Arhaus (NASDAQ:ARHS) reported record third-quarter revenue and raised its full-year sales outlook as demand for its home furnishings grew among high-end customers. Profit fell, however, as the company increased spending on marketing, technology and other expenses.
Revenue rose 6.8% from a year earlier to $368 million for the quarter ended September 30, 2026. Net income declined 36% to $7.8 million, while adjusted EBITDA fell 12.3% to $27 million.
Comparable written sales, which reflect orders placed, increased 13.9%. Comparable delivered sales, which contribute to recognized revenue, rose 2.6%. Founder, Chairman and CEO John Reed said demand was broad-based across product categories, geographies and sales channels.
Demand grows for larger projects
Reed said affluent customers continued to invest in their homes despite a challenging housing market. He cited demand for larger projects, including renovations and furnishings for second and third homes.
Orders exceeding $25,000 increased 35% during the quarter, while those above $100,000 rose 30%, Chief Financial Officer Michael Lee said. New products accounted for more than a quarter of written sales.
Arhaus more than doubled distribution of its fall catalog, and new customer acquisition rose more than 20% year over year in September. Lee said the company quadrupled the number of prospective clients reached by the catalog and attributed the September results partly to that investment, alongside new products, promotional activity and a financing offer.
During the question-and-answer session, Lee said the average order value for new customers in September was more than 30% higher than for existing customers, although the company was still examining the details of customers acquired through the catalog.
Costs weigh on profitability
Gross profit rose 8.2% to $144 million, and gross margin expanded 50 basis points to 39.2%. Lower product costs and improved pricing and product mix helped offset higher showroom occupancy costs and increased clearance activity through Arhaus’ Loft locations, Lee said.
Selling, general and administrative expenses rose 14.8% to $134.3 million, or 36.5% of revenue. Lee attributed some of the increase to marketing and technology investments, legal costs and higher sales compensation tied to written orders.
Sales commissions are recognized when orders are placed, while related revenue is recognized upon delivery. Lee estimated that this timing difference added about 100 basis points of expense pressure in the quarter and said he expected it to reverse in the fourth quarter. Legal expenses are expected to remain elevated for another one to two quarters.
Lee said Arhaus estimates annual tariff costs of $30 million to $40 million under the current framework, compared with its earlier estimate of $50 million to $60 million. The company also implemented price increases in October to help offset cost pressures.
Higher sales outlook, unchanged profit forecast
Arhaus raised its full-year revenue outlook to $1.465 billion to $1.485 billion, representing growth of 6.2% to 7.7%. It expects comparable delivered sales to increase 2.5% to 4.0%.
The company maintained its full-year forecast for net income of $71 million to $81 million and adjusted EBITDA of $160 million to $171 million. Lee said Arhaus plans to reinvest the approximately $4 million to $5 million in incremental profitability expected from its higher revenue outlook, including about $3 million for expanded spring catalog circulation and about $2 million for digital initiatives.
For the fourth quarter, Arhaus forecast revenue of $398 million to $418 million and comparable delivered sales growth of 6% to 12%. Lee said performance within that range would depend largely on how many outstanding orders the company can deliver.
Asked whether his comments about the relationship between written and delivered sales implied negative fourth-quarter demand, Lee clarified that he had been discussing total sales rather than comparable sales. He said Arhaus was not forecasting negative comparable written or delivered sales for the quarter and described October results as a continuation of recent strength.
Digital expansion and delivery investments
Arhaus is targeting e-commerce penetration of 25% of revenue over the next five years, up from approximately 16% to 17% currently, Lee said. The company hired K.C. Moss as chief digital officer in September and plans investments in its website and digital capabilities.
Lee also said the company expects its transportation management system to exceed its $1 million to $2 million savings target for 2026 and reach a $4 million to $5 million run rate in 2027, potentially higher. The system helped improve routing and truck utilization during the third quarter, offsetting some elevated fuel costs.
Arhaus ended the quarter with $318 million in cash and cash equivalents and no long-term debt. Client deposits totaled approximately $325 million, up 37.7% from the end of 2025.
About Arhaus (NASDAQ:ARHS)
Arhaus, Inc is a lifestyle-focused retailer of luxury and artisan-inspired furniture and home furnishings. The company offers products for living rooms, bedrooms, dining areas, offices and outdoor spaces, along with lighting, rugs, textiles, wall art, mirrors, décor and other home accessories.
Arhaus combines retail showrooms with e-commerce and interior design services, providing products intended to support a coordinated approach to home furnishing. Its collections are developed through collaborations with designers and craftspeople and may incorporate materials such as reclaimed wood, natural stone, upholstery fabrics and other distinctive finishes.
Founded in 1986, Arhaus serves customers primarily in the United States through its stores, online platform and interior design professionals.
