Earnings call transcript Q1 2023

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Operator

Good morning, ladies and gentlemen, and welcome to the Arhaus First Quarter of 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal remarks. Please note that this call is being recorded and the reproduction of any part of this call is not permitted without written authorization from the company.

I will now hand the call over to your host, Wendy Watson, Senior Vice President of Investor Relations.

Wendy Watson

you the thank XXXX first and call. earnings morning for Arhaus joining quarter Good today Reed, Officer. are Chief me with On John and Phillipson, Executive Co-Founder, Dawn Chief Financial Officer; and Chairman the John with this press along will release we operational a of morning’s details. start with made main summary in points the Q&A and be will Jen joined Dawn for Porter, our session. E-commerce and XXXX, our performance financial of cover Marketing Officer by the for then outlook Chief and remainder they will

one question to one follow-up. During limit Q&A, and please

If you please questions, return to the have additional queue.

available We issued our release XX-hours. today. and before for call at XX-Q on Those March our be replay Relations open Investor ended XX, our our earnings A website market on press the the ir.arhaus.com. year within available website documents are of XXXX will

future number remarks may uncertainties. or risks results expectations, objectives, reminder, statements. constitute a strategies, events results a today to trends of forward-looking due events, or As Actual and differ materially concerning

statements. SEC. be and be law, of our morning’s a in from with forward-looking additional undertakes risk no as filings company in For risk on refer as our factors statements subsequent or the as may annual release Form factors such updated the press are these to statements and required update made today’s described XX-Qs the report revise except time-to-time and the date summary The cautionary please may information, and by and XX-K of to these factors this obligation

certain release the reconciliation. includes We non-GAAP measures press morning’s relevant will financial also refer and to this non-GAAP

the to turn over call now will I John.

John Reed

on first keep my for joining a quarter you performance. today. comments few everyone, will providing and I morning, thank Good today brief our highlights us

delivering of first XX% pleased quarter million We last QX XXXX our a are year. net with revenue results, increase over $XXX very

net a demand March Demand was income of comp. decelerating in to the comprehensive Comp XXX% growth adjusted an increase flat comp sequentially increase quarter X.X% and of with XX%. EBITDA and XX%, in an growth of first

Following high-single-digit February. and demand comps in January

In demand remains comp flat. our April,

is we the the will As growth and last building first. showrooms reported our XXXX to in same investing in when putting the at focus quarter, in growth, and In the that first continuing awareness key performance assortment time you, with our products, long-term prioritize while systems discussed brand include we marketing campaigns. clients fuel that our quarter, drivers our and product

perspective, are current we From campaigns. pleased marketing our a with very

and We excited are our our the and very some plans we on XXXX, new emphasis partnerships great throughout for openings. including place marketing new support showroom

I Topanga, showrooms Naperville, new in on California pleased Speaking remainder our as open we opening studio the a well. We XX North a -- you in to Dallas of design loft Illinois eight expect June, a XX March Ashville, new showroom new April location opened expected XX, and year. on and towards second-half in openings with one the growing in Dallas am on to footprint, the of showrooms in the additional the new in In area update in showroom on progress new our this Carolina year. one

expansion new and are about we're excited we as very relocation all expected. projects our Maryland. last relocation renovation, opened proceeding Our Towson, in just week showroom And

chain. supply to Moving

pre-pandemic in the chain of on our supply As both are we most times our inbound levels. back to positioned outbound lead are and well and product elements cases

efficiently. the month, we implementing will expanded is implementing system our last to are capability chain growth Our support seven of these with XX began years. footprint along the capabilities warehouse next we us to supply which One product for enable will distribution our move enhancements management example through the systems more

I the and tools I best about combines The upholstery details, in production our just was work by available and these upholsters, state-of-the-art I'm North inspired the our two past clients enthusiasm sales facility regional will operational impressed excited at at that collections incredibly further Carolina. leaders. in of love. And and on facility crafting future the share believe our and facility brainstorm development world. spent To pieces together the to to team we machinery product talented with upholstery the days I'm teams very with anywhere coming production skilled

The outlook, want are this continue share I to client Turning are as we how the growth. start these new our products our seen reiterate outlook to reception In summary, to our with have we first the morning, with our showroom we progress to we Dawn XXXX. performance, solid pleased given of and our XXXX in details make will full-year reaffirming you. we announced quarter and

any remain look delivering in we value. on a is strategy positioned with sheet confident As macro to long-term navigate well choppiness. to shareholder focused and the our growth we And balance that future,

Finally, XXXX, years and thank for between of to truly revenue growth is grew astonishing our clients tremendous few the I XXX%. -- focusing you for on XXXX want to pulled our have focus to over together team It first. past continuing our net how me

Our grew adjusted adjusted net net net and XXXX, EBITDA you. income This is your EBITDA. grew a and commitment income proud of all our of EBITDA income In quarter all the incredibly surpassed just adjusted of our and and I'm first testament XXX% XXXXs to XXX%. of

it turn to I'll over Now Dawn.

Dawn Phillipson

morning. Thank good you and

the to with performance in be business our first John continues we resilient pleased described, operational are and and quarter. financial As our

basis. items statement four-year could quarter XX.X% X.X% demand of be a basis, XXX.X% a first stack of two-year our to stack pre-pandemic. a on on growth net We basis, income growth include: comp revenue helpful of $XXX demand and to thought on a basis, on and one-year XXXX compare three-year stack Key comp four-year a from XX% stacked million, XXX.X%

in our with XX%. quarter, sales showroom our revenue and the showroom and up up saw both we During channel XX% e-commerce channel channel our growth strong e-commerce

both orders Our of backlog. net driven our was demand and continued by the revenue in growth delivery

costs related margin as and expense, revenue, transportation higher demand. by well to variable variable gross higher credit quarter our costs the million net and interest fees $XXX card products, in and fixed higher quarter, related to increase offset first to as partially in rates the revenue rent XX% by showroom Our increased higher net increased including driven

net revenue as higher a fixed XX%, increased revenue, favorable our offset product our showroom costs occupancy higher leverage margin by reflecting percent costs Gross partially points and costs basis transportation net primarily to showroom over ability XXX to variable of the and expense.

to XX% and quarter increase business expense storage $XX was lower First million. selling expenses driven and new by corporate fees. SG&A higher of expenses product The showrooms increased growth to to demand, the by partially our support offset higher related primarily

basis primarily on driven revenue our delivered revenue As increase. on fixed we the our by to of more backlog. XX% percentage decreased as expense points costs have XX%, leverage XXX warehouse and a capacity SG&A of expanded net net

first the the XXXX, of XXXX to XXXX described. compared primarily the increased first quarter net by XXX% to Adjusted million net income adjusted increased income driven First $XX quarter to net income $XX million, million. in factors of of XXX% quarter in $XX just

EBITDA quarter $XX quarter Adjusted first million of in to the increased in million XX% XXXX. from $XX the

quarter basis an First and margin adjusted an points of resulted of net increase in XXX the million in million year-over-year. EBITDA $XX quarter, of XX% revenue $XXX XXXX adjusted EBITDA

flow. balance and the to cash Turning sheet

and as merchandise December demand costs. inventory to in and build and As due up of year-over-year the XXXX, from response to we has and cash debt. XX% as X% XXXX, higher million, inventory cash $XXX March Net inventory had were and company value long-term million XX, client $XXX equivalents continue increased no freight up XX, was to product

demand down lower Client down delivery XX, comp from million and and year-over-year, the of to growth $XXX December orders to deposits due decreased to in million, period. backlog primarily $X million relative prior XXXX, $XXX improved the

$X provided operating used XXXX, the three For of activities activities in by million net months landlord cash million with March ended and was contributions $X was net XX, $X investing million. cash

contributions approximately three expenditures, months $X million total of XXXX. net result, a of first in were landlord As capital the

Let's move outlook. now our to

As we reaffirming XXXX. our we announced morning, this full-year for outlook are

$XX.X of continue million million. X% of $XX range in full-year adjusted growth to representing $XXX X%. in positive X% of $XXX $X.X to range and billion, million growth expect income negative of the We X% EBITDA to comparable $XXX net to billion to of net million Full-year to the revenue

will our showrooms, expectations even XXXX, we a up continue our that to reflects in backlog invest delivering to Our outlook comp demand continue expenses, negative the X% as mid-single-digits. manage we carefully range of achieve through And support growth awareness, and omnichannel and all and technology development technology efficiencies infrastructure, marketing, accelerate product generate enhance to capabilities, systems including new scale. information brand investments expected and including to of growth, from which are

We first-half there our remain understanding may assumptions. confident our guidance, be in in full-year and variation some second-half original

expected, low-teens the the given we versus example, revenue originally delivery we of XXX on margin to. high-teens trends. margins may initially greater could points And and For be the guided EBITDA based performance, up first-half demand QX cadence be EBITDA net than basis up first-half

our modify to overall, year. see nothing outlook us causes to-date for But issued the we previously

refer For to XXXX related our results to and please our release. press all details other outlook,

drive pleased closing, despite we our emerge strong with ever to plans share home in to position. all weather market changing a In sheet Poised debt on to strategic longer for even position an gains with $XXX coupled furniture balance and are environment, an stakeholders. and first plan performance fragmented growth highly cycle our billion economic macro build growth us premium value in we the quarter any our our and term deliver free stronger believe on

Thank the we to like questions. for would you now your open and attention up for call

Operator

Steven session. Forbes [Operator conducting Instructions] we Guggenheim. of gentlemen, and Ladies from Our the first you. Thank be comes will question question-and-answer now

Unidentified Analyst

you're this a projects touch on [Indiscernible] up, landlords on on the then real Thank just Forbes. those very the thanks like, please just, looking negotiating wanted great. is for line that question seeing, and engaging on leverage? from our customers the the estate market that'd largest Hi, if be given you could in of what pipelines, your pre-opening the real and ask with estate. costs give for What the update you. it's us out And an And are taking I there of our are kind, Steven understanding quickly showroom environment? given product for touch to incremental anything history question. And and how number nearest

John Reed

product, think We've really things, no and the it anywhere hot question the that more products been very them designed, only some is thrilled [Steven] morning. We're seen our really It's in creative, are that -- phenomenal. things question, see to. (ph). the response with Good great one continuing Good very what clients It's some a launches well Yes, responding handmade on literally very we launched throughout ever our value new responding stuff not that to things, has has year. unique exciting The to. world. answer your really we people for is. else the

some product. As more categories of SKUs, of we expand of sizes, more similar more into this looks

anxious little landlords ever. mostly -- a opening were during as largest yes, on have the when showrooms. opening far do know, their done store we deals go, landlords As COVID, as you Those were

we've feel locations. key tenants. got believe on but These to the value we So look still locations retail locations, It's are our XXX% A focusing great going. like to their they're centers tend struggling not plus be growth, really we're are for a great to and filled. business our to I

So to it's going C our the aren't B traffic our and as you it some clients. but times They And cheap us. get visit in as or they of month of working there. for rents many locations, a live

a of we're COVID, out with getting to said, minimum. We done new least like at What negotiated years be at during the paying. stores open from need So very, we because how happy very those it's on fair. most think everything we And we're two leases. I were

Unidentified Analyst

just can Great. provide Thank color would just just expenses on you. great. very be costs quickly, start-up Thank that stores. pre-opening you. on you Any new And for and

Dawn Phillipson

Good morning. This is Dawn.

starts incurred disclosed as we just of are, the second-half what there pre-opening about did takes would on P&L. say the the the we it of So a a costs be be new that time and in rent when -- it to thinking open we're it showroom drag but haven't length to

is there next half related are some in we So showrooms back the year year. compression the opening new as that to this well

John Reed

we though, price. know Everything we in Labor, gotten light this as more really far obviously as as went all fixtures, up everything And wood. found much materials, year. has stable cost,

what our at words. surprises know we all. in costs No So are other

guys together. can see foresee in no anything. hitting ago for Our things are certainly, they are that construction coming deadlines, delays yes, three right cost years All sure. we more the now pieces But we parts did than and

I does, in say all we've of this that's and right part But plan. already factored it did, the in everything all that now. world As should

Unidentified Analyst

Awesome. Thank you.

John Reed

Thanks.

Operator

comes from question of you. The Benedict next Thank Peter line of the Baird.

Peter Benedict

Good Hi, guys. morning.

the on first-half just question high-teens the view. versus low-teens First prior

into How Just much the demand about you the maybe little talk fill, second-half? how seeing? think more that? that mean is a much backlog, bit And I sliding about you're maybe does is should environment of second-half, the That's shift question. benefit end lower from still be the or the more or is of likely kind are plan that of, my probably we revenue thinking, at first point? high-single-digits you thinking this down as

Dawn Phillipson

morning, Peter. Good

first-half not including a the push yet. and orders to then of the nice continuing some the second-half. factors, And a are quite lot we've seen variety clients into build expect of into Really, remodel So are that ready and the years. take in of really their we've last dependent to few upon it's backlog the we large over acceleration to had the a home product of number also

And the we're that while pieces for of so on the clients majority some we those of have piece. one may order, waiting

can piece we efficient to deliver the to be receded to possible, as their that and order home. with it in waiting client as then in be one we're So for

a the that push second-half. larger are reasons the of will that of to So it those backlog some into couple cause

Peter Benedict

And this shifting you're a going Thanks. you. being know, I demand flattish I Can color mean, see on expected what but you're on is down? it's tone would you demand just point. demand don't helpful. just seeing bit any to obviously, regional little be Okay. the about, then Thank to your there that moderate, around that at a talk

Wendy Watson

Yes.

too We California of there from market I do color will any John regional was you in anything or particular. add March, a on Dawn, in say bit meaningful little seen to noise it? in haven't want perspective. perhaps the a

John Reed

uncertainty yes, rest were huge very of And huge, very rainstorms. getting part the big Normally, But haven't little slowed that -- Midwest little that times those They cautious more the of a I of down. think but percent. was markets, seen than small, weather. small a we a is anything. small bit it's the Well, in a

getting stores pretty XXX% about this in these getting in being years And we're place. over that. product new mean, capture we're and excited I getting where to market. at quite starts we're our ourselves opening, I that all booming, really are last yes, we're of said, when new top great start the we're really set on stores people XX being that like few a share And booming for the to up flattish, again, setting these position set renovating economy We're place, the up of

Peter Benedict

on XX% inventory, I year-over-year. follow-up would guess my And just That's helpful. be up

You're adding stores clearly.

the further feel the And bit about marketing of little your thinking plans a year of talk year, the approach. complexion Just about event for you of your balance promotional the terms demand it, what how inventory, you're to the adding how in for are expect your moderate that about you than kind of plans inventory. in the continues

Dawn Phillipson

Sure.

and and That as in came nicely, from flat still assortment to promotional we product So perspective. We feel choose comps. We we have I'll cadence. have to with chose price quite a offerings April the how deploy and lever not in if start our positioned ourselves confident being March those. we promotions said, certainly a in

some we powder to recognize if choose good feel where that positioned, about dry have exercise we're we that. So

-- were are coming From to where perspective, relative we before. pandemic. as a times as an a down high our from receded in inventory certainly lead perspective they

So that months. looking little the flexibility bit a more as us next provides XX X, out we're into

very analyzing are attention at and very inventory. paying we're a vigilant detailed level. We're We where with our close

at as cost is still of amount rate inventory that significant well. our A higher freight

analyze in going this really So year. did position. in inventory to of been X mind understand on a and flow ago new P&L of to who's keeping and bring our with We vendors about months that's Planning that helping is engage through us kind SVP helpful the

the deploy also team effective help looking really to to this And I that's the our able mentioned bit in planning software going prior and calls, a we've over little more be months. be inventory with we're to some think efficient coming planning

degradation have to we more issues year. on see us point time, would come in the this significant inventory that, to at So margin but don't cause any that for

Peter Benedict

Good much. luck. so Thanks

Dawn Phillipson

Thank you.

Operator

comes Peter of Keith The line from next question Piper the Sandler. from

Peter Keith

like. just morning, and bit a Good Maybe to promotions thanks. follow question last Hi, little the with everyone. the up on

driver holding product that you price. something Or a I'm are costs that call just lower gross expansion. Is is could year as if a little did more. a Are the price and then one-quarter out nice And unpack the You wondering you suppliers lowering your margin to that key bit progresses? has potential that as benefit? to continue

John Reed

delivering really of lot much But own every Sure. I the the in think costs lower I start a we is Granted, inventory by coming we're The freight we're have of that. product -- is cost. come at obviously, seeing that any that's new down that, year. the And still can last so Peter. Good day, some The morning freight. then at the freight from freight costs way. cost. in the

go, As price, good bit thing year. this prices increasing far in little seen as certainly is vendors a seen we've our of decrease we but anybody haven't the

So our it's We're out as time manufacturers a and even negotiating selling a the they're But little more as had surprise not passing new efficiency amount. savings we've they with we constantly those we're at some make bit and steady huge to little of us. on products a -- get than we more held very that. us, a certainly thought as more

we going to see throughout year, sell margin. certainly So we the much that the that we paid down in freight, help as this on so inventory is

Peter Keith

helpful. you. that’s Okay, Thank

Dawn Phillipson

add just little Hey bit. Peter, in a to

And Carolina in combination last with up, So ramping of COGS, a our is the North on product that year that's freight favorability landed cost the X at mix? really keep then cost. versus facility mind percentage product really point a also,

up that of to across down now upholstery to Ohio, the all street, it's come basically street. incur the just So kind as the you priorities think to going about cost

favorability some from So there's that. also

expect we move timing in. to that the really the be see continue we to the mix delivered would to that contingent when upholstery year, mix as and through freight, it's of the facility, is being product upon received favorability product from we going So

we cost of at So freight still do percent inventory as of a a above XX% have amount inventory. substantial

bit there. So added context just to a give little

Peter Keith

laying All for you the right. question jotting notes the Okay. encouraging. guidance. That's just next with Dawn, down with and -- Maybe, were you. that The helpful I'll stick out

comp, you to full I think expect mistaken, on X I'm the digit. up not would the if be say you mid-single that year to demand down

Dawn Phillipson

correct. That's

Peter Keith

trends of good, you was give Can progresses. bit thinking QX if a slowdown. are reacceleration guess some sense we about thinking just the just it imply but year of as a little So does about some us I that, and a stack can with reaccelerate you the like little more get the maybe trends? holding the initiatives months you have comfortable stock potential in improvement Do come. us to demand? think Just

Dawn Phillipson

Yes.

a exciting some mid-single additional bit. year with we little April nicely. which promos down digits, touch exercise quarter comp. to We're this the mid-single to specific pulled initiatives, occurred have Jen. investing some those. great. probably there the excited still, more a so up We that really we choose we mean we If points is March powder need. to I But things comp marketing kind lot and of quarter are that that. that digits So if pleased over hand with I in and was for of mentioned really first dry But think we're have I'll first

So up for want talk about I know, Jen, of marketing don't some year? do this your to you

Jennifer Porter

good Hi, Yes, morning. sure.

after through a new and what few going we we've some we're direct on the responses in more said, being prospecting, then have To for and the touch particularly prior campaigns. a bit far aggressive the this acquisition also in excited As mail planned really little Dawn client out our on rest so about our of calls to things year seen year. by marketing

we with both pleased end results also campaign, December outdoor hit homes the the of hit at which in January really the the and homes that March. our beginning March then We're saw campaign of

hit homes week, beginning last of Our this campaign just summer end of week.

off that seeing forward looking as well. of results anxiously really So to the

with that particularly from response the pleased, really really, acquisition. new But client

they're strong As ads They're is. to and that people earlier, to by introduced seeing quality the the responding responding to unique storytelling, of product to products. craftsmanship, the John get really, we're from as looking response the the incredibly forward. our clients really mentioned And responding they really we're how brand, encouraged

space. in marketing think we're terms other to seeing digital continue the initiatives, optimistic be of I what in about really

has As calls, having in-house on digital been up, industry Costs over to campaigns. few has years. I've various we market. attention are an really mentioned last the with going everybody in in incredible players I close think the prior and team have relationships pay tough But the the mentioned marketing who incredible to

our managing about optimistic the campaigns to with really really happy on a optimize and coming people and The we are some and that performance we're tactics well, their really, story right right as product the of in the cautiously teams in and seeing. that path performance. campaigns those about as daily But at initiatives are new excited basis And down getting front time the journey. our the just think getting

we When we're there. good seeing really too, the on them engagement get site,

digital excited So site. exploring also And by people time are of majority spending customers of are been to they're we're in really engaging experience. with the sales the length a a seeing We the we've omnichannel investing see lever our you regardless to But way a as know, where connect experience and channel products. great and really and and clients purchasing. traffic rhouse.com the on great for us site with the as as that really whole a digitally experience

clients So both opportunity into bring convert in and see investment an stores. continue really we to that to and as an online and sales,

we're excited In experiences SurfLodge last Montag. the partnership in with then, terms our really of launch year, to

prospective of people We about with new the turned exciting our a engaging product. that out and are get find to how on summer them products sitting came with how clients, that opportunities bunch to literally really really pleased

also and And space, partnered and their iconic property. The excited outdoor their refurbishment White actually done positioning of anniversary our hotel the an that is we'll year. be continue with we're and with elephants have incredible around celebrating then renovation really So products in this white the year XXX-year They're in to Elephant this an property Nantucket. partnership Nantucket. we've

will Day, Memorial starting So be able to clients experience really that.

them cool of and able custom New tie great a England A to white partner really inspired collections, Nantucket fabric. by with blue fabric performance to cushions some iconic our great in the well assortment as create and we're elephant

with being excited to details that is that. about So We've with out really on more year. the personalities, partnering Obviously, and stress with store coming really openings. future a share And great this it's really trade but about calls. we just able to of with beautiful, pipeline partnerships lot I and new Nantucket forward been think then things to looking designers, influencers our about how exploring also down the important excited building are to just

new As And showroom, into family. awareness we've the number the is to brand recognition get with our People new showrooms, product. see friends stores get with they one of continue from drawn be the two clients. mentioned, driver engaged number they within awareness, the brand and

have new for gets just as digitally great and home engage second existing with us a in a new relocated way store now with have of us who So there with or maybe we stores store. or recently maybe engaged to us being see opened these experienced such clients a in clients all their

there. going those supporting openings lot and time of of So this attention and as year the well be a investing half results to excited we're see in really back to

John Reed

how sales and story team came the thing one is the add out that, wanted in we And designers clients number from And our of just I love clients made. our that just products to how that the one our buy us. about, it's our get from it -- how stores request to

doubling going only exactly we're but created, Jen factories also literally team our on things how just how did and her did -- video and clients small into they're catalogue a We designed. So showing amazing digital down just they're not made, on that. an are our how

not they're why the buy and and doubling we -- unique, down why product. because they're in things emotional is buy us. And and They think of from side need that's product, our Everybody showing think mean IT really to people inspiration us. to furniture. than we're could mention and I just so that us. our on comfortable inspired practical it's else which by it everything unbelievably and cheaper you clients buy that that so go But

to But long love and and It this and table material is about unique clients in see they this they more do They kind forth. stories us our their it. product bring so and know and home love inspired of is you made? And love it special products. that they get buy the when takes so they that, how us

the of some So that and Jen her our to cool be and to catalogs come videos has pushing going year. clients we're up out team with really for rest the

Peter Keith

Alright. Well, appreciate great guys. very you. and Lots of Thank good it much. content answer, I

John Reed

bet. You

Operator

next Seth you. comes from Thank question of The Barclays. line of the Sigman

Seth Sigman

March April and in April. the the provide question. stabilization that saw Hey, in demand is during Good you then Thanks But was you moderation for everybody. bit think a interesting. of period, that March. I in stabilization particularly hoping in taking I morning. kind the lot could Obviously, a noise little more there's comps the on in of context

then follow-up. Thank you could you. have if a little So a that? bit on context more And give I just us

Dawn Phillipson

Hey, Traffic number for we nicely. AOV seen first so quarter, have with average transactions order of the was we was value saw a Seth. up Sure, up. up were nicely.

we So all that chillier with that that. mention really what the the impacting like bit been of there driving the first kind here know We strong. did to a We're metrics in it Midwest than of were John some was it's did saw -- we quarter March. be. would We certainly for pleased weather

there's So touch -- the we're I out. about points think excited that we coming have

yesterday. in it just actually dropped my summer Our catalogue home got

consumers top from think going starting points we to be touch of a stay driver, kind great that's to to So they're winter the traffic clients chills. mind and as nice of with emerge

there's we So good of ahead opportunity think us. some

both happening balance what in attention come day-to-day is going perform how basis, very to yes, I next mindful is in of the report the QX more are think March and quarter close month. paying on April. But on to We and very a to when we

Seth Sigman

just Because the indirect in for right? a seeing online guess house through like guess All seeing even promotional market. points in follow-up improvement I some it you then pricing, seem differentiation curious, it. related trends of product look our discussing they're year, right. pricing activity. the this I and promotional consumers Got and possibly events, question more fully the Fair in competitor earlier, appreciating to that today an are deflation have does discounts, you potentially position enough. some the on more And sharpening more promotional their I'm

any they curious, that Is what I'm are seeing So are I guess seeking there evidence you your more from consumer? value?

Dawn Phillipson

take I'll and are around. general is based love What company product different. that pay folks we consumers great It's that, first a to great kind for aesthetic certainly is believe but our in it. what firmly and a such unique. pass It's It's of willing a and discount, look, then mean, pass along. unique our quality we I whole

there's promotionally majority I our I holiday until subset our to certainly don't But of John? they So they're of who what love more of might weekend. little a want. it. Jen consumer driven, our know clients the or willing on for They a promo a and bit who pay think is know, clients, post wait they the we product,

John Reed

to want they sure. mean their be they And be X they lifetime I or furnished is this their don't they because times truly to product that special Yes. it -- want really and homes. buy they home their in -- our X

really, never to course. so them But give they're seen smart people. to a deciding discount, not is we're recessions and take absolutely clients factor very, -- in not we that through the even Our but it's and a that's fair that's about. The focus it If value only And their factor. very We've forth. on, marketing. not the of all really is special, going it, great it what home a that's our are going deciding very makes what always for it's and It's in product. stores, what

Seth Sigman

you thank that. Okay, for

Operator

Thank Jefferies. line Jonathan comes you. question next The Matuszewski the of of from

Jonathan Matuszewski

Hey, Thanks morning, morning, John. Good my for good taking Dawn. questions.

your interior customers. on designer just is one First

my hearing are your the looking? from spend balance designer this with propensity But how some We question. could backdrop? have the curious customer deposit regarding what And their number customers shed on light you their conversations sheet. they to books of of in on That's interior first if clients customers, their are business

John Reed

spent -- them. talked I've to should some them. haven't business I I But of XX of getting been saying them, They're booked And Yes, to by -- And some interviewed with usual. helping they're told XX, as clients' single them. what I packed every them. of just homes, time I've from our one they're out

continue are two get next everybody people new had what because many few finally years, going their to for line were for understand, the finishing from or I to So which after billed builders, remodels years. in three homes is or

their They hearing homes they're They want no, that. their that, busy being move lower And into finished. from They're like to their and So prices or till They're your going as ever. not -- lives. clients you as to it want something furniture. we're packed. They on done. they're hey, wait are with move

when So busy they that as heard, ever. are I've

Dawn Phillipson

And the data that that. have, we support would Jonathan

quarter. every increase is demand seeing penetration the So to program, the continuing in-home designer we're

for So really nicely times remains that pleased by AOV then still that. over with in-home assisted an the are designer. X sales And

So…

John Reed

but and trade that a grows the it grow. month, ton every continues do have up it only bit. bought slowing people of with there. on a and business that us, all. don't with I any to And bought every middle each get come many we've we that in-home how at trade of out And see down And signed for have folks own our have that not month own we consistently quite a count The their designers, folks businesses.

Jonathan Matuszewski

That's maybe And question side, is I my really follow-up the guess trade. contract. other helpful. you on mentioned

be You scale level? to further mentioned medium-sized maybe in trying frame to to you're kind And you Elephant what this White consumers Thanks. the some of would of the of color your initiatives. and going today? done? designers, proactive and or peers but beyond contract business helpful priority there I'm of are opportunity not terms the can lodge the initiatives sure more in your end What's businesses there? deal, of be hospitality. scale similar terms you if the What's have mentioned just Any small Surf there

John Reed

to business. Jonathan. opportunity We a grow focusing our let it's team that a of we've part there's yes, our good about. And part think on business. question, do in. and Dawn it. jump I'll have smaller But talked grow It's a Great we It's one a that of significantly.

know, cool, restaurants, opportunity back in they really hotels, an more finally, As we're lot do business sure and all renovating growth want seeing we to of business a is guys and their the But they're their we hospitality I'm look there. you boutique to some have nice there. think

Dawn Phillipson

you general. on but overall. focusing on the can awareness lower is priorities does to think I the we're so showroom Contract much opportunity And Yes. and increasing as in certainly we rank it that, business grow an opportunity, to brand expansion have on add just

fastest contract that strategies very manner. something So significant our certainly we strategies of results kind in executing the then focusing on have doing think correctly we our eye opportunity, -- to want we biggest today but is but sure that on, we will the a drive we're strong make are and

fast So making we try is to don't too sure too execute important. much

that I on but certainly one over opportunity. come years, to more think, So the coming

Jonathan Matuszewski

of sense. luck. Best of Makes lot a

John Reed

you. Thank

Operator

question next from And of Stanley. Gutman line the comes Morgan Simeon of the

Simeon Gutman

I have from think, or versus and we Hope that everyone. morning, expected improve, I don't it that the hold are -- on The in did two year, more for rest sure misinterpretation know, make is I decelerate that right. it now overall clarify Can the demand came the of release. the guidance to the be guidance. maybe is square out Good just than to Can you good? original the you call and expected may comp something sales your

Dawn Phillipson

Simeon. Sure,

same. -- So we didn't everything last the is our from change quarter. in guidance We anything

to mid-single -- X% -- growth comp The from X% expected revenue full-year is up negative the range to So to demand net digits. be total is growth X%.

when with So reported we last what holding quarter. steady provided we

Simeon Gutman

first but the anything. with the seems worse better, where And that's getting but on appreciate maybe in. changed, being on little that asked call be quarter guess based that better I in. come hadn't to gets I worse, imply bit getting was I nuance better trying be weren't you the something though, guess to a the But implied or it first how one thought been I came where quarter the other one could to seems

Dawn Phillipson

not to plan anything. we're trying No,

our we point say lot significant anything choose uncertainty ability And of we a we for last -- time we'll in I to to changes. levers hit see feel pull year. this the in that there's And guide. trying this think remainder we make the the that than is what feel through and trying different imply to at to to I But don't any was year. of what move not this what feel we're But prudent put there guide confident is as in quarter. think it's out confident we it

Simeon Gutman

Okay. And then follow-up. a

different You mentioned powder a asked and promotions dry ways. of couple were

prompt even changing? quarter And you has guess, more a what First, second quarters, you, in may retailers anything in seeing are Is are anything the anything little where then subsequent the changed? getting I at aggressive? margin

Dawn Phillipson

cadence So pretty promotions. we feel year-over-year. managing we're April in early promotional year. did how We our good is lap that implemented price mid-single-digit flat about increase We the last

set what want helpful to do we're about a gains? you seeing that's So Jen, from to recall. talk from think competitive I promotional

Jennifer Porter

market. in definitely continuing Yes. there the elevated that to I see mean promotional so cadence we're out

saw going outdoor I a think well. March out in promos the you April, and lot of really in interesting as market it's

at really rate. launching that product are people So a promotional

very As were year. last Dawn flat mentioned, to we

we so seeing product. incredible with to We're we're happy the and on to business our just focused right And driving our continue deliver continuing be now. business and what

responding levers if But launch, how them. we marketing there, and optimizing it's always business. it getting supporting and As great that right really really Dawn on monitoring product our to the we have out are focused need engaging future people now, to in pull said,

Simeon Gutman

you. Thank

Operator

The Group. Cristina next comes from Advisory question of the of Telsey line Fernandez

Cristina Fernandez

awareness. wanted to I everyone. morning, good Hi, ask about brand

on wanted of have how to measured ago. it months compared you if see the recently tends to had and couple a to XX increased. six, how about number call mentioned times You've that I be

Dawn Phillipson

totally Yes. consulting awareness are with to conducted year peers. the time prior, levels firm But relative some in see back last Hi everybody, We we be comparing back the much and a I really showing our awareness did to where opportunity versus at forward. and X Cristina, good going have versus improvements just XXXX, increasing We end our years we with period, to of QX more we continue some study market, how morning. was were transparent pleased. an by excited were external brand of actually our that

name So terms relative despite to and in improvements, the in space. of those brand underpenetrated we're peers still recognition significantly awareness the

that. address to opportunity of lot a have we So

really excited and response about there. excited experiential on of partnership really of As about We're to about upcoming some to aggressive store excited the out prospecting our We're get some these opportunities name the I'm opportunities. more really earlier, new I touched openings. our

internal tell as they're Similarly, I our actually talked could think And we've John don't an teams one about, our use and your at in special able looks to But it are passionate our day-to-day quality, about I to those is, team incredibly product get it, vendors marketing and stores ability our really team obsessive a furniture the absolutely though development the if and much thing, as out how marketing be into everybody teams excited passionate this amazing as there equally beautiful. even here to and have that. products. goes material, think house. how performance point I when watching It's aware developing is opportunity attention our realized the fully we of sure product stories new really to how make life, the that our teams to

to a look of and excited point responding John's today. to marketing well really introduce really, on at those I our earlier to opportunity lot telling those improve the so And we're as a we're as we how our potential stands being think to uniqueness. to stories clients, incredibly health it showcasing But brand call, able new we how have as they're

year So of going forward. to really, really back that clients and half this excited how will to respond

Cristina Fernandez

And then product on my follow-up is side. the

the about outdoor. back you on introduction planned for and spoke for here spring you half have John, summer the for for share holiday why color perhaps around the some So season? fall you Can

John Reed

products? New

Cristina Fernandez

products. new Yes,

John Reed

Yes.

this Then indoor products, you fall. the or reminds explode starts going we're fabrics, me, kitchen that roll forth. vendor, we're some products, so think really are to got our with. for rug, out We've a only a yes, the focusing us. And if pillows, half, the from incredible business. typically obviously, But back Jen just As more she's all leathers we the new and indoor not in you're particularly really, the the up upholstery tables kind We coffee but than there, not of really furnishing with buy it upholstery. lamps, custom-made business, the on,

values, focusing fabrics delivering can on credible used. some that we're So really be cool new credible designs, really,

that to room in Our clients off to us that market is And for everything to from really indestructible we're think they're really they we fall. lengths don't the almost very go and I have the that's things have unique forth. seen to frames in the cool on of and make be and interested that exciting pets, families, just great makes look cushions sure designs can we to lock in you is have then live think to think And people the that so at. It data this in the our upholstery really coming some fabrics we country. the And use. certainly going

Cristina Fernandez

Thank you.

John Reed

welcome. You’re

Operator

of line Philip Blair. comes The Blee William next from of question the

Philip Blee

million about backlog is about you. the in of $XXX to how first-half. you left can share much the Can remaining you. fulfilled be of after quarter, expected you Last thank And that Hi, first a the trailing spoke initially quarter? related and a the half? you go we impact XX-month percent backlog? should still in a level sales, mid-teens fall-through more normalized Thank of second margin bit And deeper consider the expected into of

Dawn Phillipson

don't of we the just the it we backlog So every report. to get was give into helpful want year. comparisons habit the for year-over-year thought full disclosing time to We

through. significant push So to of still there backlog is amount

that's kind if freight -- I the relative assume of factored clarify kind not component, to certainly of So to is you're the asking case. relative into any impact the guide margin but

margin. an then the apologies, We on last factored we of into don't EBITDA to was what margin, everything gross And question? context So guide. part did some your but adjusted is the give guide

Phillip Blee

a what level as kind of normalized sales? considering Just that the percent XX-month of range still a mid-teens is, is of trailing more backlog

Dawn Phillipson

Yes.

I now, appropriate. For think that's

merchant is reduce times, consistently working -- our the our times lead know particularly around on lead products. pre-pandemic from I improve type working special to -- we're team to some As diligently order pretty

now, But historical think bit. the just little of average we strategies firm until kind a down is come deployed. some for could that So appropriate I have using

Phillip Blee

Okay. Thanks. as And That's great. quick follow-up. a

format view smaller plans of format a lease compared and the location. And accelerate you. services-focused to productivity as Thank One risk similar-sized can launch to box? footprint or to a you a announced the potential margins this then ability your studio design how of to plans Do sales this your to remind competitors your your you traditional us showrooms?

John Reed

Yes. changing and We think But our not we don't that, our whatsoever, no, impact too. it's it's strategy heard business. going to

are like opened up where put our wealth. full-size very well and away did but doing, much have idea competitors did like wouldn't what let no things a want nice North we've we in there's And got they me places there. We pockets and to just a well, of last but store plan, how -- you phenomenal and that, Asheville, Carolina month

studios design working well. are our So

We've to and go years runway got lots those. of on lots runway of --

experienced of of productivity So people just we're square trying talented together more them those. And to really team focus a on we're out continuing get tweak to little putting footage. bit to a each

So not bit. no, we're changing one strategy our we're excited and little

Dawn Phillipson

And targeting then from average have a financial that perspective, million our with traditional we're revenue contribution we margin number a showrooms, $XX said of XX%.

a it as by, but contribution higher rent we and number, lower can be is driven the would revenue showroom what you imagine, So staffing studios design that's a levels the net XX% would average target, primarily. and the around of margin have

Phillip Blee

great. Okay. That’s,

Operator

the question. conclude that So does

John Reed

Yes.

Operator

The you. of & Cowen Mak Rakhlenko question comes Company. next from Thank

Mak Rakhlenko

a taking Yes, my for question. lot thanks

on hopped XXXX. teens house's pricing to this, addressed what case think high Sorry, new is in you're higher least but to you longer ability hold up already on this your I level at our late I term? view compared

like near-term take some term, do lower baseline? the things to And this pricing So that. sort more you promos think excluding so the is new over gradually time? is longer of Or you and of could this need

Just the run the curious for business. on rate

John Reed

to it's get pass we our freight we where lower product. prices intentions to we prices along value, or where from whatsoever clients. other to. But of than we We've to We plans our more have and keep lower prices have an the happy lowering unless can vendors appropriate, If than cost we're margins need don't savings it's no from great unique. don't that, to continue our any want incredible we That's got we them. think our because

team really because because nice, they homes it desire a clients don't year Nobody that X on clients in they they sofa world. or something now, not product, that. our months my be again, like want special their save once And from to can else with a I really remember paid. buy and buy our always they the our -- And $XXX has what products. once our tell they that, it

or cheap and off they got $XXX on this tell they not saying, stuff. sofa. product on And not all our I is their But what mean they in they if love deal appreciate they their buy their "Hey, of caving they're it, they and If sofas trains why and they're right love remember a and it, and at I and not and look foam with not it got product. they cheap that kind friends. this. that's

we prices if And from lowering can lower again, we prices get so intentions from our we or no unless, costs. vendors have of freight

Mak Rakhlenko

it. Got

Thanks great. that a Okay, lot.

Operator

like session. remarks. question-and-answer Wendy over conference would our the turn for conclude Watson does to that gentlemen, closing and I Ladies now to

Wendy Watson

We our in your and forward house. your next for speaking you our call quarter. Thank to participation in you, again to everyone, look interest

John Reed

Thanks, everybody.

Operator

concludes you teleconference. your your lines. you that Ladies you. and disconnect Thank Thank may for participation, now today's gentlemen, and

Arhaus (ARHS) 1 Mar 232023 Q1 Earnings call transcript