Earnings call transcript Q2 2023

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Operator

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

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

Wendy Watson

you Arhaus thank earnings quarter and call. morning for second joining XXXX Good today Co-Founder, Officer; John Executive with are On me Reed, Chief Officer. Porter, Marketing Phillipson, Officer; Chief Chairman and Dawn eCommerce and Financial Jen Chief and of John main made release, with points press the operational will morning's a details. this we with along start summary in will Rooted, our the Dawn financial our cover outlook discuss most for and Jen performance of remainder XXXX. will recent marketing and campaign, questions. we After open will these for call remarks, prepared the

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

have additional available A issued available ended are opened you of replay our for and questions, If market the please will documents ir.arhaus.com. XX within website quarter queue. our our on the call return our We hours. June the on release before Those to XX, Investor XXXX, earnings be Relations press today. at XX-Q website

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

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

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

turn now the to will call John. I over

John Reed

continues joining our and It everyone, morning, quarter another be resilient. today. Good us business incredibly for was Arhaus Wendy. thank you great you, for and to Thank

comp year. we exceptional again continue We the quarter demand last demand the quarter, XX.X% comp clients It is the win in demand notable on comp saw in stacks a second growth. with our second and XX.X% that to

we to the May with a cadence, mid-teens demand accelerated started of comp, XXs. quarter April low flat In terms up with which June in and

We in categories are in and regions. seeing all strength all

a quarter growth We strong high in have also to demand the single with digits. July comp start up third

Turning to XX.X% second and we to net of of and for and $XXX EBITDA initiatives the growth delivered plan our with continuing for of execute strategic the net XX.X%. adjusted year, a while $XX with of margin a comprehensive quarter, of margin revenue highlights $XX million million, million income

across Dallas including delays was productivity assortment efficient growth. second, out revenue focused quarter, deliveries for new below by delivery First, on product optimize slower that of impacted temporary distribution various in Note the our a to the the a as new primarily center implemented we we systems, to three system factors: expectations drive centers; management continue three warehouse distribution these future as reduction

us also And third, deliveries delay to home-related as asking are some they complete clients projects.

efficiently gone it us center through talent distribution implement one two for more in As as that system and to three we to have from to to continue we our supply is past critical the processes scale growth. enable product we move chain capabilities, the years,

by the of some slowed will a as expected pushed in that And net offset continue Some originally second half stronger-than-anticipated factors XXXX into XXXX. our this year. demand second revenue that to in of the result, is the This quarter revenue of will be growth.

in revenue this net outlook year more will later. unchanged. our for midpoint result, discuss detail is Dawn a As

we the us clients benefit second with is It make saw quarter. freight impact in margin This benefit inventory We product a to areas nice is fall in the to assortment remain to we lower on from way costs new as lower profitability. top pass through to to pricing us of mind where enabling particular our Moving allowing we some competitively. gross for optimize a hand. the less the of ensuring earnings focus need of our and launches on address also our

the with EBITDA in stronger Additionally our full year we income outlook. net second earnings quarter, are our and adjusted raising

an share year. growth update the our on to for Turning

scaling renovation, California, To relocations our Illinois, showroom traditional in successfully studios, our Dallas. showrooms expansion have and outlet along and footprint Carolina with five XXXX, we Massachusetts a showrooms are two date, location in We North executing projects. Asheville, new opened design new new two and Topanga, Naperville, Peabody,

of proud case pleased incredible show We product. our performance are new showrooms of with very our the how strong and they

quarter location we the Coral Huntington of showrooms open and the five to For format California. showroom New in West XXXX. the quarter; been Station, new An six third additional and showrooms balance year, in opening planned Florida, to York traditional three pushed in Connecticut expect the fourth California a Hartford, has new additional showrooms, Gables,

renovation Our expected. projects expansion as proceeding all and relocation are

I experience encourage -- product the all visit of showrooms one our of yourselves. you our see and to for

We designer also our continue to grow program. in-home

designer the in-home We our Xx sale of average company enjoy value order growth are from order focused our we as on this value. assisted average is program the

to to been founded hope planet. I an our end down will team million preserving and announce Indonesia. ever, do global to in XX critical down from passed proud to in and be about efforts airline rain that wood their Nature create $XX to to the it warming. with we sustainably up our source furniture, generations slow ago quality I generation am objective part to than more I've Arhaus passionate not to must landfills. than commitment years but always support the the a forest protect Conservancy Borneo, more help And now the

economics to and Conservancy attractive directly an affiliate self-sustaining and forestry. they project on solutions support will YKAN, in drive Our Indonesian donation to ambitious Nature more as embark pilot their local the

sharing that make and to we this forward and And take a others proud and you, that the we'll to difference. certainly and hope the that employees these our us. join confident is are know incredible bold our planet. We efforts, to know business, We our together, support We we will now. we critical with journey are environment clients action we look must

strategic Finally, as our experience service enhancing well thank an focus and for openings want executing and team systems to to I their that client-first and assortment amazing opportunities capitalize will providing long-term me and as product in of significant on execution makes my ability It growth on that confident continued the incredible us. for us to ahead scale their is omni-channel showroom our allow success.

Now our I'll turn Rooted, Jen campaign. marketing it to discuss campaign over to latest --

Jen Porter

I'd health and our The across to Last Thank good campaign year, celebrate in was the trip a you, and Javier, moment to we videographers Mexico. yesterday and of today unique long-time a everyone. our John, like a to which latest capture Rooted, launched happening partner team workshops. sent morning, and take photographers our goal writers, to his magic of visit to channels. artists

Javier's organic inventive partnership, been with and has imperfection working From sustainably handcrafted his the log furniture salvaged different, and sourced wood, drive he lets beginning every only of our distinctive, designs. specialness that sees of a

As our so over businesses have the grown collaboration. has years, our together

collections sense Our We into of style evolved home. our spaces and refined. the expanded at new and new developed offerings

story Rooted the we you also and of tells the his Volume Javier's to is campaign who I campaign that immersive is process truly a to visit a encourage X story, his experience It for family, arhaus.com yourself. of trees. are. for passion his

beautiful all our the Javier furniture and We and partners most with world with offer our collections. the handcrafted around to artisan the to partner are of most so unique proud clients

we telling continuing the which and Arhaus forward look enjoy much to you hope stories very within Rooted share as enjoy them, make we as so the We to stories, special.

In QX. addition have some initiatives great Rooted, marketing to we launching in

experience entitled launched this Unabridged content on arhaus.com week. new Our

of stories Artisan much, the wonderful our inspiration, find Here you will and partnerships alongside design more. partners much

to client campaign calls. more fall offering in collections. with weeks, be wait updates and hundreds share and We some expansions just cannot our you our will best of a on new also feedback upcoming products of launching few of We hear

For now, to over I'll Dawn Phillipson. pass

Dawn Phillipson

Thank and good you, morning.

statement the our and Key a basis. we with stacked As the comp revenue comp second XXXX of million of demand X.X% growth in up X.X% million, quarter. and four-year from Net on $X performance XX.X% a negative John basis described, income XXX.X% quarter pleased growth one-year with $XXX second are of or include, on items

as in higher $XXX card higher related revenue higher to driven to by X% by quarter, increased increased margin demand. lower and the net to a credit basis partially favorable partially percent Gross costs, and XX%, product offset rates margin credit offset fees card of fixed and fees. million points revenue costs primarily by Gross product costs costs, showroom net increased XXX reflecting interest our and showroom fixed higher

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

XX% to increased Second quarter XXXX $XX net million. income

XXXX, million EBITDA the $XX million of in compared the of adjusted the the primarily the in quarter second quarter just Adjusted quarter XXXX. million million second in factors increased increased net XXXX $XX driven net Adjusted of described. to X% of from second to by in $XX X% income $XX to quarter income

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

half Let me year. now move we of are and about the this thinking how to second our outlook

our factors narrowed XXXX are our by demand net revenue QX revenue digits growth earlier to versus we growth. midpoint with second net second that revenue higher-than-anticipated half the down described half the John we offset As affected be of net implies, range the the mid-single of comp expect experiencing,

We increase the second in year. expect of to demand the half the low to in range see comps mid-single-digit

adjusted the pricing enable $XX our the full and to income the Conservancy. we benefits Nature also donation side, EBITDA the John year described increase to freight net while and guidance On our us funding profitability million adjustments realizing are

EBITDA technology revenue, the from the approximately margin both to the second to showroom Conservancy. of half new of in reduced down enhance rent and and capabilities, as compared of to to higher to the warehouse substantial management staffing, XXX Nature higher half infrastructure donation the deliveries, points XXXX showroom XXXX of benefited and backlog when investments half showrooms information we leverage previously XXX adjusted omni-channel impacted systems mentioned expect strong the versus We technology by be second and due including basis second XXXX number to

we for and and year we midpoint adjusted the are EBITDA income increasing XXXX, net outlook. as net with Accordingly, our this our unchanged announced full morning, our revenue outlook narrowing

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

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

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

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

Operator

from Instructions] is first with [Operator Steven Our Guggenheim. question Forbes

Julio Marquez

John, Julio for Steven Dawn, is on Marquez Forbes. this actually

Just a quick question.

underlying in versus And a hoping needs ensure trends, strength real the, demand estate for past be. as I on preview are the special customer term ongoing to over where is years? intermediate investments over in what product is couple the as a order was how sales of your mix to the I it still as give brief stock could guess, well experience And Given quick XXXX of the follow-up, the us outstanding you evolved new infrastructure-related pipeline. plans

John Reed

far our to look as year. as new plan, may And finding do we're we've the we'll we to at opportunities little which been stores or go that with a estate may little the and stores track stay Yes, five is, maybe right of for less real course. on present seven do a and on depending saying, deals, XXXX, themselves more finding a right as

parts one As been you own we special fabrics, especially different we're very very give really our mix -- see us the what the Since there unique great different we're that our right looks, with the about market. this able track planning. asked custom, is factory, it's Arhaus very of consumers in strong. of out really, as We is upholstery far orders, own upholstery makes very, of competitive we than our we in It's on business. feel to

it for custom order and our very And make clients. quickly we can

business. we're third So the part? of Is part happy there with very a that

Julio Marquez

on anything yes, in if And quickly, just infrastructure-related can with term? Yes. more to and you very intermediate up the [indiscernible] investments follow short

Jen Porter

question You second. that okay. out for cut Is there that Infrastructure? a Was about a -- systems?

So yes, we're excited.

the have systems continue in a lot enhance to place. opportunities infrastructure We have that of we to

several a last is here growth. the over some and strong years, management some to change grown we going do driving who's nice we've know and really more have As facilitate are ways some team that nice, efficient things, efficient we to there strong, --

we deploy another main the we're Ohio management deployed has about as warehouse in So distribution centers. thinking been that our next working to of system one have several one here. months, facility for our We're a

to working to several next really that's the on months. ones. just growth So in excited about efficient smaller talked have going several I various how continue drive see we progress continue to projects other then the to over and know planning software organization. programs to that we're then And the past we've within

Operator

Matuszewski with is from question next Jonathan Our Jefferies.

Jonathan Matuszewski

also is then sales. driven for more Historically, the contractor question driven light second suggested smaller The assisted piece bulk half. refreshes and demand of refreshes complex home the existing first is was guidance and by home your by a on you've the just framework

So I assumptions wanted drivers whether stay thinking in get about first your That's my with or second underlying to consistent those trends, how question. three improve worsen? those Curious half. for just you're the recent

Wendy Watson

is purchase out the know never in. this time. too, time related But our have factors. to clients. that continue, three assumptions, how housing We we But not that's primary in our those would have exactly general, mean, going say Understanding of will drivers all be assumptions regarding incredible Wendy. factors I to continue changed from for will play the product are Yes, coming to our to this those they Jonathan, same primary those drivers. are I they're

Jonathan Matuszewski

pricing. Got my on And follow-up then Okay. is just question you.

done rounds aggressive. hikes relative as years of the couple You've of three over haven't you peers, last been to

price enabling clients So was I for thought costs, lower chain interesting. John's comments about lower supply points

the you Is along could helpful. that passing to if competitor be Maybe lower customers, by upon cetera? driven expand in actions, points being more that just et industry, would you're the it price promotionality

John Reed

in Sure. a of Yes, their we've I money. Sure. the customers mean, belief our for always business value giving ran great

We little manufacturers. from business have lot kind that middlemen, wholesalers, direct there, than We a out the is cut all build and model different of of into salesmen and that buy stuff a people that most their the people we all the out price.

go that felt better and we up, down, if the give raise can a So our we've always we we go if value, prices. customers prices clients do, if prices

in we're ago. cost. better have for now freight that prices It's way getting compared while container raised ago, we there. a a And to quite down come costs The value as really year is the certainly years X.X

working anything to and bit, our with be every little it volume because prices to trying So we're will were impacted prices take we're looking can price still we them obviously for we'll that little us. the at do which a if have our it's help great. a selectively #X, margins, as is very things down come But it.And doing that withhold we're and not with chase down customers that, it or seems bit lower and

coming they're to at more don't now marching are low. very, that. going costs than we're because see that's they container down I So very keep

would think or in We're will be more to lower I not have raise maintained. prices going So future to them them. the

So that's the kind like. looks what future of

Dawn Phillipson

I of other that just might have Jonathan, couple you find a points helpful.

we actions So mid-June. in price implemented the the

that mind assortment, of right-size price So to mid-single-digit assortment. in quarter. limited decline. But are temporary it's keep Overall, looking those those most the on full we're the about inventory in as a impact second the of

for we're for coming within the make up how thinking newness us. assortment to as the season as And about way newness is

for that. X excited points. those were the So And really

Operator

with question next Our Simeon Gutman is Stanley. Morgan from

Jackie Sussman

for Jackie Simeon. is on This Sussman

with brand And more of guess your for important of you and business demand timing Do deliveries? the Just it be way? is up impacting timing of to any consistent comp? deliveries, you're the path marry to think in how actual on the that the I the what's kind

Dawn Phillipson

Sure.

to impacting for orders to deliver mentioned, our anticipated been the able So we those to were had couple half have like second off fulfill sales, to level ability quarter that's be well. the timelines written as of the in there the that we been client second working We're demand based through kind that delivered the of originally. impacts a of

think to say and I just percentage, keep at be year. alignment looking So you're on X.I the the mind, going the comp the different when would to more percentage demand very come of base comp those in looking last at is

So there's the of in the clients' going a there's pretty their But to get delivered particularly in product half diligently second we're homes really year, this be until and of some looking to into noise lapping folks holiday want normalization. perfect. seasons homes advanced working

John Reed

any had selling and And We're asked has products. not a you isn't this quality on if they're Jackie, just in, -- commodity. fill anything. this heirloom impact handmade to

So if takes We've like them, and weeks so because and something products we're or when to zero another products seen folks or couple order fine. get that. it our it's to cancellations absolutely of forth delayed

is in important It's for for a big not it of to clients then it's our They for And weeks our because going earlier, have like and unique. they're the product them. anywhere for so, if that's know years. wait world be deal it for but very wait they else it. they'll may very a it, They will and find couple can't many to it wait know it,

Jackie Sussman

remind you. galleries us store average of tracking follow-up. space And just what I as productivity looked new on in that? quick a on store new an how can percent Got year guess, productivity, and you a new like our one

Dawn Phillipson

Yes.

a EBITDA million contribution traditional that XX%. adjusted is we $XX minimum what target of So showrooms, we for and said revenue of

strong. out come any really enter. about well we new those is excel really performing that how are really really good metrics. we're we found showrooms of to So in the our that we they feel What market we -- gate And relative

mall in urban, lifestyle center a whether suburban, a or we're whether it's or standalone. So

feel behind not strongly we showroom experience, only So put the new but a location. we it when that pretty the in open we marketing

locations performing proud new today. of our So are how really

Operator

Our question Baird. next Benedict is with from Peter

Peter Benedict

you outlook, looks or up So view a us little talk SG&A. your margin second be half versus be Certainly, gross it is bunch. more a to on Dawn, like about help understand can SG&A going will down the maybe margin gross

and understand first That's any out And takes Just the we set call the puts expectation back versus what there? to XQ kind question. half? the for around trying are XQ, just as of my

Dawn Phillipson

be gross to I'd guide don't of happy provide some we components. while some on margin the or SG&A, So clarity to

we talk down bit seeing is a So we're freight margin within item, to line starting did gross P&L. through about that the coming and the roll

opening. So there showrooms nice there. that relief pricing rent that's locations Keep in assortment. for rolling are taken offsetting opening with six through as of are have inventory the that new Other that back advance half. some the particular more of note We're mind in in those we're showrooms actions the new in and we've items expensive

We line a And opening, couple well. those also we're no corresponding as staff months of within revenue to locations starting impact. there's prior to top

So that's important.

for SG&A, rates new but a with new seeing with these this you as interest does have the impacts card demand line we're some items. expecting year. Within accelerating through Now it and where that for role impact increases. bit and can also SG&A, compensation also so near-term showrooms the variable those imagine beyond are staffing well to a they little We're sets in fees, credit showrooms, up as XXXX us compression really but still of

revenues our little a mind of showrooms that there. demand versus bit commissioned Keep a based of are disconnect GAAP in off

in could system. talked percentage as delivered on door, also revenue working some investing just a there the order an out management So So the warehouse about to We're We're variances system, we've systems. there systems, we're about as planning get basis. right? the management the talking be

lot implementation there's advance of turning So with actually the and system, a in of those that on fees of lot along those. go cost a

at We're So how where XX, able the next be growth. quarters, that yes, growth as we're over support give know, Wendy, we a to have and I business compression. going systems don't point. think kind But to so of months really we're seen, XX, additional any us we're excited kind take are again, but context. to don't these just we've and investing this for grow near-term the thinking you about XX of I certainly do between then going a maybe guidance quarterly And the

Wendy Watson

the launch a mean, our nice quarter, delivery. we give products a -- refresh even. other of hope showrooms fall can No. the it's in I new us lift general, third would fourth our marketing split. fairly have and than and them as I But the Obviously, about big we that in our of the that a little in the would think in on campaign bit depending quarter

Peter Benedict

question then, And guess, be around COO just would I the -- next the

Wendy Watson

Peter, other one note.

donation be also SG&A, So to likely that's to we'll quarter. have the in TNC the the -- and fourth so in

Peter Benedict

Can give COO talk My Excellent. helpful. around departure. there drive from efficient chain some obviously, That's plans supply that, the become be about a bit really follow-up what's and what management would given context, are the on a more us standpoint? to your you -- just little your more logistics,

John Reed

the business. Yes. a the part take wasn't of to great got COO mutually agreed, driving forward. just great it us fit We've the that And a team

We'll the So to moving keep are what future. for we're figure our plans out going on.

team execute going. them got with things on great we've a But move the and and we'll ground keep that great, can forward

Operator

with Barclays. question next Sigman Seth is from Our

Seth Sigman

follow to conversation. price wanted the adjustment up I on

happening difficult for from some price a competitors. these of do look But to competitively adjustments, the really feel any maybe a Apples versus other it's commentary compare price So your and around you perspective? Apples what And promotional what's like? to gaps just following have

Dawn Phillipson

Yes.

that. like within competitive So evaluating proposition would with we're to exactly value we're we making sure top that that be, is kind our regards where we're it of of to sure the constantly making positioned market where set,

these at great looking not great know the really those comfortable taken really us have unique that more would quality. that feel adjustments we've we across be we We And market. really on the what today. within how would be we're that about temporary product So based as position assortment, we think some price feel of permanent I

with we're the evaluating constantly we're So but positioned I how pleased well. that think as market, really in we're

all the at you talk do want Jen, to you promotional cadence team? about

Jen Porter

Yes. promotions, I on that as think we're specifically I strategy -- mean promotional We mentioned I continuing our activity. heightened remains promo to on similarly see calls, to, such unchanged. prior

be continue to with really We it. happy

note thing the one think promotional strategy. I our to

weekends been So started seeing around you know running of we've that those how sales year, talking holiday time end and last we three-day right the always periods towards those those promotions the Black weekends, about were Friday lengthening. on

of So we growth the of I customers as think and be top to in do mind are want are we who more part mode, consideration set for those driven. promotionally

some We promotional periods. our have lengthened of

might been might day market. be the what we're have to little around in now over X seeing three a promo what So with line July a trends with in weekend four a week

-- Again, we that's mode. in growth really want are -- we

to the said, of that changes we know and with promotionally I our that the are consideration shopping. like our performance. market and subset brand set happy in we that, continue a to want are We to We and no be trying be the they're awareness. in to other strategy clients But out driven, grow there than when really

Dawn Phillipson

And just effect went those changes mid-June. into reminder a in price that

Seth Sigman

doing that you any you specific to do maybe there would context Is there? that's just more think the guys point you market, are or

Wendy Watson

is Wendy. this Seth,

up a the you repeat Can broke You bit. question?

Seth Sigman

that. about sorry I'm

there acceleration, a specific anything you it the a on or acceleration then was do the you maybe [indiscernible] So on mid pretty that's saw that -- and just throughout think, quarter, well. basis a Is one-year the just a think -- multiyear basis I as in

Wendy Watson

second your up, how question a is saw about think the still but is we basis. in and breaking and I what impressive multiyear it on demand quarter you're Seth, the acceleration

Dawn Phillipson

Yes.

we're continuing to Seth. So execute go -- ahead,

Seth Sigman

acceleration that. the if do think that it's or about sorry anything specific that drive to did there's And you No, market? you

Dawn Phillipson

some we're that. of Well, think I certainly driving

there's several probably execute on and the continuing to think really component a for market strategies talked as years. about that well. we've we're last But I outlined the

great showrooms, our the aesthetic. feel we So about

really product Our is resonating.

newness to the perhaps in several throughout folks the last bit point. different little a market. on It's some years, We've continued is which introduce other than

with at to constantly We marketing and that. to there about responses. there points looking our drive great feel we Is touch clients different certainly engage -- are ways evaluating. are So the

we'll continue I laid we're and So executing what we've think execute do out we'll on that. that to

the proud results to able being just we're results. the proud really of drive and And our of teams

Operator

is Cowen. next from Max Our Rakhlenko with TD question

Max Rakhlenko

in result was first, road? nicely you So will gross the lower have on weeks? that much in and seen the do then margin to impact but of the down think not how elasticity confirm the handful the gross the And just quarter, margin prices up over that then you've I pricing want XH will pressure past just

Dawn Phillipson

Yes.

especially as mentioned, into as we footprint evaluate, multiple the the through some that actions on into So we're flowing as our our make focus the some renewed these right we now savings sure freight forward, positioned and be they're and go the the assortment with we've time freight are to savings, how into supply feel of of of we've DCs. then is year, there's this next into chain We reinvesting year want price really inventory positioned heading P&L that taken. back half dig to

pricing time given to action impact and of ability especially reviewing to given units, opportunistic freight to that without the those we do some So we're spending a analyzing lot take think the the time an so drive rolling it's through margin there's P&L. and that

We contribute really excited with. also which said that the to savings are Conservancy, partner Nature to freight to the and proud us about enabling we're

good feeling we're about that. So

a question? was part second Sorry, there of your

Max Rakhlenko

the that you're seeing. Just elasticity

customers are reacting how to the price So cuts?

Dawn Phillipson

if helps however. slightly you. I But has a and mean different in answer me Price been so the this I -- tell good. maybe way the this think far as response I'll as client, consumer Yes. doesn't drive

of client there a about is that we're subset will the base as So thinking purchase.

waiting what fits for promo, on wants for and their holiday a our based client they product maybe their on were they quality weekend. based and on were over a and they But Maybe based waiting next aesthetic the want the lifestyle. that home the the sale

some So as well. that showcasing bit we're we've some little to differently we're a great of response them seen those products showcasing and

bit, with little to the it's So those how inventory do that about engage but driving it's we looking clients, as it's around supply as through client and a chain pricing products the well. the about we're also about

in changing on like they're how things So website the displayed the navigation.

So is regardless price engaging I looking at pleased aspects, the of kind of but with product point, the we're think with. we're all really client excited and which

Max Rakhlenko

just you and can us for the to of know that, introduce then going half should newness then it And rollout? have -- or you are sticking of much of with changes? I thinking if remind your year year the we as And all how typically if just any curious maybe but next that just what cadence, you're you're you're the then timing how about you to a expect well? second book thinking

John Reed

Yes, answer I that, Mak. can

you sales Clearly, last our are great over As the product. and clients, less XX% I resonating our our we've product know, got months. think with is up demand XX

So had merchants not the our pandemic, during products. developing, designing, sampling slow new down, I

when out So pull pandemic, came those were the lot of to a ready trigger seeing we and go, of they the on could we're and we that.

products. is We we've is. doing great know got that think it because great. we're great, of a I big so part It's why

that we looking better We every day. So year, the better to about category steady. point. for we're steady just and a get that future, staying carry every we're and at shoot things newness single trying We're XX% with and

know cutting-edge so We've got with that and and going with key Jen merchant passionate team, look rolling I. people alluded to partners that team, things say, Rooted that else. I I or great out this keep never out home really now, this anywhere think and great one that's new our we should better do we just they're products that And to, know they that on better run. cool at love campaign our roll some very so have we we out be design a did is such a seen coming working a right Take product talented fall of and

And so staying yes, we're course. on

Dawn Phillipson

Mak, And is add also really would that at in newness exciting in coming I that's that, coming margins.

price we're pieces the of proud really these we're market. So within able how to

Max Rakhlenko

don't on Can you mind, you elaborate just comment. if maybe just that, last that

Dawn Phillipson

that really the right? you're want strong we I have detail, tell we in, the much really at coming I as Max, mid-single-digit price mean, newness we got into I I guess, as mentioned great think -- we've you points, take And reasons, yes, adjustments for go price overall pricing, the mostly margin. competitive looking too and don't then that, assortment But in. we to can

temporary, provide upon than more right? it's more of would most we've those others, pricing you're little stock taken months of on others. is and digit have than mid-single being the supply across that clarity also also contingent higher I as levels, some while maybe categories in and those we about in to So that a thinking assortment, it addition the

but out, about overall, with you really that P&L we're know just we're we think model this perspective. really focused I margin So good and the also feel I know a that on how but don't from management, can client, positioned

John Reed

possible, lower it we margin, what so we go to of to the can new absolutely do. cool add price maybe we we hit and roll feel we quality more, keep as we going design products margin that's cheapen out get can't mean, products, just chasing the through overpriced. on the a on profitable. products we so side, higher a interested from get point product that merchant work sell is because that, great we It's a to say pass and let's cheapen on. be the new of And But hundreds absolutely analyze good or the we we not stuff, product. Yes. that's in we can we but I on quality not cheaper it's I'm so products,

a point, we value, roll and on just merchandise a great we our good anything Dawn's that's a and that's product philosophy #X, at because great margin products. how is and do So out it getting we're to

Operator

Our next Jeremy Craig-Hallum. from Hamblin is question with

Jeremy Hamblin

strong Congrats the results. on

outlook to a picture I belabor about are the posted, gross rate, as is. not come in step-up that second to just though that your for But here what you've more the of just questions margin margin a gross think, terms a I the seems best think expectations your of long-term guys in and the asking you had bit margin. up, the But So year. point gross here it sustainable step in half in

playing than, kind And at the the of you're offer few that kind it still on is -- clearly, a let's those viewpoint sounds part the you vendors is margin? a a level ago. see, in can kind the that not drivers gross is But kind targeting on wanted to that comments say, of of higher key scale a whether margin ability still that years of Any biggest gross sustaining share this, like, additional the also and sustainability maybe just or of it's adjustments digit, to maybe part that. like a I with big price scale mid-single of

Dawn Phillipson

Yes.

said Adjusted the nicely you to we to that a So And that a there's but I we path. of as articulated continue linear is the grow opportunity be business. we've may scale not what in it think expect past lot that EBITDA, and

footprint. in this those lapping in the particular, So months to year in strong in advance thinking backlog Those rates, the of QX, about back XX some costly as are year. particularly margin actually half in showroom also opening really X investing We're advanced, we're our of you're we're in last lapping showroom. delivery

fixed last great those we're same in keep leverage year. to saw this that So on benefit that mind have we not expenses that year, going

to it's think keep said was the backlog important I and between what flow-through in XX% on in mind, that about rate that is we've XX%. So to 'XX, $XXX million, just the was

flow-through strong that, back 'XX, half $XXX year in on delivery million out. this 'XX, depending really about the of plays backlog So, in how on

a in to But investing So as continue those in are processes. to we significant talent. well or rates. is role play investing to you're the We're a certainly longer backlog as in grow really in thinking investing going Company positioning about role, we're term, systems

really pieces. vendors we to closely pricing products in the around those as work certainly, with And continue

the more and larger think where to how come about term. on really is Company from but So to I we're able a deliver we're be perspective, feel good that we to the medium heading, going about and excited near over

Jeremy Hamblin

here household And the here. markets a The really slightly then openings kind markets, new upcoming of showroom income market. on are higher just coastal follow-up

$XX the bogey. are bit seeing you that those level -- economics a costs expectations rent noted as unit bogey a Are have little set even well? that you you given likely that higher get of Do to higher level the kind economics bit around of million to marketplaces are that, terms In little in you expectations higher for unit want? the

Dawn Phillipson

right. exactly you're Yes,

for all Adjusted of So our XX% we're a targeting contribution showrooms. EBITDA year in three

Now average. that's an

some to thinking like in is of an we're perhaps California, depending these the as showroom, Ohio. about might on showrooms, in going we're better So going perform California particularly demographic, Akron-Canton into which location than

So get financials these we've each within And able and existing entering the new laser-focused performance deals pleased the really the markets. that we're some to that locations and been of on and expect out we're with we new coming location. markets very adding or of of anticipate then

the on focused financial location. definitely we're of each performance So

Operator

next Our Sandler. with Peter Keith Piper is question from

Peter Keith

impressive. this on really first campaign. it to that pretty a the Maybe week, kick video. it's Jen I Rooted just Congrats that did impressive demand on it's acceleration, off notice earlier

give plan interest. a the So could of drive maybe it the how profile that it collections, quite the and do to bit awareness push just you that to customers that, because Polanco of like does us on raise increase out help seem of Acacias

Jen Porter

are thrilled campaign. We with the

in channels. earlier media this our to some in advertising We're week our for doing new the I and found clients. social mentioned, arhaus.com, As launched market on can prospect stores, be on out website, our it

the working get Arhaus for You and partners might as our time, to introduced to message first be well. some out influencers getting that with of

really to we're see So out. excited how this plays

the special it's and about health what what beginning. known and campaign since the we really stories particular our this incredible think is about on is I have what so is expanding

crafted, think materials design they made, of, they're of the know made to our what we how they from, of are buying.They and interior designers hear great things the clients that. sustainability any consultants that are elements products stories want out is know to the that I behind want the artisans from one to come where how they're

telling so we've our to really always this in is scale. a like basis one-to-one on do stories you these showrooms, it, ability said, And loved on broader but a

have clients edition, just in will an going our printed available limited work out top stunning of art. our showrooms. that And to be absolutely also a be it's of some incredibly We beautiful book will

creators call, the to incredible sent creators incredible And all some mentioned watching it's capture really in together. Mexico that artists artists some to earlier and I Mexico. As a come we just synergy on the story incredible really been of and

we're mentioned the seeing our And to from getting to things know both the X. to in internal people time.I first and our for is, two is other earlier from really employees clients, I just Volume then are us the call, I who new from excited note reactions want as this start think

Arhaus of to of a elements, combines lot incredibly have make a lot really of tell, lot we that stories So a a partners, to lot products special. of

launches That catalogues So of stories I campaign campaign few in two product weeks, continuing then and And the this as fall be details. that all is our about the future, fall weeks here. will next forward in hitting mentioned, to incredible. looking in showcasing the the is and the homes the and

to that elements there on to of this initiatives. really of layering marketing just sort additional excited so punch for our storytelling want And

Peter Keith

Dawn. question, second specifically guess I'll ask I to My

what the donation. guidance midpoint EBITDA sales midpoint puts of charitable of takes expecting. of steady, that margin million the on that and more just we kind so Could in But some help increase color you there's little a guide, growth? the out is So better us the guidance holding margin particularly the $XX impressive if front sales suggest what's something the out to you're adjust EBITDA playing on and is give than

Dawn Phillipson

Yes.

about the So we've nice seen thinking flow-through primarily margin. as front on really freight we're gross

at for volume. we through really SKU little that's of it's And dependent. how freight and just So bit what what because within that forecasting upon is us, flow organization, going impact challenges have contingent in is the client seeing even exactly purchasing a to

freight in conservative we're think. a through we've flow So P&L, little I been the in thinking about how

response we saw so it's us enabling there, And things. do and other nice some to some

front, with macro to how especially in the that we And make continuing so from want uncertainty, staffed we're appropriately, we're thoughtful invest much overstaffed. we're very about talent not sure I think the organization to

about prudent investments just about As we're being thoughtful well. thinking and really financially sure those within business, that as making the we're timing of the

So combination minded flow and through. fiscally I by our management team in with the it's freight our think active some strong management team really management

Operator

America. of Bank with Nagle Curtis from is question next Our

Curtis Nagle

they're earlier home made call clarify to completing to delay calling think a customers what I asking point, wanted John, Just the in you sounds it like as out, projects.

on guess we I that. see there? cancellations by Are or we what's I'm little that surprised just a might Just going worried

John Reed

our are going seeing But renovating not I'm yes, their cancellations It's not on delayed. on homes builder, is small. so invariably, clients worth zero thing clients even but renovating. are building forth. still is we're that And old percentage talking builders so about. the Absolutely it's same homes just a are second What's and The this. and

may least a Like a still they lot I are up couple clients months, for our their -- of clients said, of three months our at two home. finishing or being delayed And for on new be homes there. built

in take the even obviously, furniture and forth. people tell future home Obviously, don't COVID, even than there is because yes, or so So -- they has But was been the can't the the more room for more were nothing ready. delays different building past. and

a timing issue. That's see all as we it no, timing absolutely just But thing. It's it positive a just issue. is, a

Curtis Nagle

terms about inventory think of in carrying to in of terms Anything modeling?

John Reed

Sorry?

Curtis Nagle

Yes.

of to So holding yes, -- in just terms about to inventory maybe in And more are the temporarily? -- result, a terms as think be you going

John Reed

we clients deposit try hold them, a for we we're inventory from to keep according And our stock. inventory buying is concept to sales. SKU. to we when their inventory them, -- absolutely. get our SKU try prudently purchase, keep look it But We in and So we at by

do right away, we to them. So it deliver if can want clients

work any if And we'll two for adding hold it in don't no. But for or them deliver we're to our they're want ready. still when we'll and they three months, it inventory hold warehouse reasons, not it

Operator

Cristina Our Group. with next from question Telsey is Fernandez

Cristina Fernandez

far Dawn, environment, demand what which said this about single-digit ask assuming in in increase, to half the mid-single-digit July. assumptions the in and to wanted to the you've you low the but good year. back so first is a you're for of deceleration really I half seen

I function those keeping behind that's year? process relative macro a in the is thought of it you your maybe earlier conservative So the assumptions or guess, to

Dawn Phillipson

Yes, conservative nature. my personal just Cristina, own it's

right that doing there We the know things executing. things. macro I We're the we're some can't feel control. we are So in just that all

things about mindful be to trying we're think things the on can. I the we executing we So can't we're control,

financials So particular. I don't out to in my the want of sleeves get on

that's And would assumption. reasonable be with think we I that So result. thrilled honestly, a

at. So that's where heads are our

Cristina Fernandez

for just And flat up then e-commerce seemed at Q quarter, the in double by channel, they the like your performance were sales digits. looking on retail

anything Are So demand channel? to trends by you seeing divergence in note? any

Dawn Phillipson

No.

in keep [indiscernible] So delivered that mind are those of sales.

higher So just e-com EPS have showroom as sometimes about sales. component thinking than a you're

So call be timing a that. It's it's a derived just timing. just metric, from function nothing to of nothing out, to

Cristina Fernandez

clarification. last one maybe And

On delays delivery to you system mentioned or the you what back this saw in the as magnitude because will the second quarter half. upgrade, relative quarter of the less be the of we be that, continue same that to Is the move delays fourth the through you impact saw quarter? it John, going is third going through to and

Dawn Phillipson

in through lot those change to have the supply shifting two there of learning distribution go We've a center We years plan. lot. in chain we're moving from last been from one never perspective, from to form, expected smoothly two. had and systems a perspective, the a we're as true kinks So some this to a year,

drive implement to learning we're how out and to continuing a So while execute. We're lot. figuring

level, So execute think we year, feel to that guide to not if we there continue we'll better. and that in out confident I drive this the to really put for

Operator

to back Wendy like turn Ladies question-and-answer the and gentlemen, would for Watson to we and session, have reached the remarks. call closing end of I the

Wendy Watson

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

Operator

participation. concludes Thank Thank conference. you. you today's your for This

lines this your at time. You may disconnect

Arhaus (ARHS) 9 Aug 232023 Q2 Earnings call transcript