Arhaus (ARHS) Q1 Earnings Beat Estimates, Revenues Decline Y/Y

Arhaus, Inc. ARHS reported first-quarter 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. However, both metrics declined from the year-ago quarter. The company saw a decline in comparable growth of 9.5% in the first quarter of 2024.

However, ARHS is actively expanding its physical and digital presence, opening showrooms in strategic locations and enhancing its e-commerce platform to improve customer experience. The company is optimistic about its performance for the remainder of 2024 and into 2025, buoyed by strong consumer demand for its diverse range of high-quality, handcrafted products.

Investments in new warehouse management systems aim to increase operational efficiency, aligning with ongoing efforts to drive sales and improve service delivery in both physical and online markets.

Arhaus, Inc. Price, Consensus and EPS Surprise

 

Arhaus, Inc. Price, Consensus and EPS Surprise

Arhaus, Inc. price-consensus-eps-surprise-chart | Arhaus, Inc. Quote

Q1 Performance in Detail

Arhaus posted earnings of 11 cents a share in the first quarter, beating the Zacks Consensus Estimate of 2 cents. This compares with earnings of 25 cents a year ago.

Net revenues were $295.2 million, down 3.1% year over year. However, the top line surpassed the Zacks Consensus Estimate of $263 million.

The gross profit amounted to $115.1 million, down 10.3% from the $128.2 million reported in the year-ago quarter. The gross margin contracted 310 basis points (bps) to 39%. The downside can be attributed to lower net revenues and higher Showroom costs as the company continues to expand its footprint.

Selling and administrative expenses rose 16.8% year over year to $96.7 million. This increase was mainly due to higher selling expenses associated with new Showrooms and robust demand, elevated corporate expenses as the company continues to invest in strategic initiatives to support and fuel business growth, and rising warehouse costs as the Dallas location enhances its productivity. We note that, as a percentage of net revenues, selling and administrative expenses increased 560 bps to 32.8%.

Adjusted EBITDA declined 46.9% to $29.1 million from $54.8 million in the first quarter of 2024. The adjusted EBITDA margin slipped 810 bps to 9.9% in the quarter under review.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Financial Details

Arhaus ended the quarter with cash and cash equivalents totaling $233.2 million as of Mar 31, 2024. The company has no long-term debt. Net cash provided by operating activities was $37 million for the three months ended Mar 31, 2024, compared with $11 million for the three months ended Mar 31, 2023.

Guidance

For the second quarter of 2024, Arhaus expects net revenues of $310-$320 million. Comparable growth is anticipated between a 9% and a 7% year-over-year decline. Management expects a net income of $14-$18 million. Adjusted EBITDA is likely to be $33-$38 million.

For 2024, Arhaus expects net revenues of $1.33-$1.37 billion. In 2023, Arhaus reported net revenues of $1.3 billion. Comparable growth is anticipated between a 4% and a 2% year-over-year decline. Management expects a net income of $95-$105 million.

Adjusted EBITDA is likely to be $185-$200 million. The effective tax rate is estimated at ~26% for 2024.

Management anticipates a capital expenditure of $80-$100 million for 2024. In 2024, the company intends to open between nine and 11 Showrooms and will also renovate, relocate and expand several existing locations.

Shares of this Zacks Rank #3 (Hold) company have gained 28% in the past three months against the industry's decline of 2.3%.

Key Picks

Some better-ranked stocks in the same space are The Gap, Inc. GPS, American Eagle Outfitters Inc. AEO and Abercrombie & Fitch Co. ANF.

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for GPS’s current fiscal-year earnings and sales indicates declines of 0.3% and 4.9%, respectively, from the year-ago period’s reported figures. GPS has a trailing four-quarter average earnings surprise of 180.9%.

American Eagle is a specialty retailer of casual apparel, accessories and footwear. The company currently has a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for American Eagle’s current fiscal-year earnings and sales indicates growth of 12.5% and 3.4%, respectively, from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company presently has a Zacks Rank of 2. ANF has a trailing four-quarter average earnings surprise of 715.6%.

The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 20.1% and 5.9%, respectively, from the year-ago period’s reported figures.

Buy 5 Stocks BEFORE Election Day

Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).

Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.

They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S. 

Don’t Wait. Download FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report

The Gap, Inc. (GPS) : Free Stock Analysis Report

Arhaus, Inc. (ARHS) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.