Arhaus (NASDAQ:ARHS) reported record second-quarter net revenue of approximately $385 million, up 7.4% from a year earlier and above the high end of its guidance range, as the luxury furniture retailer cited broad-based demand across products, customer channels and showroom formats.
Comparable written sales rose 12.5% during the quarter, bringing the year-to-date increase to 2.8%, while comparable delivered sales increased 4%. Founder, Chairman and Chief Executive Officer John Reed said clients continued to invest in larger home projects and showed no meaningful evidence of trading down.
Tariff Refund Boosts Quarterly Profit
Arhaus said its results included an unplanned benefit from refunds of tariffs paid under the International Emergency Economic Powers Act. The company requested $37.8 million in refunds, recognized a $32.7 million receivable as of June 30, and had received $5.1 million in cash refunds at quarter-end. Chief Financial Officer Michael Lee said the company has since received the full refund in cash.
During the quarter, the company recognized a $23.8 million benefit in cost of goods sold from the tariff recovery. Of that amount, $15.5 million was related to inventory sold before April 2026, while $8.3 million related to inventory sold during the second quarter. Arhaus also recorded $14 million, primarily from lower inventory costs, within merchandise inventory.
Gross profit increased 16.1% to $172 million, and gross margin rose 330 basis points to 44.7%. Excluding the $15.5 million benefit tied to inventory sold before April, gross profit would have risen 5.6% to $157 million and gross margin would have been 40.7%, down 70 basis points from the prior year. Lee attributed the normalized margin decline largely to higher fuel and shipping expenses.
Net income increased 13.1% to $40 million, while adjusted EBITDA rose 16.8% to $70 million. Excluding the $15.5 million tariff benefit associated with inventory sold before April, adjusted EBITDA would have been $55 million, down 8.9% from the year-earlier period, reflecting elevated fuel and shipping costs, higher selling expenses tied to new showrooms, and strategic investments.
Selling, general and administrative expenses rose 16.1% to $118 million. The increase included an $8.4 million rise in general and administrative costs, including about $3 million of technology licensing and other business-transformation investments, and a $7.9 million increase in selling expenses.
Demand, Product and Showroom Expansion
Management said second-quarter demand was supported by strong traffic, higher-value orders and larger projects. Reed said the mix of new and existing customers was largely unchanged, but the company saw larger sales per customer as consumers renovated rooms and homes.
Lee said Arhaus saw strength in average order value, units per transaction, and orders above $10,000, $25,000 and $100,000. The company also increased marketing activity, including paid search, digital optimization and catalog distribution.
Arhaus plans to launch a 40th anniversary fall catalog that will reach more than twice as many households as its spring catalog, including high-potential prospective clients. The company also expects its September semiannual storewide sale, new product offerings and stronger in-stock inventory levels to support fall demand.
The company opened a nearly 20,000-square-foot traditional showroom in Ashburn, Virginia, during the second quarter, relocated its Westlake, Ohio, showroom, and expanded its Park Meadows location in Lone Tree, Colorado. It also recently opened a relocated Charlotte, North Carolina, showroom measuring about 35,000 square feet.
For 2026, Arhaus continues to expect approximately 10 to 14 showroom projects, including four to six new openings and six to eight relocations, renovations or expansions. Reed said the Ashburn showroom has performed ahead of expectations since opening.
The company also highlighted its enhanced trade program, which offers design professionals a choice between a commission-based arrangement and a discount structure. Reed said Arhaus has added thousands of new trade members each month since the program’s launch a few months ago.
Technology and Cost Initiatives
Arhaus said it successfully launched its transportation management system during the second quarter. Its enterprise resource planning and order management system implementations remain scheduled for a February 2027 launch.
The company is also accelerating deployment of a new point-of-sale platform into the fourth quarter, ahead of its original timetable. Lee said the company expects the project to simplify its technology roadmap, reduce reliance on legacy systems and provide its showroom sales teams with a more modern selling platform.
Arhaus ended the quarter with $226 million in cash and cash equivalents. Net merchandise inventory totaled $354 million, up 4.3% from Dec. 31, while client deposits rose 11.8% year over year to about $264 million. Management said aged inventory declined both sequentially and from a year earlier, while best-seller inventory and in-stock availability improved.
The company estimates that its 2026 tariff impact under the new Section 301 tariff framework will be between $30 million and $40 million. Arhaus said it is addressing that pressure through diversified sourcing, vendor negotiations, pricing actions and operational efficiencies. Lee also cited approximately $10 million each of elevated annual fuel expense and higher shipping costs, driven in part by disruption in the Middle East.
Arhaus raised its delivery fee in June, which Lee said is expected to contribute $5 million to $6 million of annualized run-rate benefit, with most of that benefit beginning to flow through in the third quarter. The company also expects its transportation management system to generate $4 million to $5 million in annualized run-rate savings as it ramps.
Outlook Maintained for Revenue, Raised for Profitability
For the full year, Arhaus maintained its net revenue outlook of $1.43 billion to $1.47 billion, representing growth of 3.7% to 6.6%, and continued to expect comparable delivered sales ranging from flat to up 3%.
The company updated profitability guidance to reflect the tariff recovery, now forecasting net income of $71 million to $80 million and adjusted EBITDA of $160 million to $171 million. Arhaus expects to reinvest $7 million to $10 million of the recovery during 2026, including expanded fall and spring catalog circulation, increased marketing and digital spending, and the accelerated point-of-sale project.
For the third quarter, Arhaus expects net revenue of $355 million to $375 million, comparable delivered sales of down 1% to up 5%, net income of $8 million to $13 million, and adjusted EBITDA of $26 million to $34 million.
Management said its outlook does not assume a meaningful improvement in housing turnover, consumer confidence or broader macroeconomic conditions. Reed said the company remains cautious about external factors but believes its product assortment, inventory position and fall initiatives position it for a strong second half.
About Arhaus (NASDAQ:ARHS)
Arhaus (NASDAQ:ARHS) is a U.S.-based retailer specializing in high-end home furnishings and décor. Since its founding in 1986 in northeastern Ohio, the company has built a reputation for curating unique, design-forward products that blend contemporary aesthetics with artisanal craftsmanship. Headquartered in Boston Heights, Ohio, Arhaus operates a network of brick-and-mortar galleries across the United States alongside a robust e-commerce platform, serving customers from coastal metropolitan areas to interior regions.
The company’s product portfolio encompasses a wide range of furniture categories—including sofas, dining tables, bedroom pieces and storage solutions—complemented by lighting fixtures, rugs, pillows, wall art and decorative accessories.
