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Arhaus Q3 Earnings Miss Estimates Despite Strong Sales Growth
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Key Takeaways
Arhaus' Q3 earnings fell 44.4% to 5 cents per share, missing estimates, despite a 6.8% revenue increase.
ARHS' written sales rose 13.9%, but higher SG&A expenses and transportation costs pressured profits.
Arhaus raised its 2026 revenue outlook to $1.465-$1.485 billion, driven by improving demand.
Arhaus, Inc. (ARHS - Free Report) reported third-quarter 2026 earnings of 5 cents per share, which missed the Zacks Consensus Estimate of 8 cents. The bottom line declined 44.4% from the year-ago quarter's earnings of 9 cents. Quarterly revenues increased 6.8% year over year to $368 million but fell short of the Zacks Consensus Estimate of $372 million.
The earnings shortfall reflected higher selling, general and administrative (SG&A) expenses, increased marketing and technology investments, and elevated transportation costs. Nevertheless, comparable written sales increased 13.9%, indicating strong underlying client demand.
ARHS' Comparable Written Sales Gain Momentum
Comparable written sales increased 13.9% year over year in the reported quarter, following 12.5% growth in the second quarter. Year-to-date comparable written sales jumped 6.7%. Comparable delivered sales rose 2.6%, bringing the nine-month growth rate to 1.8%.
The difference between written and delivered sales reflects the timing of order fulfillment, as revenues are recognized when merchandise reaches customers. Management highlighted broad-based demand across product categories, geographies and selling channels.
New product introductions accounted for more than one-fourth of written sales during the quarter. Expanded customization offerings, interior design services and trade-channel engagement supported customer demand.
Arhaus increased its marketing efforts during the third quarter, more than doubling distribution of its 40th anniversary fall catalog. The campaign helped increase new customer acquisition by more than 20% year over year in September.
Higher-value transactions also contributed to demand growth. Orders exceeding $25,000 increased 35% during the quarter, while transactions above $100,000 rose 30%. The company also benefited from increased order volumes and average order values.
Management attributed the encouraging response to compelling new collections, expanded customization and stronger engagement among affluent customers. The company continues targeting consumers undertaking larger home renovation and furnishing projects.
ARHS' Gross Margin Expands Despite Cost Pressures
Gross profit increased 8.2% year over year to $144.4 million, while gross margin expanded approximately 50 basis points to 39.2%. Lower product costs, improved product mix and transportation efficiencies supported profitability.
The company's transportation management system generated an 80-basis-point gross margin benefit, while higher delivery fees contributed another 20 basis points. However, fuel surcharges and showroom occupancy expenses remained headwinds. Management expects pricing actions implemented in October and transportation efficiencies to support future gross margin improvement.
Arhaus' Higher Operating Expenses Weigh on Profit
SG&A expenses increased 14.8% year over year to $134.3 million. SG&A expenses represented 36.5% of revenues, an increase of 250 basis points.
Higher variable compensation associated with strong written sales growth, increased marketing and technology spending and elevated legal expenses contributed to the increase. Management expects some compensation-related pressure to reverse as written orders convert into delivered revenues.
Operating income declined to $10.1 million from $16.4 million in the prior-year quarter. Adjusted EBITDA fell 12.3% to $27.4 million, while adjusted EBITDA margin contracted 170 basis points to 7.4%.
ARHS' Showroom Expansion and Digital Strategy Progress
Arhaus ended the quarter with 109 showrooms across 31 states compared with 107 at the end of 2025. During the quarter, the company completed two showroom projects, including a relocation in Charlotte, NC, and a renovation in Atlanta, GA.
The company continues investing in its digital platform and operational infrastructure. Its modern point-of-sale system is scheduled for initial implementation in early 2027, while enterprise resource planning and order management systems are targeted for phased implementation later that year.
Management aims to increase e-commerce penetration from approximately 16-17% currently to 25% of total revenues over the next five years. Transportation improvements are also expected to generate annualized savings of $4-$5 million at full scale.
Arhaus Raises 2026 Revenue Outlook
Management raised its full-year 2026 revenue outlook to $1.465-$1.485 billion, indicating growth of 6.2-7.7%. Comparable delivered sales are now expected to increase 2.5-4%. The company had earlier guided net revenue between $1.43 billion and $1.47 billion and comparable delivered sales in the band of down 1% to up 5%.
The company maintained its net income guidance of $71-$80 million and adjusted EBITDA outlook of $160-$171 million.
For the fourth quarter, revenues are projected at $398-$418 million, calling for growth of 9.1-14.6%. Comparable delivered sales are expected to increase 6-12%, while adjusted EBITDA is forecast at $44-$55 million.
ARHS' Balance Sheet Remains Healthy
Arhaus ended September with cash and cash equivalents of $318 million, up 25.5% from December 2025, and no long-term debt.
Merchandise inventory increased 6.4% to $360 million, while client deposits surged 37.7% to $325 million, reflecting a larger outstanding customer order base.
Net cash provided by operating activities reached $173 million during the first nine months of 2026 compared with $127.5 million in the year-ago period. Free cash flow increased to $114.8 million from $67.8 million.
Shares of this Zacks Rank #2 (Buy) company have risen 34.8% over the past three months against the industry’s decline of 0.6%.
The Zacks Consensus Estimate for Williams-Sonoma’s current fiscal-year sales and EPS implies growth of 4.1% and 7.5%, respectively, from the year-ago figures. WSM delivered a trailing four-quarter earnings surprise of 4.9%, on average.
Target Corporation (TGT - Free Report) , which operates as a general merchandise retailer, currently carries a Zacks Rank #2. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.
The Zacks Consensus Estimate for Target’s current fiscal-year sales and EPS implies growth of 4.6% and 39%, respectively, from the year-ago figures.
Wayfair Inc. (W - Free Report) , a leading online retailer of furniture and home goods, currently carries a Zacks Rank #2. Wayfair delivered a trailing four-quarter earnings surprise of 11.5%, on average.
The Zacks Consensus Estimate for Wayfair’s current fiscal-year sales and EPS calls for growth of 7.5% and 15.4%, respectively, from the year-ago figures.
View the Zacks #1 Rank List
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Arhaus Q3 Earnings Miss Estimates Despite Strong Sales Growth
Key Takeaways
Arhaus, Inc. (ARHS - Free Report) reported third-quarter 2026 earnings of 5 cents per share, which missed the Zacks Consensus Estimate of 8 cents. The bottom line declined 44.4% from the year-ago quarter's earnings of 9 cents. Quarterly revenues increased 6.8% year over year to $368 million but fell short of the Zacks Consensus Estimate of $372 million.
The earnings shortfall reflected higher selling, general and administrative (SG&A) expenses, increased marketing and technology investments, and elevated transportation costs. Nevertheless, comparable written sales increased 13.9%, indicating strong underlying client demand.
ARHS' Comparable Written Sales Gain Momentum
Comparable written sales increased 13.9% year over year in the reported quarter, following 12.5% growth in the second quarter. Year-to-date comparable written sales jumped 6.7%. Comparable delivered sales rose 2.6%, bringing the nine-month growth rate to 1.8%.
The difference between written and delivered sales reflects the timing of order fulfillment, as revenues are recognized when merchandise reaches customers. Management highlighted broad-based demand across product categories, geographies and selling channels.
New product introductions accounted for more than one-fourth of written sales during the quarter. Expanded customization offerings, interior design services and trade-channel engagement supported customer demand.
Arhaus, Inc. Price, Consensus and EPS Surprise
Arhaus, Inc. price-consensus-eps-surprise-chart | Arhaus, Inc. Quote
Arhaus' Marketing Initiatives Boost Client Engagement
Arhaus increased its marketing efforts during the third quarter, more than doubling distribution of its 40th anniversary fall catalog. The campaign helped increase new customer acquisition by more than 20% year over year in September.
Higher-value transactions also contributed to demand growth. Orders exceeding $25,000 increased 35% during the quarter, while transactions above $100,000 rose 30%. The company also benefited from increased order volumes and average order values.
Management attributed the encouraging response to compelling new collections, expanded customization and stronger engagement among affluent customers. The company continues targeting consumers undertaking larger home renovation and furnishing projects.
ARHS' Gross Margin Expands Despite Cost Pressures
Gross profit increased 8.2% year over year to $144.4 million, while gross margin expanded approximately 50 basis points to 39.2%. Lower product costs, improved product mix and transportation efficiencies supported profitability.
The company's transportation management system generated an 80-basis-point gross margin benefit, while higher delivery fees contributed another 20 basis points. However, fuel surcharges and showroom occupancy expenses remained headwinds. Management expects pricing actions implemented in October and transportation efficiencies to support future gross margin improvement.
Arhaus' Higher Operating Expenses Weigh on Profit
SG&A expenses increased 14.8% year over year to $134.3 million. SG&A expenses represented 36.5% of revenues, an increase of 250 basis points.
Higher variable compensation associated with strong written sales growth, increased marketing and technology spending and elevated legal expenses contributed to the increase. Management expects some compensation-related pressure to reverse as written orders convert into delivered revenues.
Operating income declined to $10.1 million from $16.4 million in the prior-year quarter. Adjusted EBITDA fell 12.3% to $27.4 million, while adjusted EBITDA margin contracted 170 basis points to 7.4%.
ARHS' Showroom Expansion and Digital Strategy Progress
Arhaus ended the quarter with 109 showrooms across 31 states compared with 107 at the end of 2025. During the quarter, the company completed two showroom projects, including a relocation in Charlotte, NC, and a renovation in Atlanta, GA.
The company continues investing in its digital platform and operational infrastructure. Its modern point-of-sale system is scheduled for initial implementation in early 2027, while enterprise resource planning and order management systems are targeted for phased implementation later that year.
Management aims to increase e-commerce penetration from approximately 16-17% currently to 25% of total revenues over the next five years. Transportation improvements are also expected to generate annualized savings of $4-$5 million at full scale.
Arhaus Raises 2026 Revenue Outlook
Management raised its full-year 2026 revenue outlook to $1.465-$1.485 billion, indicating growth of 6.2-7.7%. Comparable delivered sales are now expected to increase 2.5-4%. The company had earlier guided net revenue between $1.43 billion and $1.47 billion and comparable delivered sales in the band of down 1% to up 5%.
The company maintained its net income guidance of $71-$80 million and adjusted EBITDA outlook of $160-$171 million.
For the fourth quarter, revenues are projected at $398-$418 million, calling for growth of 9.1-14.6%. Comparable delivered sales are expected to increase 6-12%, while adjusted EBITDA is forecast at $44-$55 million.
ARHS' Balance Sheet Remains Healthy
Arhaus ended September with cash and cash equivalents of $318 million, up 25.5% from December 2025, and no long-term debt.
Merchandise inventory increased 6.4% to $360 million, while client deposits surged 37.7% to $325 million, reflecting a larger outstanding customer order base.
Net cash provided by operating activities reached $173 million during the first nine months of 2026 compared with $127.5 million in the year-ago period. Free cash flow increased to $114.8 million from $67.8 million.
Shares of this Zacks Rank #2 (Buy) company have risen 34.8% over the past three months against the industry’s decline of 0.6%.
Stocks Looking Red Hot
Williams-Sonoma, Inc. (WSM - Free Report) , which operates as an omni-channel specialty retailer of various products for home, currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Williams-Sonoma’s current fiscal-year sales and EPS implies growth of 4.1% and 7.5%, respectively, from the year-ago figures. WSM delivered a trailing four-quarter earnings surprise of 4.9%, on average.
Target Corporation (TGT - Free Report) , which operates as a general merchandise retailer, currently carries a Zacks Rank #2. TGT delivered a trailing four-quarter earnings surprise of 10.5%, on average.
The Zacks Consensus Estimate for Target’s current fiscal-year sales and EPS implies growth of 4.6% and 39%, respectively, from the year-ago figures.
Wayfair Inc. (W - Free Report) , a leading online retailer of furniture and home goods, currently carries a Zacks Rank #2. Wayfair delivered a trailing four-quarter earnings surprise of 11.5%, on average.
The Zacks Consensus Estimate for Wayfair’s current fiscal-year sales and EPS calls for growth of 7.5% and 15.4%, respectively, from the year-ago figures.