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Will Arhaus' Technology Investments Deliver Long-Term Margin Gains?
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Key Takeaways
ARHS launched its TMS and pulled forward its new POS rollout to the fourth quarter of 2026.
TMS is expected to generate $4-$5 million in annualized run-rate savings once fully operational.
Arhaus plans $4-$6 million of additional technology spending to accelerate modernization efforts.
Arhaus, Inc. (ARHS - Free Report) is making strategic investments in technology licensing and other costs to support its broader business transformation. These investments totaled approximately $3 million in the second quarter, and management believes they are important to strengthening the client experience, improving scalability and supporting long-term profitable growth.
Technology remains a key enabler of Arhaus’ strategy. During the second quarter, the company successfully launched its Transportation Management System (TMS), while its Enterprise Resource Planning and Order Management System implementations remain on track for a February 2027 go-live. In addition, Arhaus is pulling forward the implementation of its new modern point-of-sale (POS) platform into the fourth quarter of 2026, ahead of its original timeline. Management said that the accelerated rollout should help the company transition away from legacy systems faster and reduce deployment risk as it advances its technology roadmap.
Arhaus expects TMS benefits to contribute to its margin outlook during the balance of the year. Management is projecting approximately $4 million to $5 million of annualized run-rate savings once the system is fully operational, with some of the benefits expected to flow through in the third and fourth quarters. This savings opportunity could support margins as the anticipated TMS benefits begin to materialize.
The company expects $4 million to $6 million of incremental technology spending versus its initial digital transformation plans. The accelerated POS rollout is expected to add $2 million to $3 million to this year’s P&L, while another $2 million to $3 million is being deployed toward additional IT resources to address the backlog of initiatives and accelerate modernization efforts. These investments are creating some near-term expense pressure, but management expects the broader technology initiatives to improve operational efficiency, support sustainable growth and help expand margins over time.
The Zacks Rundown for ARHS
Shares of ARHS have rallied 48.5% over the past three months compared with the industry’s 1.3% growth. ARHS currently carries a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
From a valuation standpoint, ARHS trades at a forward price-to-earnings ratio of 17.11X, higher than the industry’s average of 15.52X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ARHS’ current fiscal year earnings implies 12.5% year-over-year growth, while the same for next fiscal year earnings implies a 3.5% year-over-year increase.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Victoria’s Secret & Co. (VSXY - Free Report) operates as a specialty retailer of women's intimate apparel and other apparel and beauty products worldwide. At present, VSXY sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VSXY’s current fiscal-year sales and earnings implies growth of 9.1% and 56.7%, respectively, from the year-ago figures. VSXY has delivered a trailing four-quarter earnings surprise of 81.9%, on average.
Five Below, Inc. (FIVE - Free Report) operates as a specialty value retailer in the United States. At present, Five Below carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings implies growth of 15.1% and 36.7%, respectively, from the year-ago figures. FIVE delivered a trailing four-quarter earnings surprise of 70.1%, on average.
Fossil Group, Inc. (FOSL - Free Report) designs, develops, markets, and distributes consumer fashion accessories in the United States, Europe, Asia, and internationally. At present, FOSL carries a Zacks Rank of 2.
The Zacks Consensus Estimate for FOSL’s current fiscal-year sales indicates a decline of 4%, while the same for earnings indicates growth of 96.7% from the year-ago figures. FOSL delivered a trailing four-quarter negative earnings surprise of 236.2%, on average.
View the Zacks #1 Rank List
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Will Arhaus' Technology Investments Deliver Long-Term Margin Gains?
Key Takeaways
Arhaus, Inc. (ARHS - Free Report) is making strategic investments in technology licensing and other costs to support its broader business transformation. These investments totaled approximately $3 million in the second quarter, and management believes they are important to strengthening the client experience, improving scalability and supporting long-term profitable growth.
Technology remains a key enabler of Arhaus’ strategy. During the second quarter, the company successfully launched its Transportation Management System (TMS), while its Enterprise Resource Planning and Order Management System implementations remain on track for a February 2027 go-live. In addition, Arhaus is pulling forward the implementation of its new modern point-of-sale (POS) platform into the fourth quarter of 2026, ahead of its original timeline. Management said that the accelerated rollout should help the company transition away from legacy systems faster and reduce deployment risk as it advances its technology roadmap.
Arhaus expects TMS benefits to contribute to its margin outlook during the balance of the year. Management is projecting approximately $4 million to $5 million of annualized run-rate savings once the system is fully operational, with some of the benefits expected to flow through in the third and fourth quarters. This savings opportunity could support margins as the anticipated TMS benefits begin to materialize.
The company expects $4 million to $6 million of incremental technology spending versus its initial digital transformation plans. The accelerated POS rollout is expected to add $2 million to $3 million to this year’s P&L, while another $2 million to $3 million is being deployed toward additional IT resources to address the backlog of initiatives and accelerate modernization efforts. These investments are creating some near-term expense pressure, but management expects the broader technology initiatives to improve operational efficiency, support sustainable growth and help expand margins over time.
The Zacks Rundown for ARHS
Shares of ARHS have rallied 48.5% over the past three months compared with the industry’s 1.3% growth. ARHS currently carries a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
From a valuation standpoint, ARHS trades at a forward price-to-earnings ratio of 17.11X, higher than the industry’s average of 15.52X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ARHS’ current fiscal year earnings implies 12.5% year-over-year growth, while the same for next fiscal year earnings implies a 3.5% year-over-year increase.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Victoria’s Secret & Co. (VSXY - Free Report) operates as a specialty retailer of women's intimate apparel and other apparel and beauty products worldwide. At present, VSXY sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VSXY’s current fiscal-year sales and earnings implies growth of 9.1% and 56.7%, respectively, from the year-ago figures. VSXY has delivered a trailing four-quarter earnings surprise of 81.9%, on average.
Five Below, Inc. (FIVE - Free Report) operates as a specialty value retailer in the United States. At present, Five Below carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for FIVE’s current fiscal-year sales and earnings implies growth of 15.1% and 36.7%, respectively, from the year-ago figures. FIVE delivered a trailing four-quarter earnings surprise of 70.1%, on average.
Fossil Group, Inc. (FOSL - Free Report) designs, develops, markets, and distributes consumer fashion accessories in the United States, Europe, Asia, and internationally. At present, FOSL carries a Zacks Rank of 2.
The Zacks Consensus Estimate for FOSL’s current fiscal-year sales indicates a decline of 4%, while the same for earnings indicates growth of 96.7% from the year-ago figures. FOSL delivered a trailing four-quarter negative earnings surprise of 236.2%, on average.