Arhaus, Inc. Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Good morning, thank you for joining us for the Arhaus second quarter 2026 earnings call.

Joining me on today's call for prepared remarks are John Reed, our Founder, Chairman, and Chief Executive Officer, and Michael Lee, our Chief Financial Officer. During Q&A, we kindly ask that you limit yourself to one question only. This will allow us to get to as many callers as possible within our one-hour window. You are welcome to re-queue for additional questions if time permits. We issued our earnings press release and Form 10-Q for the quarter ended June 30th, 2026 before the market opened today. Those documents are available on our investor relations website at ir.arhaus.com. A replay of the call will be available on our website within 24 hours. I would like to remind everyone that our remarks today concerning future expectations, events, objectives, strategies, targets, trends, or results constitute forward-looking statements.

Actual results or events may differ materially due to a number of risks and uncertainties. For a summary of these risk factors and additional information, please refer to this morning's press release and the cautionary statements and risk factors described in our most recent annual report on Form 10-K and subsequent 10-Qs as factors may be updated from time to time in our filings with the SEC. The forward-looking statements are made as of today's date, except as may be required by law, the company undertakes no obligation to update or revise these statements. We will also refer to certain non-GAAP financial measures, and this morning's press release includes the relevant non-GAAP reconciliations. Now, I will turn the call over to John. John, over to you. Thanks, Tara.

Good morning, everyone, thank you for joining us. This morning, we reported second quarter results that reflect the continued strength of the Arhaus brand and the resilience of our business. We generated record net revenue and strong comparable written sales, reflecting continued client engagement and momentum across our three customer demand channels, which is a testament to the strength of our differentiated model. While the broader environment remains dynamic, the high-end consumer continues to demonstrate resilience supported by a relatively healthy U.S. economy, solid consumer spending, and the positive wealth effects of higher stock prices. We delivered record net revenue of $385 million above the high end of our guidance range. Comparable written sales increased 12.5% in the quarter, bringing year-to-date comparable written sales to 2.8%.

Our clients remain highly engaged and continue to prioritize investments in their home, driving strong demand for our differentiated product assortment and the elevated experience Arhaus provides. Turning to products. For 40 years, Arhaus has been built on the belief that furniture and decor should be responsibly sourced, lovingly made, and built to last for generations. That philosophy continues to differentiate our brand and remains one of our strongest drivers of client demand. During the quarter, we saw strength across our assortment and collections. Clients responded to our distinctive mix of heirloom quality furnishings, globally curated designs, and handcrafted pieces made with natural materials and time-honored techniques. Strong written sales reflected continued interest in new product introductions alongside our extensive customization capabilities, giving clients the opportunity to create spaces that feel uniquely their own.

This balance of timeless design and thoughtful innovation continues to resonate with both our new and existing clients. Demand was broad-based across categories, including upholstery, outdoor, and The Collected Home, our vintage-inspired collection celebrating craftsmanship, heritage, and enduring designs. Our domestic upholstery manufacturing capabilities in North Carolina remain an important competitive advantage, allowing us to deliver exceptional quality, customization, and service while providing greater flexibility and control over production. We remain committed to keeping our assortment fresh while staying true to the aesthetics that define Arhaus. We believe the strength of our product strategy lies in offering distinctive furnishings that are difficult to replicate, supported by disciplined merchandising, continuous product innovation, and meaningful investments in our product pipeline. Looking ahead, we have several important events in the coming weeks to engage with our clients.

We will launch our special 40th anniversary fall catalog, reaching more than double the number of households compared to our spring catalog, including a focus on high-potential prospective clients, followed by our September semiannual storewide sale. Combined with compelling new product introductions and a strong in-stock position, we believe this positions us well for the important fall selling season. Better inventory availability allows us to offer clients more of what they want, when they want it, supporting higher conversion, stronger delivered sales, and an even better client experience. I want to thank our product team and artisan partners around the world. Their passion for great design, commitment to craftsmanship, and ability to anticipate emerging trends continue to differentiate the Arhaus brand and bring our vision to life for our clients. Turning to our clients. The second quarter reinforced the breadth and quality of demand across all three demand channels.

Our core customers, Arhaus Interior Design and Trade. Throughout the quarter, we continued to see clients investing in home through larger, higher value projects, reflecting healthy engagement with our premium assortment and no meaningful evidence of trade down. We believe this speaks to the resilience of our client base, the differentiated value of the Arhaus brand, and the enduring appeal of our product offering. Interior design continued to be an important driver for client engagement as more clients use our complimentary design services to bring larger whole home projects to life. These relationships not only create a highly personalized experience, but also creates a deeper client loyalty and long-term engagement with Arhaus. We have also been encouraged by the early response to the enhanced trade program, which relaunched earlier this year.

Supported by the dedicated team focused on expanding relationships with design professionals, we believe the program represents a meaningful, long-term opportunity to broaden our reach to cultivate a growing base of recurring project-driven business. Overall, the continued strength across our core customer interior design and trade channels highlights the multiple ways clients choose to engage with Arhaus. We believe this diversified demand model, combined with a differentiated product and elevated client experience, positions us to continue building lasting customer relations and supporting sustainable long-term growth. Turning to showrooms. Our showrooms are the front door of the Arhaus brand and one of the most important drivers of awareness, engagement, conversion. They bring product to life, support our interior design and trade channels, and provide an immersive client experience that differentiates Arhaus. Demand across the showroom portfolio was broad-based during the quarter.

We generated strong written sale growth across every region and all of our showroom formats, including our traditional and design studio showrooms. This breadth gives us confidence that demand is not dependent on a single geography or market, and that our product and brand resonates with clients from coast to coast. We continue to see significant white space for expansion while maintaining a disciplined approach to grow. During the second quarter, we opened a nearly 20,000 sq ft traditional showroom in Ashburn, Virginia, relocated Westlake, Ohio showroom, and expanded a Park Meadows showroom in Lone Tree, Colorado. Just last week, we opened our newly relocated Charlotte, North Carolina showroom at the Village at Southpark. At approximately 35,000 sq ft, it is our second largest traditional showroom after our Pasadena, California showroom and provides an elevated, immersive destination for our clients in an important market for us.

The opening also reflects our long-standing connection to North Carolina, where skilled artisans craft many of our signature upholstery pieces. For 2026, we continue to expect approximately 10-14 total showroom projects, including 4-6 new openings, 6-8 relocations, renovations, and expansions. We maintain a disciplined approach to evaluating projects against our targeted return criteria, and recent openings have continued to perform in line with our expectations. A key reason for our showroom perform well is our people. Ashburn demonstrates the importance of combining the right location with the experienced team. We placed established leaders from nearby showrooms at the location and hired and trained the broader team well ahead of the opening. As a result, Ashburn opened with a team that understood our product, clients, design services, and service model, and the showroom has performed ahead of our expectations since opening.

We continue to believe our physical presence remains an important competitive advantage and a meaningful driver of awareness, client engagement, and conversion. As we look ahead, we remain focused on executing the strategy that has served us well for four decades, creating exceptional products, delivering an elevated client experience, and investing thoughtfully in the long-term growth of the Arhaus brand. We believe we are well positioned for the important fall selling season and remain confident in the signature opportunities ahead. I want to thank our team members and artisans around the world for their passion, craftsmanship, and commitment to excellence. Their dedication is what makes Arhaus special and continues to strengthen the relationship we have with our clients. With that, I'll turn the call over to Mike.

Thanks, John, and good morning, everyone. Our second quarter performance reflected disciplined execution against our most difficult year-over-year comparison of 2026. We delivered results above the high end of our guidance range across all our key financial metrics and generated strong comparable written sales, reinforcing our confidence in the full-year outlook. This marked our seventh consecutive quarter of delivering results at or above our guidance. Before I turn to our results, I want to address an unplanned benefit related to IEEPA tariffs that was recognized in the quarter and not included in our previous financial guidance. Arhaus requested refunds of $37.8 million for IEEPA tariffs previously paid. As of June 30th, 2026, we recognized a receivable of $32.7 million, which is included in prepaid and other current assets within the balance sheet, and we received $5.1 million in cash refunds.