Arhaus (NASDAQ:ARHS) executives highlighted record annual revenue, continued showroom expansion, and a stepped-up investment cycle during the company’s fourth-quarter and full-year 2025 earnings call, while also outlining tariff expectations and guidance for 2026.
Record revenue in 2025 as Arhaus points to resilience in high-end demand
Founder, Chairman and CEO John Reed said the company finished 2025 with “a strong year of execution,” arguing that Arhaus’ long-term thesis is working despite macro volatility such as softer housing turnover, tariffs, and broader uncertainty. For the full year, Reed said Arhaus delivered record net revenue of $1.38 billion, up 8.5% year-over-year, and noted that net revenue has nearly tripled since 2019.
Reed said interior designers-assisted projects generate average order values more than four times standard orders, and he highlighted the trade channel as a long-term growth opportunity, citing a U.S. interior design market size of approximately $27 billion.
Product, customization, and sourcing flexibility
Reed said 2025 represented one of the strongest periods of innovation in the company’s history, with designs that leaned into “richer colors, pattern, and texture” and a more traditional aesthetic. He described customers as increasingly using customization—selecting from hundreds of fabrics, leathers, finishes, and silhouettes—supported by expanded domestic upholstery capabilities at the company’s North Carolina manufacturing facility.
On sourcing, Reed said no single country defines Arhaus’ strategy, which provides flexibility in a volatile trade environment. He stated that in 2025 the United States represented approximately 32% of total receipts, including internal manufacturing, and that about 70% of upholstery sourcing was domestic, with the largest portion produced in Arhaus’ North Carolina facilities.
Showroom growth and omni-channel model
Arhaus continued to emphasize physical showrooms as a key driver of its omni-channel strategy. Reed said approximately 90% of total sales in 2025 came from clients living within 50 miles of an Arhaus showroom. The company ended 2025 with 107 showrooms after completing 13 showroom projects during the year.
During the Q&A, Reed discussed a recently opened 40,000-square-foot location in Pasadena, California, which he said is being used to test merchandising and layout options, including expanded design centers and larger decor displays. He added that the company is not shifting to only large-format stores and cited the opening of a smaller 14,000-square-foot store in Bozeman, Montana, as another example of flexibility by market.
Financial results: margins pressured in Q4 by inventory reserves and occupancy costs
CFO Michael Lee said 2025 net revenue of $1.38 billion came in at the high end of guidance. Gross profit was $536 million, up 7%, while gross margin declined 50 basis points to 38.9%, which Lee attributed primarily to higher showroom occupancy costs tied to expansion. Selling, general and administrative (SG&A) expenses rose 7.7% to $447 million, though SG&A as a percentage of revenue declined 30 basis points to 32.4%.
Net income for 2025 was $67 million, down 1.9% year-over-year, which Lee said reflected expansion and continued investment. Adjusted EBITDA increased 8.9% to $145 million, with adjusted EBITDA margin flat at 10.5%.
For the fourth quarter, net revenue rose 5.1% to $365 million, also at the high end of guidance. Gross margin fell 190 basis points to 38.1%. Lee said the decline was primarily driven by:
- An increase in inventory reserves of 160 basis points related to obsolete inventory identified during the quarter
- Higher showroom occupancy costs of 110 basis points
- Partially offset by improved delivery efficiencies of 100 basis points
SG&A increased 6.8% to $119 million, with higher spending tied largely to technology investments as well as selling expenses for new showrooms and corporate costs to support scale. Q4 net income fell 29.1% to $15 million and adjusted EBITDA declined 15.1% to $35 million.
Lee said the company’s warehouse management system investments provided better SKU-level insight, which influenced a business decision to take a loss on inventory deemed obsolete rather than route it through clearance centers. He added that he was “very comfortable” with inventory controls and valuation after the company filed his first 10-K as CFO.
Tariffs, strategic investments, dividend, and 2026 guidance
Lee said Arhaus is in the early stages of a multi-year digital transformation to replace legacy finance and operations systems. He put total program investment at approximately $30 million through 2030, with expected cash investment of roughly $12 million in 2026 and $10 million in 2027, before tapering in 2028 to a run rate of around $2 million annually for licensing and maintenance through 2030. He also cited distribution progress, including the decision to bring distribution management of the Dallas facility in-house, which he said ramped ahead of schedule.
On tariffs, Lee said trade policy remains fluid following a recent Supreme Court ruling related to certain global and country-specific tariffs. For 2026, the company estimated tariff impacts in the range of $30 million to $40 million, reflecting some benefits from vendor negotiations, sourcing shifts, and operational efficiencies. He said Arhaus would continue to assess pricing, noting the company took pricing actions in October and has used promotions as another lever, though he did not disclose the amount of pricing taken.
Arhaus ended 2025 with $253 million in cash and cash equivalents, up 28.3% year-over-year, and net merchandising inventory of $339 million, up 14.1%. Lee said the inventory increase included $14 million of incremental tariff impacts as well as inventory to support bestsellers, new products, and new showrooms. Operating cash flow was $137 million and free cash flow was $59 million. The board declared a special cash dividend of $0.35 per share, which Lee said was the company’s second special dividend since its IPO, while noting Arhaus remains debt-free.
For 2026, Arhaus guided to net revenue of $1.43 billion to $1.47 billion, Comparable Delivered Sales of flat to +3%, net income of $66 million to $75 million, and adjusted EBITDA of $150 million to $161 million. For the first quarter of 2026, the company projected net revenue of $300 million to $320 million, Comparable Delivered Sales of -5% to +1%, net income of $0 to $5 million, and adjusted EBITDA of $13 million to $20 million. In Q&A, Lee attributed near-term softness to weather-related store closures and delayed spring catalog mailings in certain markets, along with incremental promotions in February intended to reengage customers.
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.
