Luxury furniture retailer Arhaus (NASDAQ:ARHS) missed analysts' expectations in Q2 CY2024, with revenue flat year on year at $309.8 million. Next quarter's revenue guidance of $335 million also underwhelmed, coming in 7.2% below analysts' estimates. It made a GAAP profit of $0.16 per share, down from its profit of $0.29 per share in the same quarter last year.
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Arhaus (ARHS) Q2 CY2024 Highlights:
- Revenue: $309.8 million vs analyst estimates of $314.3 million (1.4% miss)
- EPS: $0.16 vs analyst estimates of $0.12 (35.8% beat)
- Revenue Guidance for Q3 CY2024 is $335 million at the midpoint, below analyst estimates of $361.1 million
- The company dropped its revenue guidance for the full year from $1.35 billion to $1.27 billion at the midpoint, a 5.9% decrease
- EBITDA guidance for the full year is $135 million at the midpoint, below analyst estimates of $190.8 million
- Gross Margin (GAAP): 40.1%, down from 51.1% in the same quarter last year
- EBITDA Margin: 12.9%, down from 20.4% in the same quarter last year
- Free Cash Flow of $11.25 million, down 62.3% from the same quarter last year
- Locations: 100 at quarter end, up from 85 in the same quarter last year
- Same-Store Sales fell 7.1% year on year (-0.8% in the same quarter last year)
- Market Capitalization: $1.94 billion
With an aesthetic that features natural materials such as reclaimed wood, Arhaus (NASDAQ:ARHS) is a high-end furniture retailer that sells everything from sofas to rugs to bookcases.
Home Furniture Retailer
Furniture retailers understand that ‘home is where the heart is’ but that no home is complete without that comfy sofa to kick back on or a dreamy bed to rest in. These stores focus on providing not only what is practically needed in a house but also aesthetics, style, and charm in the form of tables, lamps, and mirrors. Decades ago, it was thought that furniture would resist e-commerce because of the logistical challenges of shipping large furniture, but now you can buy a mattress online and get it in a box a few days later; so just like other retailers, furniture stores need to adapt to new realities and consumer behaviors.
Sales Growth
Arhaus is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 20.7% over the last five years was exceptional as it added more brick-and-mortar locations and increased sales at existing, established stores.
This quarter, Arhaus missed Wall Street's estimates and reported a rather uninspiring 1% year-on-year revenue decline, generating $309.8 million in revenue. The company is guiding for revenue to rise 2.7% year on year to $335 million next quarter, improving from the 1.9% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 11.9% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Arhaus has generated solid demand for its products over the last two years. On average, the company's same-store sales have grown by a healthy 12% year on year. This performance suggests that its steady rollout of new stores could be beneficial for shareholders. When a company has strong demand, more locations should help it reach more customers seeking its products.
In the latest quarter, Arhaus's same-store sales fell 7.1% year on year. This decrease was a further deceleration from the 0.8% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Arhaus's Q2 Results
We were impressed by how significantly Arhaus blew past analysts' EPS expectations this quarter. On the other hand, it cited a soft consumer landscape and lowered its full-year revenue and EBITDA guidance, which fell short of Wall Street's estimates. This quarter featured some positives but the outlook could have been better. The stock traded down 5.1% to $13.15 immediately after reporting.
Arhaus may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.