Luxury furniture retailer Arhaus (NASDAQ: ARHS) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 8% year on year to $344.6 million. Guidance for next quarter’s revenue was optimistic at $351 million at the midpoint, 2% above analysts’ estimates. Its GAAP profit of $0.09 per share was in line with analysts’ consensus estimates.
Is now the time to buy ARHS? Find out in our full research report (it’s free for active Edge members).
Arhaus (ARHS) Q3 CY2025 Highlights:
- Revenue: $344.6 million vs analyst estimates of $337.7 million (8% year-on-year growth, 2% beat)
- EPS (GAAP): $0.09 vs analyst estimates of $0.08 (in line)
- Adjusted EBITDA: $31.24 million vs analyst estimates of $29.46 million (9.1% margin, 6% beat)
- Revenue Guidance for Q4 CY2025 is $351 million at the midpoint, above analyst estimates of $344.1 million
- EBITDA guidance for the full year is $140 million at the midpoint, in line with analyst expectations
- Operating Margin: 4.8%, up from 3.3% in the same quarter last year
- Locations: 103 at quarter end, up from 101 in the same quarter last year
- Same-Store Sales rose 4.1% year on year (-9.2% in the same quarter last year)
- Market Capitalization: $1.33 billion
StockStory’s Take
Arhaus delivered third quarter results that met market expectations, with revenue growth attributed to a strong product lineup and disciplined execution. Management highlighted the success of the Fall 2025 Collection, which achieved record demand, particularly in upholstery and custom orders. CEO John Reed emphasized the impact of new product launches on client engagement and order values, noting that the in-home design program continued to boost customer loyalty and conversion rates. The company's ability to control design and production through domestic sourcing also played a role in maintaining lead times and margin discipline despite ongoing tariff challenges.
Looking forward, Arhaus is banking on new product introductions and continued showroom expansion to sustain its momentum. Management described plans for further innovation in its product assortment, including upcoming collections designed to distinguish the brand in the premium market. CFO Michael Lee acknowledged that macroeconomic uncertainty and shifting tariff policies will remain headwinds, but noted that strategic pricing actions and sourcing diversification are expected to help protect margins. The company is also investing in a digital transformation initiative to drive operational efficiencies and support long-term growth.
Key Insights from Management’s Remarks
Management attributed Arhaus' third quarter performance to a combination of strong product innovation, showroom expansion, and resilient demand from high-end clients despite a dynamic macro environment.
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Fall Collection Success: The Fall 2025 Collection resonated with customers, leading to record-setting demand in September and strong engagement across catalog, website, and showrooms. Management credited product newness and customization as key differentiators.
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Upholstery and Custom Orders: Upholstery remained a core growth driver, with nearly 70% sourced domestically, supporting control over quality and lead times. Custom orders reached their highest levels, reflecting consumer appetite for personalization.
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In-Home Design Impact: The in-home designer program delivered its best month ever, with clients using these services generating order values approximately four times higher than average, reinforcing the importance of personalized service in driving sales.
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Showroom Expansion: The opening of new showrooms, including the largest yet in Pasadena, California, contributed to increased brand awareness and client engagement. Management emphasized that nearly 90% of clients live within 50 miles of a showroom, amplifying the impact of physical locations.
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Tariff and Sourcing Strategy: Arhaus navigated tariff uncertainties through a diversified sourcing model spanning North America, Europe, and Asia. Management implemented targeted pricing actions and vendor negotiations to offset incremental tariff costs, highlighting flexibility and resilience in their supply chain.
Drivers of Future Performance
Arhaus expects upcoming quarters to be shaped by new product launches, continued showroom investments, and proactive margin management amid ongoing tariff and macroeconomic uncertainty.
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Product Pipeline Expansion: Management highlighted a robust pipeline of upcoming collections, with CEO John Reed stating that future launches will further distinguish Arhaus in terms of creativity and craftsmanship. These introductions are expected to maintain strong client demand and support revenue growth.
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Operational Efficiency Initiatives: The company is investing in a digital transformation project aimed at modernizing core operating systems. CFO Michael Lee described anticipated benefits in productivity, internal controls, and logistics, targeting a 50-basis-point reduction in SG&A by 2030 and improved order management.
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Tariff Mitigation and Pricing: Arhaus faces rising tariff costs but plans to offset these through a mix of operational efficiencies, vendor collaboration, and selective pricing increases. Management indicated that new products are being priced with tariffs in mind, and ongoing supply chain flexibility will be key to sustaining margins.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the sales performance and client reception of new product collections and expanded categories, (2) the execution and benefits of the digital transformation initiative aimed at driving operational efficiencies, and (3) Arhaus' ability to manage tariff pressures through sourcing flexibility and pricing strategies. The pace of showroom expansion and evolving macroeconomic trends will also be important indicators of sustained growth.
Arhaus currently trades at $9.41, down from $9.73 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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