Arhaus, Inc. Q1 FY2025 earnings call

• People: Building for long term with deep bench of experienced leaders, welcoming new CFO Michael Lee. • Supply chain and sourcing: Diversified sourcing across North America, Europe, South Asia; US manufacturing supports proprietary design, cost control; China receipts expected to decline. • Vendor relationships: Built on mutual trust, shared values; vendors help navigate uncertainty. • Resilient high-end client base: Over-indexed to affluent consumer less reactive to macro volatility. • Consistent strategic execution: Focus on product quality, innovation, omnichannel engagement, technology investment. • Showroom growth: Opened 11 showrooms in 2024, 28 projects in pipeline; timing driven by readiness. • Financial strength: Debt-free with $214 million cash and cash equivalents. • Omnichannel strategy: Anchored by showrooms, e-commerce, catalogs, in-home design, digital content, client personalization; designer-led services drive higher order values.

Net revenue grew 5.5% to $311 million in the first quarter. Demand comparable growth was 4.1%. Showrooms: Completed 5 total projects in Q1, with plans to complete 12-15 total showroom projects in 2025, including 4-6 new showrooms and 8-9 strategic relocations. Product: Design is core, with clients responding to warmer products, softer silhouettes, etc. Outdoor collection with premium teak, all-weather wicker, and Italian upholstered collection; upholstery remains handcrafted. Revenue contribution: Net revenue from showrooms and product segments not explicitly broken down by exact percentage but net revenue growth driven by various segments.

• Full year 2025: Net revenue $1.29B-$1.38B, comparable growth -5% to +1.5%, net income $48M-$68M, adjusted EBITDA $123M-$145M. • Q2 2025: Net revenue $320M-$350M, comparable growth -2% to +5%, net income $17M-$24M, adjusted EBITDA $41M-$48M. • Tariff impact: $10M P&L impact factored, with potential mitigation via sourcing shifts and vendor concessions. • Strategic investments: $15M-$20M in SG&A for systems and infrastructure in 2025.

• Macro volatility and consumer sentiment impact on sales. • Tariff dynamics affecting costs and pricing. • Uncertainty in trade environment impacting margin and momentum.

Q: Gross margin and occupancy leverage?

A: Occupancy deleverage in Q1 due to lower revenue; expect slight deleverage in 2025 but not as pronounced as Q1, with product margin expected to offset.

Q: Follow-up on gross margin and sales outlook?

A: Flat gross margin expected year-over-year, with second half comps easier and volume discount working; new store performance affected by opening timing.

Q: Final follow-up on showroom productivity?

A: New space productivity affected by opening timing, with consideration of when showrooms open and deliveries flow through.