Arhaus NASDAQ: ARHS reported first-quarter fiscal 2026 results that management said marked the highest first-quarter net revenue in the company’s history, while acknowledging a tougher demand backdrop tied to weather disruption, delayed marketing, and heightened macro and geopolitical uncertainty.
Net revenue rose 0.9% year over year to $314 million, Chief Financial Officer Michael Lee said, landing above the midpoint of the company’s guidance range. Founder, Chairman, and CEO John Reed said the company delivered the quarter’s performance “despite several temporary headwinds,” including weather-driven showroom disruptions, a delayed spring catalog, and the onset of the conflict in Iran that contributed to more cautious consumer sentiment.
Quarter results and demand trends
Lee said gross profit was $114 million, down 1% from last year, with gross margin declining 70 basis points to 36.4%. He attributed the margin pressure primarily to higher fuel prices (40 basis points) and higher showroom occupancy costs (40 basis points). Selling, general and administrative expenses rose 1.9% to $112 million, driven by a $1.9 million increase “primarily related to strategic investments to support and drive the growth of the business, including supply chain and technology improvements and other corporate expenses.”
Net income was $2.2 million and adjusted EBITDA was $18 million, both within guidance, Lee said, noting the seasonal impact to first-quarter margins due to lower operating leverage.
On demand, the company’s comparable delivered sales fell 1.7%, while comparable written sales decreased 5.7% during the quarter. Reed said the caution was “most visible” in comparable written sales, which he characterized as down a little over 5% and driven by temporary factors rather than structural changes in the business.
Lee added detail on the weather impact, saying that more than half of the company’s showrooms experienced temporary closures during the quarter. In response to an analyst question, he said the closures reduced selling days by about 4% for the quarter, including “60 showrooms close for 5 days in January,” plus additional closures later in January and February.
Management said trends improved as the quarter progressed. Lee said comparable written sales improved “meaningfully in the back half of March,” supported by “elevated promotional activity” that drove stronger engagement and conversion. Reed also pointed to improving momentum “through April and into May,” which he said provided confidence heading into the second quarter. In Q&A, Lee stated that demand in April “absolutely has turned positive,” and said April and May were performing ahead of some internal forecasts, describing the recovery as “more like a V-shaped recovery.”
Strategy: product, showrooms, and client channels
Reed reiterated a long-term growth framework centered on five drivers, beginning with product innovation. He said Arhaus is in “one of the strongest periods of product innovation in our history,” describing a broader design shift toward “richer colors, patterns, architectural silhouettes, and layered textures.” Reed emphasized customization and domestic upholstery sourcing as competitive advantages, citing “hundreds of silhouettes and more than 700 fabrics and leathers.”
During Q&A, Reed said the company accelerated the launch of certain products and that results have been “phenomenal,” though he noted the company is “playing catch up to get them to all stores.” Chief Marketing and Ecommerce Officer Jennifer Porter added that the delayed marketing involved the company’s 228-page “big book” catalog, which she described as the key vehicle for introducing new product into customers’ homes. Porter said the early summer catalog was delivered at the end of March, and that the company was “really excited” to build on early engagement going into the outdoor season.
Reed also highlighted the company’s showroom growth strategy. Arhaus operates 108 showrooms, including a traditional showroom in Ashburn, Virginia, that opened “just last month,” and an expansion of the Park Meadows showroom in Lone Tree, Colorado, completed “just this week.” Reed said the company expects to complete approximately 10 to 14 showroom projects in 2026, including four to six new openings and six to eight relocations, renovations, or expansions.
On client engagement, Reed pointed to three channels: core customers, projects supported by Arhaus interior designers, and trade partners. He said Arhaus interior designers represented a “significant %” of total written sales in the first quarter and that the company expects that contribution to grow. Reed also cited momentum in trade and described a redesigned Arhaus Trade program intended to strengthen relationships with design professionals, builders, and developers.
In Q&A, Reed said the updated trade program gives professionals a choice between compensation structures: “We were giving them basically a commission… and now we’ve offered them a discount instead. One or the other. They get to choose.” He said early response has been “phenomenal,” while acknowledging the program had been live only around 30 days.
Investments in distribution and technology
Lee said the company is making progress on distribution and technology initiatives designed to improve operational efficiency, enhance the customer experience, and strengthen internal controls. He highlighted the April go-live of phase 1 of a new transportation management system (TMS). Lee said the company is nearing the end of its “hypercare” phase and expects to be fully operational shortly.
According to Lee, the TMS is expected to deliver benefits over time, including cost efficiencies through load optimization and route planning, greater operational visibility through real-time tracking, and improved integration across the broader distribution network.
In Q&A, Lee said early indicators show improvements in key performance indicators, and he estimated the full TMS program could provide $4 million to $5 million of annualized benefits over time, with $1 million to $2 million modeled for fiscal 2026. He said Arhaus’ order management system (OMS) and enterprise resource planning (ERP) initiatives remain on schedule and on budget, with the company “still tracking for a Q1 launch on both of those systems.”
Balance sheet, inventory, tariffs, and supply chain commentary
Arhaus ended the quarter with $177 million in cash and cash equivalents, down 30% from December 31, 2025. Lee said the decline primarily reflected a $49 million special cash dividend paid in March. Net merchandise inventory totaled $369 million, up 9% from year-end, driven by higher product costs, tariff impacts, and inventory investments in best sellers, new product introductions, and outdoor assortments. Excluding the tariff impact, inventory would have increased about 6%, Lee said.
On tariffs, Lee said policy remains fluid, citing a Supreme Court ruling related to certain IEEPA tariffs and the rollout of a CBP refund process. He said the company is evaluating the administrative process for refunds, but added that guidance does not include any potential IEEPA refund benefits. Based on current policy, Lee reiterated an estimate for 2026 tariff impacts of $30 million to $40 million, reflecting benefits from vendor negotiations, sourcing shifts, and operational efficiencies.
Asked about potential foam shortages tied to a Texas chemical plant incident, Lee said the company was “very comfortable, confident with our foam supply” and was not expecting disruption, though he noted some cost pressure on foam that he characterized as a small part of overall product cost.
Guidance reiterated; second-quarter outlook reflects uncertainty
Lee reiterated full-year fiscal 2026 guidance, calling the environment “challenging” but stating the company remains confident in its outlook. Arhaus continues to expect:
- Net revenue: $1.43 billion to $1.47 billion (3.7% to 6.6% growth)
- Comparable delivered sales: flat to +3%
- Net income: $66 million to $75 million
- Adjusted EBITDA: $150 million to $161 million
For the second quarter of 2026, the company forecast net revenue of $350 million to $370 million (down 2.4% to up 3.2%), comparable delivered sales of -5% to flat, net income of $19 million to $24 million, and adjusted EBITDA of $40 million to $49 million.
Lee said the second-quarter outlook reflects a range of outcomes given ongoing uncertainty and a difficult comparison to the prior year, when delivered comps were up 10.5% in the second quarter, supported by the “early ramp of Dallas” following the insourcing of the Dallas distribution center. He said that five weeks into the quarter, the company was “trending toward the high end” of its second-quarter guidance range.
On profitability assumptions, Lee said fuel and logistics costs remain a key source of uncertainty. In response to questions about gross margin expectations, he said the company was being “a little bit cautious” given fuel price dynamics and described a lag between mitigation actions and when they appear in the profit and loss statement.
Reed closed by emphasizing the company’s balance sheet and flexibility, stating Arhaus is “debt-free and operating from a position of strength.”
About Arhaus NASDAQ: ARHS
Arhaus NASDAQ: ARHS is a U.S.-based retailer specializing in high-end home furnishings and décor. Since its founding in 1986 in northeastern Ohio, the company has built a reputation for curating unique, design-forward products that blend contemporary aesthetics with artisanal craftsmanship. Headquartered in Boston Heights, Ohio, Arhaus operates a network of brick-and-mortar galleries across the United States alongside a robust e-commerce platform, serving customers from coastal metropolitan areas to interior regions.
The company’s product portfolio encompasses a wide range of furniture categories—including sofas, dining tables, bedroom pieces and storage solutions—complemented by lighting fixtures, rugs, pillows, wall art and decorative accessories.
Further Reading
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