Arhaus, Inc. Q4 FY2024 earnings call

Showroom Expansion: 2024 was a record year for showroom growth with 11 new openings and 5 strategic relocations, reaching 103 showrooms across 30 states. Highlights included new showrooms in Greenwich, OKC, Palm Desert, LA, and Corte Madera, plus a relaunched Naples showroom. Long-term strategy aims for 165 traditional showrooms. ### Product Innovation: Focus on design and product innovation, with new wood furniture selections, customizable designs, and power motion furniture. Partnerships with global artisans and dedication to craftsmanship. ### Supply Chain: Diversified global supply network with the US being the largest net revenue contributor. Dynamic sourcing strategy to mitigate geopolitical and tariff risks. ### Key Pillars: Long-term strategy includes increasing brand awareness via omnichannel approach, expanding showroom footprint, enhancing omnichannel capabilities/technology, and investing in growth to build scale and margins.

Net revenue breakdown shows the United States accounts for the largest share of net revenue, with the remainder distributed across multiple countries. In the fourth quarter, net revenue was $347 million, up 0.9% year-over-year. Full year 2024 net revenue was $1.271 billion, down 1.3% year-over-year. Fourth quarter gross margin was $139 million, a decrease of $2 million or 1.8%, while full year gross margin was $501 million, a decrease of $39 million or 7.3%. Fourth quarter SG&A expense was $111 million, an increase of $11 million or 11.1%, and full year SG&A expense was $415 million, an increase of $39 million or 10.5%.

Full Year 2025: Anticipates net revenue between $1.36 billion and $1.40 billion (comparable growth 0%-3%), adjusted EBITDA between $140 million and $150 million. ### First Quarter 2025: Anticipates net revenue between $303 million and $323 million (comparable growth -6% to +1%), adjusted EBITDA between $17 million and $27 million. Guidance reflects conservative assumptions on macro factors like housing market and includes potential tariff impacts.

Geopolitical and Tariff Risks: Dynamic supply chain faces risks from geopolitical events, tariff changes, and market conditions. ### Macroeconomic Uncertainties: Uncertainty in housing market and broader economic conditions could impact demand. ### Competitive Pressures: Fierce competition in the premium home furnishings market, including promotional environments.

Q: Speak to the line of product newness in 2025 and inventory status?

A: John Reed stated 2025 product lineup is solid with new styles, designs, and colors, keeping pace with changing consumer tastes. Inventory is up due to new showrooms, expanding categories, and ramping up for the outdoor season.

Q: How did demand trend across price points in Q4?

A: Jennifer Porter said pricing strategy focused on value, with Q4 demand showing traction across price points, pleased with results, and promotional environment met expectations.

Q: Thoughts on store openings for 2025?

A: John Reed mentioned targeting 5 new showrooms in 2025, with locations in areas like Pasadena, Ohio, etc., and focus on great locations that align with brand strategy.

Q: Explain the comp outlook for 2025 and macro assumptions?

A: Jennifer Porter said comp outlook is conservative, focusing on primary drivers like light remodels and considering housing market as a factor but not the largest driver.

Q: Talk about EBITDA guide and incremental spend?

A: Ryan Brody explained EBITDA guide factors in system investments, showroom expansion costs, and potential tariff impacts, with incremental spend related to strategic growth initiatives.