ARHS Stock Hits 52-Week Low After Disappointing Q1 Earnings

Aarhaus NASDAQ: ARHS shares have been under intense pressure since the top home goods company reported first-quarter earnings on May 7. Although the company posted a record first-quarter surplus, investors appear to be focused on declining comparable sales and margin pressure, largely due to bad weather and soft demand amid broader macroeconomic uncertainty.

The drop added to an already struggling stock, which has fallen nearly 70 percent since peaking above $19 nearly two years ago.

Record Q1 Revenue Buried by Comp Sales, Margin Concerns

Arhaus reported revenue of $314 million for the quarter, up 0.9% year over year. The number beat Wall Street estimates by just over $300,000 and came in above the midpoint of the company’s guidance.

During the earnings call, Chief Financial Officer Michael Lee said, “This performance is particularly noteworthy given that we have passed a period last year that did not face similar tax uncertainty, significant volatility, or geopolitical disruption. Despite these ongoing headwinds, including the recent escalation of global conflicts, we continue to deliver net income growth in a volatile environment.”

While showroom growth increased revenue, weather disruptions and weak consumer sentiment coupled with macroeconomic uncertainty weighed on comparable sales. Comparable delivered sales, which measure the benefits of orders, fell 1.7% year-over-year, while comparable written sales, which measure orders placed, fell 5.7% from last year. The latter was further hampered by the delay in the release of the company’s Spring catalog.

Profits also weakened during the quarter. Net income fell 70 basis points to 36.4%, while net income fell 54.5% to $2 million. Earnings per share of 2 cents were in line with analyst estimates but down from 3 cents in the year-ago period.

Q2 Guidance Adds to Investors’ Worries

The company also provided cautious guidance for the second quarter, with Lee noting, “We expect continued near-term pressure as consumers remain cautious amid continued economic and geopolitical uncertainty.” He also added that the company also posted a strong second quarter loss from last year.

Arhaus expects Q2 net income of $350 million to $370 million, representing a year-over-year change of 2.4% to 3.2%. The company also forecast comparable sales down 5%, revenue of $19 million to $24 million, and adjusted EBITDA of $40 million to $49 million.

Lee noted that the second quarter outlook “shows a range of results, with the bottom end taking continued pressure on demand trends and the top end including benefits from improved inventory availability, strong stock positions, customer deposit conversions, and the positive impact of our increased sales and marketing activity.”

Arhaus reiterated its outlook for the full year 2026, expecting revenue of $1.43 billion to $1.47 billion, representing year-over-year growth of 3.7% to 6.6%. The company expects comparable sales to be flat to 3%, while forecasting revenue of $66 million to $75 million and adjusted EBITDA of $150 million to $161 million.

Stocks Continue to Slide After Earnings

Arhaus shares fell nearly 7% following the Q1 report and continued to decline in five of the following seven sessions. The stock is down more than 22% since the earnings release and recently fell to a 52-week low of $5.63.

The stock is down about 35% in the past three months and 50% in the past year.

Several negative reactions from analysts have added to the pressure, with four analysts lowering their price target on the stock following the earnings. The current consensus rating is Hold, eight analysts rate Hold and three rate it Buy.

The 12-month price average of $9.58 suggests the stock could see more than 60% upside from its current price of $5.70. Even the lowest price target of $7.25 means more potential. Remaining price targets range from $8 to $13.

Arhaus Now Trades Below Key Peers

Following high sales, Arhaus trades at a discount to some of its competitors. The stock currently trades at 12X earnings, compared to the retail industry average of 17.6X. Peers Williams-Sonoma Inc. NYSE: WSM and RH NYSE: RH both trade at 19X earnings.

Arhaus stock has a sales multiple of about 0.6X, which is generally in line with RH and well below Williams-Sonoma’s sales multiple of about 2.6X.

It is worth noting that the latest sale has not been classified in Arhaus. Some high-end home goods retailers have also felt the pinch from a slowing housing market and a more cautious consumer environment. Shares of RH have fallen more than 40% in the past three months, while shares of Williams-Sonoma have fallen nearly 20% over the same period.

Although Arhaus remains profitable and continues to grow revenue, soft comparable sales and cautious near-term guidance have moderated investor sentiment. Still, with the stock trading well below its highs and at a discount to peers, some investors may begin to question whether the selloff is over.

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