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Arhaus, Inc. (ARHS - Free Report) reported second-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate and the top line missed the same. Both metrics improved from the year-ago quarter. The company saw demand in comparable growth of 11.6% in second quarter of 2023.
With a successful first half of 2023, Arhaus has refined its projections for the full year by increasing the outlook for net income and adjusted EBITDA and narrowing the net revenue outlook.
The company is continuing to execute its Showroom expansion plans for this year, including the addition of three Showrooms in the second quarter of 2023 in Naperville, IL, Topanga, CA, and Grapevine, TX. The performances of these new Showrooms are highly satisfactory to Arhaus. Furthermore, a Showroom was opened in Peabody, MA.
Arhaus posted earnings of 29 cents a share in the second quarter, beating the Zacks Consensus Estimate of 26 cents. This compares to earnings of 28 cents per share a year ago.
Net revenues were $312.9 million, up 2.2% year over year. However, the top line missed the Zacks Consensus Estimate of $326.3 million.
Although Arhaus achieved strong earnings during this quarter, net revenues lagged management expectations. This can be attributed to delivery delays as the company scales its distribution and IT systems in response to rapid and substantial growth experienced over the past few years.
Image Source: Zacks Investment Research
The gross profit amounted to $140.1 million, up from the $133 million reported in the year-ago quarter. The upside can be attributed to higher revenues. The gross margin expanded 140 basis points (bps) to 44.8%. The metric benefited from higher net revenues and lower product costs, partially offset by higher fixed Showroom costs and credit card fees related to increased interest rates and demand.
Selling and administrative expenses rose 4.1% to $86 million. As a percentage of net revenues, selling and administrative expenses increased 50 bps to 27.5%. This was primarily driven by increased corporate expenses to support growth of the business and higher selling expenses related to new Showrooms and demand, partially offset by lower warehouse expenses.
Adjusted EBITDA increased 5.5% to $63.8 million compared with $60.4 million in the second quarter of 2022, driven by higher sales and an improved gross profit performance. The adjusted EBITDA margin expanded 70 bps to 20.4% in the quarter under review.
Other Financial Details
Arhaus ended the quarter with cash and cash equivalents totaling $177 million as of Jun 30, 2023. The company has no long-term debt. Net cash provided by operating activities was $62 million for the six months ended Jun 30, 2023, compared with $41 million for the six months ended Jun 30, 2022.
Guidance
Management revised its 2023 guidance. For 2023, Arhaus expects net revenues of $1,250-$1,290 million. Earlier, Arhaus expected net revenues of $1,240-$1,300 million. Comparable growth is anticipated between a 2% decline and a 1% rise year over year. Management expects a net income of $102.5-$112.5 million.
Adjusted EBITDA is likely to be $187.5-$197.5 million. Management earlier expected adjusted EBITDA of $180-$195 million. The effective tax rate is unchanged at ~26% for 2023.
Management anticipates a capital expenditure of $70-$80 million for 2023.
Arhaus anticipates opening six more Showrooms throughout the remainder of the year. It also announced a commitment to make a $10 million donation to The Nature Conservancy to support global forest conservation.
Shares of this Zacks Rank #2 (Buy) company have gained 46.1% in the past three months against the industry's decline of 2.9%.
3 Other Red-Hot Stocks to Consider
Here we have highlighted three other top-ranked stocks, namely BJ’s Restaurants (BJRI - Free Report) , Ulta Beauty Inc. (ULTA - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
BJ’s Restaurants owns and operates a chain of high-end casual dining restaurants in the United States. It currently sports a Zacks Rank #1 (Strong Buy). BJRI’s expected EPS growth rate for three to five years is 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJ’s Restaurants’ current financial-year sales and earnings suggests growth of 5.6% and 108%, respectively, from the year-ago reported numbers. BJRI has a trailing four-quarter earnings surprise of 121.1%, on average.
Ulta Beauty, which is a leading beauty retailer in the United States, currently has a Zacks Rank #2. ULTA has a trailing four-quarter earnings surprise of 15.9%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings suggests growth of 8.3% and 1.9%, respectively, from the year-ago reported numbers.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank #2. AEO’s expected EPS growth rate for three to five years is 9.6%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings suggests growth of 275% from the year-ago reported number. AEO has a trailing four-quarter earnings surprise of 9.2%, on average.
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Arhaus (ARHS) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Arhaus, Inc. (ARHS - Free Report) reported second-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate and the top line missed the same. Both metrics improved from the year-ago quarter. The company saw demand in comparable growth of 11.6% in second quarter of 2023.
With a successful first half of 2023, Arhaus has refined its projections for the full year by increasing the outlook for net income and adjusted EBITDA and narrowing the net revenue outlook.
The company is continuing to execute its Showroom expansion plans for this year, including the addition of three Showrooms in the second quarter of 2023 in Naperville, IL, Topanga, CA, and Grapevine, TX. The performances of these new Showrooms are highly satisfactory to Arhaus. Furthermore, a Showroom was opened in Peabody, MA.
Arhaus, Inc. Price, Consensus and EPS Surprise
Arhaus, Inc. price-consensus-eps-surprise-chart | Arhaus, Inc. Quote
Q2 Performance in Detail
Arhaus posted earnings of 29 cents a share in the second quarter, beating the Zacks Consensus Estimate of 26 cents. This compares to earnings of 28 cents per share a year ago.
Net revenues were $312.9 million, up 2.2% year over year. However, the top line missed the Zacks Consensus Estimate of $326.3 million.
Although Arhaus achieved strong earnings during this quarter, net revenues lagged management expectations. This can be attributed to delivery delays as the company scales its distribution and IT systems in response to rapid and substantial growth experienced over the past few years.
Image Source: Zacks Investment Research
The gross profit amounted to $140.1 million, up from the $133 million reported in the year-ago quarter. The upside can be attributed to higher revenues. The gross margin expanded 140 basis points (bps) to 44.8%. The metric benefited from higher net revenues and lower product costs, partially offset by higher fixed Showroom costs and credit card fees related to increased interest rates and demand.
Selling and administrative expenses rose 4.1% to $86 million. As a percentage of net revenues, selling and administrative expenses increased 50 bps to 27.5%. This was primarily driven by increased corporate expenses to support growth of the business and higher selling expenses related to new Showrooms and demand, partially offset by lower warehouse expenses.
Adjusted EBITDA increased 5.5% to $63.8 million compared with $60.4 million in the second quarter of 2022, driven by higher sales and an improved gross profit performance. The adjusted EBITDA margin expanded 70 bps to 20.4% in the quarter under review.
Other Financial Details
Arhaus ended the quarter with cash and cash equivalents totaling $177 million as of Jun 30, 2023. The company has no long-term debt. Net cash provided by operating activities was $62 million for the six months ended Jun 30, 2023, compared with $41 million for the six months ended Jun 30, 2022.
Guidance
Management revised its 2023 guidance. For 2023, Arhaus expects net revenues of $1,250-$1,290 million. Earlier, Arhaus expected net revenues of $1,240-$1,300 million. Comparable growth is anticipated between a 2% decline and a 1% rise year over year. Management expects a net income of $102.5-$112.5 million.
Adjusted EBITDA is likely to be $187.5-$197.5 million. Management earlier expected adjusted EBITDA of $180-$195 million. The effective tax rate is unchanged at ~26% for 2023.
Management anticipates a capital expenditure of $70-$80 million for 2023.
Arhaus anticipates opening six more Showrooms throughout the remainder of the year. It also announced a commitment to make a $10 million donation to The Nature Conservancy to support global forest conservation.
Shares of this Zacks Rank #2 (Buy) company have gained 46.1% in the past three months against the industry's decline of 2.9%.
3 Other Red-Hot Stocks to Consider
Here we have highlighted three other top-ranked stocks, namely BJ’s Restaurants (BJRI - Free Report) , Ulta Beauty Inc. (ULTA - Free Report) and American Eagle Outfitters Inc. (AEO - Free Report) .
BJ’s Restaurants owns and operates a chain of high-end casual dining restaurants in the United States. It currently sports a Zacks Rank #1 (Strong Buy). BJRI’s expected EPS growth rate for three to five years is 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJ’s Restaurants’ current financial-year sales and earnings suggests growth of 5.6% and 108%, respectively, from the year-ago reported numbers. BJRI has a trailing four-quarter earnings surprise of 121.1%, on average.
Ulta Beauty, which is a leading beauty retailer in the United States, currently has a Zacks Rank #2. ULTA has a trailing four-quarter earnings surprise of 15.9%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings suggests growth of 8.3% and 1.9%, respectively, from the year-ago reported numbers.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently has a Zacks Rank #2. AEO’s expected EPS growth rate for three to five years is 9.6%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings suggests growth of 275% from the year-ago reported number. AEO has a trailing four-quarter earnings surprise of 9.2%, on average.