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Arhaus, Inc.

ARHS
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Business Summary

Arhaus, Inc. is a premium home furnishings brand founded in 1986 by John Reed, its CEO, and his father. The company operates a vertically integrated model, encompassing product design, direct sourcing from skilled artisans and manufacturing vendors globally, and domestic upholstery production at its North Carolina facility. This model allows Arhaus to offer an exclusive and customizable assortment of heirloom-quality furniture and décor. The United States premium home furnishings market is estimated to be approximately $100 billion , which Arhaus believes is highly fragmented and offers significant opportunity for market share expansion.

Arhaus positions itself to grow market share through its differentiated brand, scale, and resonance with affluent clients who prioritize quality, craftsmanship, and design. The company's competitive strengths include a design-led, artisan-crafted concept delivering livable luxury, a highly experiential and integrated omni-channel model, industry-leading personalization and customization capabilities, and strong direct global sourcing relationships. Over 90% of its products, based on net revenue in 2025 , are exclusive to Arhaus. The company's upholstery assortment is approximately 70% domestically sourced based on merchandise receipts in 2025 , with a significant portion produced at its own North Carolina manufacturing facility.

The company generates revenue through its integrated omni-channel model, which connects Showrooms, interior design services, eCommerce, and catalogs. Its primary customer segments include core customers, those working with Arhaus interior designers, and trade professionals. Interior designer-assisted projects typically yield average order values (AOVs) over four times higher than standard orders, with approximately 40% of these clients becoming repeat purchasers . The omni-channel model is designed to support higher client engagement, repeat behavior, and durable revenue growth.

Arhaus offers a broad range of product assortments across categories such as furniture, outdoor, bath, lighting, textiles, and décor. This enables clients to furnish entire homes through a single brand. Specific product examples include bedroom, dining room, living room, and home office furnishings, as well as outdoor dining sets, chaises, lighting, and fire pits. Bath products include vanities, storage, faucets, hardware, and Turkish bath towels. Lighting includes chandeliers, pendants, table and floor lamps, and sconces. Textiles cover handcrafted indoor and outdoor rugs, bed linens, pillows, and throws. Décor ranges from wall art and mirrors to vases and candles. The company maintains relationships with nearly 400 vendors , with its top 10 vendors, including its internal manufacturer, representing approximately 50% of its net revenue in 2025 . Only one external vendor accounts for more than 10% of net revenue, and two others each account for more than 5% .

For the fiscal year ended December 31, 2025, Arhaus reported net revenue of $1,379,222 thousand , an increase of 8.5% from $1,271,107 thousand in 2024. Gross margin was $536,408 thousand , representing 38.9% of net revenue . Operating income was $88,886 thousand , resulting in an operating margin of 6.4% of net revenue . Net and comprehensive income was $67,256 thousand , or 4.9% of net revenue . Basic earnings per share were $0.48 , and diluted earnings per share were $0.48 . Net cash provided by operating activities was $136,848 thousand . As of December 31, 2025, cash and cash equivalents totaled $253,356 thousand . The company had no borrowings on its revolving credit facility and total liabilities of $976,518 thousand .

Comparing 2025 to 2024, net revenue increased by $108.1 million , or 8.5% . This growth was primarily driven by $64.4 million of revenue from Showrooms opened in 2024 and 2025 , with the remainder from increased product demand. Gross margin increased by $35.2 million , or 7.0% , but decreased as a percentage of net revenue by 50 basis points to 38.9% from 39.4% . This percentage decrease was mainly due to a 60 basis point increase in Showroom occupancy costs , partially offset by a 40 basis point decrease in delivery and transportation costs . Selling, general and administrative (SG&A) expenses increased by $32.0 million , or 7.7% , to $447.4 million , but decreased as a percentage of net revenue by 30 basis points to 32.4% from 32.7% . Net and comprehensive income decreased by $1.3 million to $67.3 million .

During the reported period, Arhaus opened 12 Showrooms and closed 7 for relocations, along with 1 permanent closure, resulting in 107 Showrooms open at the end of 2025 . The company transitioned its Dallas, Texas distribution center, previously managed by a third-party logistics provider, to Arhaus management in 2025 . In October 2025, the company amended its 2021 Credit Facility to extend the maturity date from November 8, 2026, to October 17, 2030 , and increased the letter of credit commitment to $15 million . An irrevocable standby letter of credit for $5.1 million was issued in May 2025. The company also hired Michael Rengel as Chief Merchandising Officer in February 2026 , Michael Lee as Chief Financial Officer in 2025 , and Allison Sutley as Chief Information Officer in 2025 .

Business Outlook

Arhaus anticipates total capital expenditures, net of landlord contributions, to be approximately $70.0 million to $90.0 million in fiscal year 2026 . These expenditures are primarily allocated towards new Showrooms and investments in information technology and systems infrastructure.

A major growth vector for Arhaus is the expansion of its Showroom footprint. As of December 31, 2025, the company operated 107 Showrooms across 31 states . Based on its analysis, Arhaus has identified approximately 165 total locations in the United States that could support Traditional Showrooms and approximately 50 total locations that could support Design Studios . This expansion strategy is disciplined, market-by-market, with rigorous evaluation of location, format, and customer demographics. The company believes this significant whitespace opportunity in both existing and new markets will increase brand awareness, engagement, and conversion, driving sustainable growth.

Another key growth area is the continued investment in scalable infrastructure, distribution, and delivery. The company manages its distribution through centers in Boston Heights, Ohio; Dallas, Texas; and Conover, North Carolina . The Dallas facility was transitioned to Arhaus management in 2025 . These multi-year investments in technology, distribution, and manufacturing are designed to support growth, improve operational efficiency, and enhance client experience.

Regarding operational outlook, Arhaus is undertaking a multi-year transformation to modernize its IT infrastructure. This includes implementing a new enterprise resource planning (ERP) system, an order management system, and a transportation management system . The total incremental investment for these technology upgrades is expected to be approximately $30 million , covering implementation, project staffing, and licensing fees through 2030. Cash outflows for these upgrades were approximately $1 million in 2025 , with an anticipated $12 million in 2026 and $10 million in 2027 . Cash outflows are expected to taper in early 2028, transitioning to annual licensing and maintenance costs of approximately $2 million per year through 2030 .

For capital allocation, the company's primary cash needs are for merchandise inventories, payroll, marketing, Showroom rent, capital expenditures for new and renovated Showrooms, and infrastructure and information technology development. Arhaus believes its operating cash flows will be sufficient to meet working capital requirements and other capital needs for at least the next 12 months . The company's debt-free balance sheet and strong liquidity provide financial flexibility to invest through economic cycles. On February 17, 2026, the Board of Directors declared a special cash dividend of $0.35 per share , payable March 31, 2026 .

Risk Factors

Arhaus faces several material risks, including potential future operating losses and fluctuations in growth rates of revenue, earnings, and margins due to macroeconomic conditions, consumer confidence, and housing market health. The company's reliance on foreign manufacturers and third-party transportation carriers exposes it to international risks, supply chain disruptions, and increased costs from tariffs, trade policy changes, and volatile freight expenses. Cybersecurity threats, including data breaches and system interruptions, pose risks to sales, costs, liability, and reputation. Furthermore, the company has identified material weaknesses in its internal control over financial reporting as of December 31, 2025 , which could impact accurate and timely financial reporting. The dual-class common stock structure concentrates voting power with the Founder and Founder Family Trusts, potentially limiting other stockholders' influence and affecting the market price of Class A common stock. The company's substantial lease obligations for its Showrooms also expose it to increased financial risks, particularly if Showroom locations become unsuitable or client traffic declines.

Management Priorities

Management emphasizes a commitment to sustainable growth and profitability through disciplined execution of its operating model, supported by its omni-channel approach. The company's strategic priorities include offering premium, artisan-crafted products that differentiate the brand, expanding its Showroom footprint to enhance awareness and engagement, increasing brand awareness through immersive experiences and storytelling, maintaining an integrated omni-channel model for a connected client journey, and investing in scalable infrastructure to support growth. Management believes its operating cash flows will be sufficient to meet working capital requirements and other capital needs for at least the next 12 months . The Board of Directors declared a special cash dividend of $0.35 per share , payable March 31, 2026 , reflecting a disciplined capital allocation approach. Management also acknowledges ongoing efforts to remediate material weaknesses in internal control over financial reporting, with a multi-year initiative to modernize IT infrastructure and enhance financial reporting processes.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Overview
  2. [2] Item 1, Business — Our Premium, Artisan-Crafted Products
  3. [3] Item 1, Business — Industry-Leading Personalization and Customization
  4. [4] Item 1, Business — Interior Designer Services
  5. [5] Item 1, Business — Overview
  6. [6] Item 1, Business — Our Premium, Artisan-Crafted Products
  7. [7] Item 1, Business — Our Premium, Artisan-Crafted Products
  8. [8] Item 7, MD&A — Results of Operations
  9. [9] Item 7, MD&A — Comparison of the Years Ended December 31, 2025 and December 31, 2024
  10. [10] Item 7, MD&A — Results of Operations
  11. [11] Item 7, MD&A — Results of Operations
  12. [12] Item 7, MD&A — Other Operational Data
  13. [13] Item 7, MD&A — Results of Operations
  14. [14] Item 7, MD&A — Other Operational Data
  15. [15] Item 7, MD&A — Results of Operations
  16. [16] Item 7, MD&A — Other Operational Data
  17. [17] Item 8, Consolidated Statements of Comprehensive Income
  18. [18] Item 8, Consolidated Statements of Comprehensive Income
  19. [19] Item 7, MD&A — Cash Flow Analysis
  20. [20] Item 7, MD&A — Liquidity Outlook
  21. [21] Item 7, MD&A — Credit Facility
  22. [22] Item 8, Consolidated Balance Sheets
  23. [23] Item 7, MD&A — Net Revenue
  24. [24] Item 7, MD&A — Net Revenue
  25. [25] Item 7, MD&A — Net Revenue
  26. [26] Item 7, MD&A — Gross Margin
  27. [27] Item 7, MD&A — Gross Margin
  28. [28] Item 7, MD&A — Gross Margin
  29. [29] Item 7, MD&A — Gross Margin
  30. [30] Item 7, MD&A — Gross Margin
  31. [31] Item 7, MD&A — Gross Margin
  32. [32] Item 7, MD&A — Selling, General and Administrative Expenses
  33. [33] Item 7, MD&A — Selling, General and Administrative Expenses
  34. [34] Item 7, MD&A — Selling, General and Administrative Expenses
  35. [35] Item 7, MD&A — Selling, General and Administrative Expenses
  36. [36] Item 7, MD&A — Selling, General and Administrative Expenses
  37. [37] Item 7, MD&A — Net and Comprehensive Income
  38. [38] Item 7, MD&A — Net and Comprehensive Income
  39. [39] Item 7, MD&A — Showroom Openings and Closings
  40. [40] Item 1, Business — Investments in Scalable Infrastructure, Distribution, and Delivery
  41. [41] Item 7, MD&A — Credit Facility
  42. [42] Item 7, MD&A — Credit Facility
  43. [43] Item 7, MD&A — Credit Facility
  44. [44] Item 10, Directors, Executive Officers and Corporate Governance
  45. [45] Item 10, Directors, Executive Officers and Corporate Governance
  46. [46] Item 10, Directors, Executive Officers and Corporate Governance
  47. [47] Item 7, MD&A — Capital Expenditures
  48. [48] Item 1, Business — Showrooms and Real Estate Strategy
  49. [49] Item 1, Business — Showrooms and Real Estate Strategy
  50. [50] Item 1, Business — Investments in Scalable Infrastructure, Distribution, and Delivery
  51. [51] Item 1, Business — Investments in Scalable Infrastructure, Distribution, and Delivery
  52. [52] Item 7, MD&A — Liquidity Outlook
  53. [53] Item 7, MD&A — Liquidity Outlook
  54. [54] Item 7, MD&A — Liquidity Outlook
  55. [55] Item 7, MD&A — Liquidity Outlook
  56. [56] Item 7, MD&A — Liquidity Outlook
  57. [57] Item 7, MD&A — Liquidity Outlook
  58. [58] Item 7, MD&A — Liquidity Outlook
  59. [59] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  60. [60] Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  61. [61] Item 9A, Controls and Procedures

Analysis on 5/22/2026