ARHS Stock Gains 18% After Q2 Earnings Beat, 2026 Profit Outlook Raised

ARHS Q2 Key Performance Insights

The company reported earnings of 28 cents per share, beating the Zacks Consensus Estimate of 20 cents by 40%. The bottom line increased 12% from 25 cents reported in the prior-year quarter.

Net revenues rose 7.4% year over year to $384.9 million, marking the highest quarterly revenues in Arhaus' 40-year history and surpassing the Zacks Consensus Estimate of $343 million by 12.2%. The growth was particularly noteworthy as the company lapped a strong prior-year comparison that benefited from the accelerated ramp-up following the insourcing of its Dallas Distribution Center. Management also noted that year-over-year comparisons are expected to become more favorable through the remainder of 2026.

Retail revenues increased 7.4% year over year to $320.2 million from $298.2 million and surpassed the Zacks Consensus Estimate of $300 million by 6.7%. eCommerce revenues rose 7.4% year over year to $64.7 million from $60.2 million but missed the Zacks Consensus Estimate of $67.1 million by 3.6%. 

Comparable delivered sales increased 4%, while comparable written sales climbed 12.5%, driven by strong demand across all three customer channels and broad-based strength across product categories. Management noted continued momentum in custom upholstery, outdoor and home decor offerings, supported by resilient demand from its premium customer base.

At the end of the second quarter, the company operated 109 showrooms across 31 states. The company completed four showroom projects, including new showroom openings in Ashburn, VA, and Ontario, CA, along with a relocation in Westlake, OH, and an expansion in Lone Tree, CO. Management also highlighted healthy demand across all geographic regions and continued strength in traditional showrooms and design studios.

ARHS’ Margin & Cost Performance

Gross profit increased 16.1% year over year to $172.1 million from $148.2 million, while gross margin expanded 330 basis points to 44.7% from 41.4% in the prior-year quarter. The improvement reflected a $23.8 million benefit from IEEPA tariff recoveries, of which $15.5 million related to inventory sold prior to April 2026. Excluding the tariff recovery benefit, gross margin was 40.7%, reflecting continued pressure from higher fuel and shipping costs.

Selling, general and administrative (SG&A) expenses rose 16.1% to $117.8 million from $101.5 million, primarily reflecting strategic technology investments, higher selling expenses associated with new showroom projects and other growth initiatives. As a percentage of net revenues, SG&A increased 230 basis points to 30.6% from 28.3% in the prior-year quarter.

Operating income increased 16% year over year to $54.3 million from $46.8 million, supported by higher revenues and tariff recoveries that more than offset increased operating expenses.

Adjusted EBITDA increased 16.8% year over year to $70 million from $59.9 million, while adjusted EBITDA margin expanded 150 basis points to 18.3% from 16.8%. Excluding the benefit from tariff recoveries, adjusted EBITDA would have been $55 million and adjusted EBITDA margin 14.3%, reflecting higher fuel and shipping costs, increased showroom investments and strategic growth initiatives.

Solid Balance Sheet Supports Long-Term Growth Strategy

Arhaus ended the quarter with cash and cash equivalents of $226.4 million and remained debt free. Cash declined sequentially, reflecting the payment of a $49 million special cash dividend in March.

Net merchandise inventory increased 4.3% to $353.5 million, while client deposits rose 11.8% to $263.8 million from year-end 2025. Net cash provided by operating activities totaled $59.8 million during the first six months of 2026, while net cash used in investing activities was $36.9 million, including $29 million in company-funded capital expenditures and $8 million in landlord contributions. As of June 30, 2026, the company had recognized $32.7 million of tariff refund receivables and had already received $5.1 million in cash, supporting its improved profitability outlook.

Arhaus Updates 2026 Profit Outlook

The company maintained its 2026 net revenue outlook of $1.43-$1.47 billion, representing year-over-year growth of 3.7% to 6.6%, and continued to expect comparable delivered sales between flat and up 3%. However, management raised its profitability outlook to reflect the benefit from previously paid IEEPA tariff recoveries. The company expects net income of $71-$80 million, up from the prior outlook of $66-$75 million, and adjusted EBITDA of $160-$171 million compared with the earlier range of $150-$161 million.

For 2026, Arhaus continues to expect approximately 10 to 14 showroom projects, including four to six new showroom openings and six to eight relocations, renovations or expansions, representing mid-single-digit net unit growth for the year.

For the third quarter of 2026, the company expects net revenues to be between $355 million and $375 million, representing year-over-year growth of 3% to 8.8%. Comparable delivered sales are projected to range from a decline of 1% to growth of 5%, while net income is expected to be between $8 million and $13 million and adjusted EBITDA between $26 million and $34 million. Management noted that the outlook continues to reflect uncertainty related to the consumer environment, geopolitical conditions and the timing of written sales converting into delivered sales.

ARHS Stock Past Three-Month Performance

Image Source: Zacks Investment Research

Shares of this Zacks Rank #2 (Buy) company have risen 48.8% over the past three months compared with the industry’s 1.2% growth.

Other Key Picks

Abercrombie & Fitch Co. ANF operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. The company carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1  Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales suggests growth of 6.1% and 4.9%, respectively, from the year-ago actuals. ANF delivered a trailing four-quarter average earnings surprise of 8.1%.

American Eagle Outfitters Inc. AEO is a specialty retailer of casual apparel, accessories and footwear for men and women. The company also holds a Zacks Rank #2 at present. 

The Zacks Consensus Estimate for American Eagle's current fiscal-year earnings and sales suggests growth of 17.3% and 8.8%, respectively, from the year-ago actuals. AEO delivered a trailing four-quarter average earnings surprise of 48.5%.

Designer Brands Inc. DBI designs, produces and retails footwear and accessories. It offers shoes, boots, sandals, sneakers, socks, handbags and accessories. It also carries a Zacks Rank #2.

The Zacks Consensus Estimate for Designer Brands’ current fiscal-year earnings and sales suggests growth of 137.5% and 0.5%, respectively, from the year-ago actuals. DBI delivered a trailing four-quarter average earnings surprise of 112.8%.

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