Arhaus has gotten torched over the last six months - since February 2025, its stock price has dropped 24.2% to $8.76 per share. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Arhaus, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Arhaus Not Exciting?
Even though the stock has become cheaper, we don't have much confidence in Arhaus. Here are three reasons why we avoid ARHS and a stock we'd rather own.
1. Shrinking Same-Store Sales Indicate Waning Demand
Same-store sales is an industry measure of whether revenue is growing at existing stores, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Arhaus’s demand has been shrinking over the last two years as its same-store sales have averaged 5.4% annual declines.
2. Fewer Distribution Channels Limit its Ceiling
With $1.29 billion in revenue over the past 12 months, Arhaus is a small retailer, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with suppliers. On the bright side, it can grow faster because it has more white space to build new stores.
3. Shrinking Operating Margin
Operating margin is a key profitability metric because it accounts for all expenses necessary to run a store, including wages, inventory, rent, advertising, and other administrative costs.
Analyzing the trend in its profitability, Arhaus’s operating margin decreased by 5 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 5.8%.
Final Judgment
Arhaus isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 17.6× forward P/E (or $8.76 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of our top software and edge computing picks.
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