffs to be approximately $10 million, including a 25% tariff on steel and aluminum and a 170% tariff on goods from China.
- The company is working to mitigate this impact through strategic sourcing shifts and vendor cost concessions.