ARHS - Earnings call 4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Arhaus Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] 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 turn the call over to your host, Wendy Morse, Senior Vice President of Investor Relations. Please go ahead.

Wendy Watson

Good morning and thank you for joining Arhaus for the fourth quarter and full year 2023 earnings call. John joining Chairman Italy; us Phillipson, Financial are Officer, Chief and me Chief is who this Officer. with Reed, and Co-Founder, Executive Dawn On morning for our be Q&A the by will Officer session. they remarks, and e-commerce prepared Jen After Porter, Chief Marketing for joined

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

than X-K resulted market return operating we have for and Showroom December flows ended of the X please leasehold being condensed months queue. other ended inform in to the incorrectly opened after property, landlord in related ascribed issued XX, close, to of equipment to in to included the before activities rather consolidated market today.Yesterday, you an and we XX, September flows convinced furniture If error This net. questions, our inaccurate that statement We prior filed certain year our cash XX, the XXXX. and XXXX, and cash in error as to additional consolidated unaudited identified earnings release the completion investors XXXX, prepaid press investing sheet balance assets an improvements unaudited September current for

to website revise Investor for X-K. comparative included our As restate will our XXXX financial the These amended third XX, on balance the in documents ir.arhaus.com. available Relations details, December third such, refer quarter more of statements and please sheet that we be are the XXXX the at will XX-Q.For quarter

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

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

refer financial non-GAAP morning's the our available hours.Now A this will measures replay call We website and the press some be will I of release reconciliations. non-GAAP within call on also this turn relevant will to over XX includes John. to

John Reed

are Good have the call We of delivered morning million joining EBITDA line XXXX exceeded on strong to net net $XX and the adjusted of everyone a top million, fourth thank pleased you and and for our of revenue and us very for with $XXX bottom quarter income million $XX today. quarter. outlook

enhance and demand and comprehensive year, margins.Highlights of four, up and of our XXXX of our invest technology; Turning with long-term of in comp Comp our comp revenue channel for million. was two, and and it scale channel to enhance of high demand of $XXX XX% growth to our EBITDA expand the one, and our in in our e-commerce year these and our each of income XXXX. on the brand year growth outlook three, XX% top omni-channel XX% adjusted by a for from cycling another of a to billion $X.X of full or XXXX end fueled capabilities results million X% of long-term growth growth up to Arhaus increase exceptional awareness; of and full year year base; build strategies growth and our XXXX Showroom net full growth X% at XX% both performance, Showroom of include growth of XX% channels X% $XXX comp and

payable Showrooms, XX in since have the Showrooms. I'm X of a cash following be business the and pleased of went later to want public our we another and to on that we per this approved astonished delivering am announce market April year.Over our a or had of years, generation cash to adding on our furnishings special share value are return U.S. the and we us about Given of has we home at sheet has pleased Dawn At results. our premium in has grown strength the but Directors three short last XX our record XXXX the total, cover while outstanding than to XX on call, to of times for I XXXX.We the our Board XXXX. detail these Today on year almost to shareholders very team of by team we I strong time XX, congratulate what our add sheet in expect full growth November to will to XXXX's continue XX%, close able strength Arhaus more financial balance retaining Showroom X in our March performance, accomplished investing been that X of $X.XX growth. industry. allow that time to results more XX% dividend the fourth will shareholders balance quarter XXXX while nine to believe

or XXX% We and million, net $XXX $XXX increased by or net by income our or million. our EBITDA have million adjusted our $XXX by increased XXX% increased revenue XXX%,

our the has future significant so has As potential execution it and as me our and team been, excited. impressive so that this is growth is by

our and mentioned, I in margins investment renovations, traditional opening economics are which new relocations target continue new our design our least recommendations friends strong target above new new clients expand to Going with introducing Showrooms.The continue number especially studios Showrooms XXXX, years towards design and including With one and expand of we to we and along $XX target several on word Showrooms, we six we Starting brand largest the and eight projects. wonderful one new brand Showroom number incredible or years, more and very traditional grow another completed our with who exceed at payback showcase, expect expansion revenue in XXXX XXXX, or the we eight product three XX% they two relocate building XXX with growth, two family. outlets growth continued awareness.In Arhaus our year Remember, plans Showroom look less.In and three, to of Showroom many feedback outlet generate from adjusted to several way Showrooms. year averaging next Showroom location or Showrooms way and EBITDA work average around the to by expand awareness strategy. two as faster and our mouth clients from expect million the as of new than projects is through brand existing number four Showrooms, the number equal market record is executing traditional the Showroom to our the the of forward awareness we -- we two we in to the with forward, renovate, projects, experience history, by over Showroom studios,

across newer ensure product incredible our enjoy inspiration, collections. with of and incredible demand to products Our delight XXXX the heart is seek the product persistent for the the from globe. these value success throughout continue and and we offers it we at driven our world of recommendations our many describe of the proposition traveling clients We to by artisans meet beautiful with product frequently

in to introductions XXXX products.Last told lineup XXXX. working members I our I of product As I on in and best I Wendy exciting was are thought new and really mentioned, the year today high product joining development Italy year some that am where you expansions have be team you we going think the even category and ever product very new exceeded with I bar from

catalogs outdoor the and yourself. product to time are and and Showrooms encourage all some to judge arhaus.com showcasing this of Showrooms and I spring Our go currently you for to spend

some omni-channel continued capabilities make During to technology. to important also and our investments XXXX, growth we enhance

highlighting campaigns We and are product in from elevate not time story introducing growing and artisans time our Segreto, our campaign, a but and campaigns Secret. our story Italy.These This incredible insights a only volume website States. from brand to tell is Beautiful United Bellissimo the launched X Mexico our stories, highlight new launch they online have print A at the clients many across we when the of also Arhaus engagement great to are

to asking response products. Mexico storied artisans was about of ] introductory building which a which been clients last woodworking story beautiful rooted, of campaign testament of behind The [ to the talented common decades a story craftsmen we and have in in all current our know a partnerships, As our instrumental campaign a released Italian of brand. our developed family more ago volume established and is we reminder, fall.The some highlighted our the to to not were

through look this are forward to telling to volumes. continue We the future and thrilled Arhaus story series

long-term growth warehouse planning and and and make the capabilities to We manufacturing, technology supports upgrade our that our allocation, and investments strategic management, are to business continuing efficiencies. in enhances inventory and delivery also plans

and I'm at There priorities days debt-free These is initiatives.I'm years. on our alone. us. the on investments deliver no teams I've ways our Our technology and disciplined for operational and are both you many our generally scope near- stands expected give out create this by Dawn brand, like early the there the balance it have XXXX collections. Arhaus opportunities been detail these will and and of and people roadmap our though more potential and prospects for excited enhancements no will strategic and even and team's of clock close people to to with stands XX the buttressed and in Arhaus in is will long-term our and excited working combined of our enhancements beyond no like size feel margin advantages has well-positioned like there and that I execution our in These financial XXXX our about on to are been goals.As around us continue of sheet business investments. look these long-term we the the potential. collections and our about are which still strong

materials and of to alongside our leads Our most talented craftsmen and craft the and is some best comfort.We using on on mission and decor design best with travelers to and world product quality curious the designers furniture the the unparalleled are designed focus us work earth. and

clients' we Our an every never believe experience are. step at and we curate With lead Instead, to on authentic I in the defined by of have we the footprints, the of single we our of compelling choosing, We encourage inspiration to always clients the our clients digital help take and we industry. customization style. authentic journey.We encourage the the build their supporting exploration, styles layered team our and visitor way. in presentations best every spaces, the relationships, homes and are unique inspiring expression aim who inviting are and Showrooms curate their letting journey carefully

We are a as passionate doers team of designers, are and as dreamers curious. we

a Dawn. for I'll and forward great of team it Finally, in XXXX XXXX our our I'm to thank to clients. job I will want dedication continue turn their for we over beyond.Now, to what and Arhaus and to personally congratulate them build looking to

Dawn Phillipson

Thank and morning. John you good

was As exceeded fourth delivered the stacked a growth not November to revenue November John of include: full we net year in of our net of which with Key X.X% and million a expectations by our our are XXXX revenue was proud mentioned, preserve XX.X% our XXXX year. basis. from a operating in for X.X% we earnings. XXXX growth the performance We one comp repeat the fourth strong another a and fourth that of XX% record made XXXX impacted year comp revenue financial and promotions our growth decline that in statement comp in with decision throughout items of four-year were quarter backlog year against to and pleased basis results fourth of reflected in quarter a strategic the margin. incredibly $XXX quarter a on quarter demand both delivery.We year comp and solid quarter, on concluded last that quarter comparison income Demand

costs million product in percent support lower basis driven action $XX Showroom to Our million to $XXX strategic expense million, investments. mix by increased the revenue.Gross decreased to to and adjusted costs $X expense margin fourth million in quarter. related the expenses driven the $XX and and partially resulted to transportation decreased $XX to margin transportation June million by net in primarily EBITDA SG&A margin of and from primarily revenue lower new primarily investments $XX $XXX $XX business million offset $XX of a Showrooms reduction to points of gross selling XXXX by by that adjusted revenue, in and in increased million.Adjusted EBITDA quarter net higher million, Showroom were warehouse net as the quarter a partially of The through driven in Fourth SKUs XXX revenue fourth decreased fourth increased to costs the Fourth well XX%, quarter to XXXX in EBITDA our million related net as quarter price sell lower $XX demand offset growth decreased expense. income quarter XX% net million $XXX related XXXX. quarter of by of million the as

statement growth growth X.X% key year of $X.X of a items a the and include: year basis demand revenue billion, For on year of comp comp income X.X% full four and on one XX.X% stacked basis. net

invest reiterate business, card and improved setup and backlog partially SKUs. technology Showrooms revenue adjusted donation in our exceptional and expense the million appreciation of and XX Product the offset related year percent was Showroom income adjusted the net year, Full company Full resulted XXXX. was to by our and a demand growth partially as investments of decreased of teams net across net flow XXXX cost of of and to in channels partially past revenue XXXX Conservancy. by $XXX Distribution margin instrumental by year.I the to revenue These increased XXX we in new to net to resonate.Our price SG&A delivery transportation basis e-commerce points products the credit approximately favorability offset from and as of increase XX%.The higher abnormal our margin and were strong in costs. was demand XX%, The to net and a year our $XX John's offset container strategic primarily and the points impact decreased by EBITDA open Nature including to opening and Showroom year net XX% for of year through to million record basis strong During by of of $XXX investments which was marketing product expense, revenue support the as the percent in as and a EBITDA both driven billion fees, were the favorable year, Gross reflecting promotion growth increases non-recurrence Dallas million. expense versus of $X.X management million revenue. XXXX, expenses Full performance lower want to increased action drive Center. the primarily our in over due warehouse continued driving work of $XX prior the costs strong costs which XXXX driven the both

competitive debt Turning one morning's the our this our it sheet balance is to special flexibility announcement, us. strong free of affords dividend and strengths financial

of pleased the the cash growth Following to Board to $XXX dividend. in approximately in and performance, having shareholders in million cash capital return ended and a is several our cash million outstanding years $XX form special year of of Directors generation,

having runway growth.Investing footprint profitable enviable our to continue from growth are We remain high pleased business grow position to also Showroom in the the note special are and of in remains to with our returns dividends, we to investments a top that both as the priority. drive growth unchanged and our [ ] strategic long

continue on growth will with Showroom our to CapEx with in to the $XX profitable planned majority million build investment We million of allocated XXXX, $XXX projects. to that

range a uncertainty Next, backlog to X%. year turn for I'd delivery, we of negative and have XXXX. negative growth to for our With macroeconomic to continued lapping assumed X% prior like outlook comp

normalize we backlog will reminder, XXXX.While until with enter a metric backlog million normalized in comp As $XX growth a are XXXX our XXXX. abnormal in we delivery approximately comping not

year net X%, of of income of billion XXXX, EBITDA X% to represents $XXX $XX of to million X% expect $XXX adjusted which $XXX comp $X.XX million and X%, $X.XX we decline net to full the to million to For growth of renew billion, million.

success making significant full margins number investments we expect year be of strategic capabilities this of projects operational XXXX. robust drive are driven and long-term. enhance investments most our comping We in to the year Deleverage than half and Showroom strategic year the adjusted delivery year.XXXX backlog lower EBITDA is and and will include first to our be our improvements by prior

of from with to gross deleverage most amount in We expect a margin. of deleverage lesser come the SG&A

invest approximately work in $XX system as initiatives well a delivery experience allocation management we experience. our in Strategic also year new corporate manufacturing software, invest $XX expect million our this e-commerce to and in growth continue the other ERP.We programs. as such best-in-class Ohio for addition Center, We and client and to planning to in-home and Distribution trade include as in-home to a million drive streamline operation Showrooms designer to as our investments year, and strategic investments a warehouse new in will

first quarter million of to comp $XXX million. of For $XX the a $XXX and we to adjusted million million million, net XX%, decline revenue to net $X of $X expect million XXXX, of $XX XX% to of

the warehouse As be to compared primarily comp down in indicates in our first comp we weather-related to the first declined the management high-single-digits implementation system growth. This as new our is XXXX, in to mid-single-digit due revenue accelerating of of January.Quarter-to-date range low of and March XXXX. to January demand quarter February demand in quarter weather-impacted teens with expect traffic impacts net

the is in expect year the our and first of adjusted The SG&A we quarter. margin to revenue significant due and growth deleverage revenue is in outlook deleverage decline due investments.As a of price gross net deleverage the to action year. SKUs. strategic coming implies, expect continue fixed Of deleverage balance full from continued quarters on this approximately we to cost third balance as in delivery the revenue We decline of of make EBITDA the the

year SG&A earnings and is action a of complete P&L P&L. the in and the inflection margin gross from expected the the XXXX revenue and Showroom first impact second our from We as product new expect June positively impact price deleverage in in with half both half

We May. report on when quarter quarter will in update you expectations first performance our we second financial

For to our goals. related all press XXXX please release.We're outlook, to long-term refer growth other details reiterating our also

We these expect near-term achieve we're in the goals. enable investments will to making us the

meet advantage and mid-single-digit growth acknowledge of the low-double-digit share high-single-digit believe Showroom investments closing the on success necessary execute our execution we We in build unchanged. our the up XXXX in leading needs to revenue our for would us call value believe driving Over adjusted now our debt-free plan and comparable and the long-term on remain dedication I reflects high-single-digit sales $XXX well-positioned any target growth competitive and on is fragmented EBITDA and the mid-to make work sheet for growth enabling focused of hard and all furniture. want again premium are you and In economic to highly to growth. our to strategy of remains a environment We net which balance strong focus our teams.Our to open stakeholders.Thank we questions. clients to our in gains the home keenly we billion like growth

Operator

question first Our from Peter Sandler. Instructions] is Keith Piper [Operator with

Peter Keith

want which rollouts about the I interesting. results. to are system ask Great

send ERP the the the about So down two then and risk systems so come in other that next of can spines, of ERP talk could fear years? systems some analysts future the benefits

John Reed

anything do got but a you have on Peter. things Good full manufacturing to more John separate I of soon. our we're our here. that we're a laying that? add don't this doing system in upholstery. planning totally doing a believe ERP Dawn, than to Dawn's system out morning, stages. then and management a kind for system anytime plants I, probably and then warehouse information system We're manufactures

Dawn Phillipson

Good morning, Peter.

spines client speaking infrastructure certainly, continuing updating, evaluate down quarter compromise we -- very contemplating not that what really deliberately to. of we of don't think, We and being and a hired top ERPs, we we sequencing we also the implementers the consulting and experience, only last we're everyone, to make you're thoughtful, of think exactly for want don't compromise for should fourth I that full and year, line, -- are I to look the and really and the revision in mindful. but our systems cadence be at that very that business what agency send we us fear certainly help grow operational integrity.So alike. the sure as analysts to we

very be So trying we are thoughtful. to

that's some for product have some more going We planning systems also are the financial but and coming network, other and think will Really, do not yet we're systems but our through deployed.So have software. in new facilitate the it efficiencies where to system, are excited these of just help that product order under about needs mentioned like seamlessly thing excited the have that. past efficiencies, once going we're analysis, is management to allocation really of us only same not the from an which we sure be. which is we facilitate help as There operational for that kind of making started, movement to

would overall, on very systems, So certainly we're a I enhancements to and say, as think thoughtful, we're the prudent, operational responsible we're -- taking impact I but changes, approach, laser-focused infrastructure well.

Peter Keith

just then technical ] for question. And financial little a [ Dawn, more maybe,

in out it's lag. rolling system bit management sales warehouse of the causing probably little a QX, I With guess

So, little carry worse maybe going we to for Is shift QX, there a directly a got sales QX? you could sales into than or roll into that's also that QX us thought. quantify bit

Dawn Phillipson

probably worth. We a think about week it's

could you to in quarter. math, number of typical being what see like just the we looks take quarter a the impact said, deliveries the weather. of on kind divide That some simple also did January So, by weeks related and in

who we we XXXX, we're year, they and the sequential we as and see revenue really think particularly in if delay pretty quarters, that those I drivers there, as difficult we're excited out thinking we or as then should will that following out are move the as we And deliveries the kind are impact. think think year. about as those year-over-year look favorable least the the or impact quarter net acceleration to through move through the So conditions snowy about you of certainly times, the lowest icy first has conditions there's deliveries.So year-over-year at

Operator

Our Jonathan from of line Jefferies. Matuszewski is question with next the

Jonathan Matuszewski

results. Nice

down assumptions for your just guide X% comp X%. is one to XXXX down on of underlying First

give us you've color existing light help Just refreshes, about like for That's that home have my on weighting renovations, terms factors question. the scale large demand you're in your of some business. said that how first thinking most sales,

John Reed

Dawn. ahead, Go

Dawn Phillipson

Yeah, We that we're lot of as client a the know room. to morning, uncertainty. a continues continues painting and so about something do to Good simple -- light refresh Jonathan. home our as there be macro, continues could thinking certainly renovate, refresh be as a to their

and there's think happening.As we market you about think of our runway. as industry, of the that Jen, marketing billion so still $XXX of share Showrooms, much really market Italy campaigns. We're less we So just team you plenty us to we marketing the than of as some about box continue these ton continues do for and just the awareness to different to on campaign? outside the total brand opportunity of want the expand of a have think so open talk kind X%

Jennifer Porter

we're really Yeah, Good morning. Jonathan. excited. Hi, Sure.

we're audiences. a excited up mentioned, Showrooms, to to we're have people, opening those not the out really that present to new really but also the excited in we well, ways more Arhaus we're that presenting Arhaus marketing new but similar Dawn way new about As within as only opportunities

craftsmanship, campaign launched and by and campaign about what are mentioned, have all are John really excited the with these We in we been go we our kicked John us to really a artisans spring team to with just time audience. with to campaigns rollout our and I share make able stories experiencing a world. us Arhaus really things in really a just to detail marketing allow delivering people think rooted stories we're the share big and give we be does it the proud February.And responses how featuring as these into that larger fall. seeing into the So our Italy our Mexican our our see are that share series those last about the to we a talks And Really, are stories as those of share product stories, to campaigns. unique those and tell we special. things market. way for those thrilled And are that decades. But let excited off really

are learning seeing a great and lot.We really We some digital, campaigns. traffic those results, particularly are with on engagement

really of So start clients getting existing clients stories just mentioned, decided really, telling also clients. exciting. current is John And future really to engage because and from with them questions and we as these we were interests seeing potential

more what to we'll come excited year but that, of So through there. about the really rest from see the

Jonathan Matuszewski

That's seeing their there helpful. having choosing helpful. could on And revenue regarding their Are just and called of seeing deviation out on Any color I color guess that historical if orders would last up, relatedly, Thanks update the impact seen whether still to at there been you've of guess kind rates, And deliveries. one point year guess, consumers think then there. postponed anything cancellation any you that an you an for receipt dynamic? a postpone when you're get may I have be recognized I or we follow from levels. I

John Reed

in they a certain few last we have as steady hold Yeah They [indiscernible]. been quite number increase I'm cancellation any not one. have the seen years. rates,

had delaying now we're that's orders actually and better a We're either. seeing people been, we little case. really doing normal than So not

they you see builders an are that in category, least -- Sometimes our had -- homes, stick people but renovating as date people most And that people as renovating that in caught actual we to. they clients obviously, at when aren't up least the moving a quite at are, telling their can have as bit. been, much know,

are delaying getting We're field. in So not things people like better seeing year. that we last did

be all. that factor So a we're at as to seeing not going

Operator

is question from line of with Baird. next the Our Benedict Peter

Peter Benedict

kind around Kind over you're how the recovery question the of year. guys. thinking a cadence, hey, top course about of Oh, the of the line

terms little bit but a drivers sector in thinking talked macro the what just demand. of about a that just some You little bit maybe unpack of there, you're

understand that the than guys cadence of backlog just help saw maybe comparisons my your clearly million doing in that that. first better on release 'XX the and understand That's $XX been question. the You we just you that us have sector, so but view there

John Reed

morning, good help strong, is, you seeing saying can with last Dawn, all we're strong. what this. we've very -- as But Yeah, year was been me Peter. along,

products Our so product. it's And products. think people think well. days. of curve unique dead I from competition our resonating just just a ahead we're we're We are way want the And on new with these very on what

think how are people they're don't we designers unknown our up So walking product, and Coast, And our new who in from people are love Showrooms stores and new fall because fall because opened in, just especially more amazing purchasing relatively who we resonating.That's love finding with with and our many coming really we've West they we're love everyday more just fall we're clients are the responding. as getting with in so know and brand in on out our fantastic. in who are us brand,

about, part about that? other new of the the the So grow. add that part so people us, forth want what is And to continue products more to products. and better the lineup the great. strong. products know I'm on better to to be. great we're all selling just you and And going we're seeing of that's we And have We'll more Dawn,

Dawn Phillipson

Sure.

new those clients' so what locations. and feel the the we how fourth great last those reiterate new were so within think materials, are We're of the John was engagement the I to year. introductions, So that performing in marketing product with the just quarter excited about saying, Showrooms opened

as as revenue how about we bit and we're to cadence quarter, the through about February great do bit we engaging quarter, year, that acceleration. think -- was thinking about in think about move offerings, clients sequential as demand think a I first net nicely.So accelerated feeling the a the all little soft. will expect but impact in the So our with first January we really we're switching demand of

we QX are in to that's in quarter Showrooms but of year, a every really new slated So expect this net revenue XXXX QX. by not open be that to in the quarter and driven improve fourth going Showrooms bit.And only heaviest

as So openings benefit the back from well. we in nice those should see some half

towards the second and about slightly relatively second backlog half. It's think we XXXX, first half. As in between split weighted half evenly heavier it's

Peter Benedict

then was guys That's turn And the XXXX. you a benefit side the on things, maybe helpful. sourcing in of transportation for just to

have have freight? Just coming kind exposure 'XX. product of And on terms to Remind the the all and what that thoughts where ocean Sea, of might on just your kind from. for any assumed in the doing curious Red activity, rates inbound what is guys plan you geographic your of you in be your us,

John Reed

in Keep made products some made our which being -- half States, almost United made mind, the are and United in the product we've always other our in Yeah. of here. States upholstery is

off business the So that almost takes the table. half

parts, affected Sea in strong, of strong where that all. fair other of is fair Red especially Europe product, Italy. by products, amount we're we and in amount the a we Mexico buy The None a buy of at

them. Some just cost not we that. were, but We're have of things seeing significant the rerouted Asian increases with

not. if So through go wrong, we're part right Sea not the of there, Red that again, business maybe may or of not And business. the -- our we're it's XX% about worried

it's going be So not significant. to

Dawn Phillipson

Yeah, just there. on to layer

few years, last the over slight international. coming in versus we some products adjustments domestic seen think have I

these slight back in It's few So to this have optimistic perspective.We're And seeing what we and it's coming factored reiterate based related we a little John's something the days. then to to IPOed. half we versus XX% we're off layered just really domestic kind some or today I in to the probably with the to in in a delays. point, ordering prudent related in increases of from Red the issue XX% see client closer of we have increases seeing know kind so bit But point, is number are Sea year think just well any haven't significant from when seen but Sea and John's freight Red costs the cost, that for of that cautiously to we're far, guide a won't but the managing week there. we delay of issue what certain upfront lower clients just containers,

Operator

Partners. Guggenheim is line question with Steven Forbes from next Our the of

Steven Forbes

of John, so simply excited was the thoughts or about is if the sound on sort early you accelerating? really new be demand on month-over-month John, the But the you is. it consumer how Is the consumer your early to the Jen, may with reads on the trends weather outdoor core noting could And hear compare I wondering during expand in super love what's February? is acceleration how early. any engaging driving it Dawn, product, would engagement collections,

John Reed

Sure.

of that two the all, was weeks really of it First first February affected. versus January, we were January that

saw weather You rightfully weather February.So for was in two through Once of the basically first There some last of except January and of we're trends blip so. actually the and weeks, a got and we nasty California think, news. two hell guys whatsoever. the country kind weeks I heard the I positive in with mean, worry we not was news course out giving the the there. any scared of Florida, everybody that it then, the and the

is product very very, resonating strong. It's Our strongly.

is But If mail quality style, by us products, things We've the new get just from We price. incredible incredible Hopefully you've full far stores, got it doing. As product. it's the put best we three catalog great and about are new have together, to hearing on years great in outdoor far they running just half you. received got the really years not, days Literally, and far XXXX.So a far assembled ago, all as ever. a And We'll a fantastic in by outdoor our clients team let But had ago, from the is we've are know. three results the our catalog. very so best it. it's else at response launched ago. product The it. hit fresh speed one and the nobody fantastic. some the world been we're things, in at

strong to this So be outdoor going year. we think is

Steven Forbes

follow extremely capital Maybe flow free up strong balance just a quick structure, -- sheet, profile. cash

of special accelerating store opportunity an you right growth thinking to are sort Are coming a growth years? rate the pipeline. about the growth? here sort store announced maybe store thoughts of footage give you thinking there dividend, the about accelerate you how XXXX but on of potentially You or us over preliminary Is some growth square or

John Reed

quite you Well, we last know, we've Right, and growth, renovations right. bit been year. of store this saying year did a also new as

shooting more to year, to seven growth of back is five centers plan, we're which well-planned, stores size beyond add as very to our go full we and the fit. and see strategic 'XX a very into couple on a design Going

expand our we're stick beyond So looking we've not what been to we're with plan. going strategic planning all to along, and

Operator

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

Jeremy Hamblin

Congrats on the strong results.

the come make interpreting on clarify, growth just to we're the high-single-digit you'd and see want here mentioned that right back we the to on growth basis could long-term sure way, last Just mid- point if a Dawn. the to Showroom Showroom that

we five thinking are talking are about and So beyond? per to 'XX FY year, about percentage we still seven or a that Showrooms on basis

John Reed

ahead, Go Dawn.

Dawn Phillipson

a on Thanks. In design five makes basis that. seven like the five of -- Yeah, so sense. incremental on top to feels near-term, to on the number think traditional I percentage with that's studios seven the right adding

Jeremy Hamblin

profile step pricing solid of action And basis. then as your where you seems you looking on gross up dragging had nice planning years? said get in into on I in as improvement 'XX. levels some profile, on a second expect the And margin gross a half just are forward it falling, fewer well at to go mix we for on kind see your that out margin terms Are of of sales you your based maybe think that in

Dawn Phillipson

that the out product of XXXX good long-term I we did to So that was right-sized margin. will inventory goals very haven't In of is take guide kind we about we gross feel to our typically primarily. you kind some June of cost. don't medium, sure put price -- gross actions But make say our really for what margin and

delivery And a clear half perspective. we'll in from through this first those so year the of

plays is we top longer fixed making premium I rolls as reinvest think on in initiatives we The our and where the we kind we that and as that delivery scale those around the expansion, we term, to of think laser-focused can see want think we to how areas have margin, be. in goal won't we dynamic to it invest over revenue, we experience that our second strategy, growth time some in client experience, have we'll fixed we But as like mean doesn't line we half these really gross to margins scale I investing yeah, over would we costs.It are P&L to that designer in-home feel So we in-home continue of on driving that really experience. right? program, will of and across focus we'll we over program, board. is leverage kind new really always of benefit be, on long-term continue through our having about it expect I provide see which where luxury been through that.But may that time, trade Showroom as said, remain continue to leverage linear, sure a And the as strategically relatively to And drive that and some elevate these not continue be cost it out.

Jeremy Hamblin

actions, margins gross gross pricing QX just If kind on pricing and from the 'XX, on first impact what up sneak in the of of just margin? of impact actions a I kind you could follow would and on the half characterize the the mix

Dawn Phillipson

upon the looking when contingent bit through is Yeah, a haven't of just flow what full that at about say did we P&L because really you're the it we a But we was took disclosed decrease that from mid-single-digit across timing. assortment. price

back think we forward. feeling prices price have as of really So be normalized good say about our position go those to pleased that kind forward a going they we are should assortment where largely to so

Operator

is line Max of Cowen. question next with Rakhlenko from TD Our the

Maksim Rakhlenko

Great.

differences costs galleries? economics we you've well? how And be How the much West as the What like in know that higher paybacks robust legacy any if outlined but the compared galleries unit I in are to as your bigger more what in about? is revenue it's markets? look of for early, could do those you there's first, think side Coast those So some about should new then thinking

John Reed

economics, The the current any specifics, strong. strong. going resonates they're West the I do And already our people Coast the more year, sales product have feel to people, stores I be a we in are store just but stronger store. ones mean, new upcoming have there's And very -- we very the with than, Ohio, already be there's West Yeah, the more on don't last loving and really They're we've know money. opened Coast. on we ones And should Akron, the absolutely the in where with a say, it.

very feel about we Difficulty]? [Technical confident So or numbers I it. you specific if don't know have Dawn,

Dawn Phillipson

want disclose kind Yeah, certainly but no, says holds to I I we'd don't what of think true. mean, John geographically,

to still in contribution XX%. remain And perform Midwest minimum the a location would is kind $XX than adjusted for million. of line market. smaller California Showroom better of at a the top then on EBITDA we expect larger You focused average But maybe a

those within payback, of So outperform, payback a may is under, on we two little the in sure locations come which some significantly some laser-focused may we under that making have bit remain years. but

region. excited to So feeling continue really the unlocked -- Dallas about for and Dallas Center strategy to West that our overall opening so us geographic good up that Distribution Coast develop

Maksim Rakhlenko

western or question ask the now mile going markets. but it And need look be what like then it. depending is you you still it and to Is was DC DC, the that are will of Dallas, And to Got [ is How on actually, stem to as on less over I some where Midwest a that deliver going? be, those efficiencies? those could facilities you ] how time, less ramping? savings as out

Dawn Phillipson

Yeah.

allocation performing. to, of early be mentioned next I which, are get ago, would where running of we up we time, expected So to continues year. bit software a as allocation, underperform it because Dallas we kind little at say, It to the inventory in expecting is point this and primarily

productivity in allocation the system software we won't order place. and management until the fully unlock we able be Dallas So to have

where are it to with be. interim, So kind those we allocation necessary and like to shuttling back get product that as pieces.In to are in kind try line we'd the forth of two of inventory

and the we that remain need these product We're to to to I Certainly, deployed on there's importantly, get So, making the big team platforms unlock I really focused experience on of well, the know it. savings. is time laser-focused for as remain them. a to the order but systems receives sure that. their we stem couple excited that seamless unlock is client on in implement

to come look on more stem could I savings say, XXXX, would what like. So those in

Operator

is next of Our the from Simeon Morgan line with Stanley. question Gutman

Simeon Gutman

[indiscernible]. wanted Hey, about ask to you John. I

I touched but bit and if even style heard it looking a design you're some of prepared adjustments. in biased, I hat and And product. stands you in in trends, of Q&A, and point. your about okay on am across price the your curious terms your made on putting You've it's where some product price

one also product specific about thinking others? than any design within know And even your that's I assortment not Can we're sits. you Just you trends, faster fits said where all. it talk growing about

John Reed

years a few warmed have ago. gotten rounder, lot.They've away hot up gone trends forth curvier so a saw those were -- grays that so they've We from woods and dark the products, changed, getting I a been the obviously as walk few seeing we've all When our clients Sure. Yeah, Like before, it. the for looking fun lot upholstery I looks new are their part have in I'd our product. for said And love are homes. where to. over years is we're and the business of categories all of Yeah. into things a It's on softer, new have think gotten consumers gotten hitting we've excited. on and that what's ago and sales, really categories cylinders brand fresh our they the especially wood store looks, new to product our

work So a that on quite few going in to collections we and more launch look at we're XXXX. to continue large

on those.We're I as not where be So on greedy want them want be. don't setting I buyers as strong and be well, my so very forth as and margins to margin. tell we far products are to the that let's the new

going where to that we're our but so out. don't clients a the profitable, get healthy greedy have Let's margin business we can long-term, get very we're that half cut

tell greedy. customers better consumer.You direct it their business right our best the manufacturers, and So they not happy, model end And business our the can't of right we back, prices the friends, think margins, great from get the come totally warehouse, growing. getting ] being from and value, there clients things, but a right the keeps are In from they our us factories, works. the buy [ to way giving into our we

great. So types doing yeah, have the very and are in Again, we're things those XXXX that doing to into -- and I shapes -- tighter curvier certainly well, they're 'XX. helped. that trends gotten softer, continue that's of perceive anything Hope

Simeon Gutman

connected the parts. disruption maybe of if great. one Dawn. last up, And They're in WMS the got demand Correct positive to My of and The some running for comps, the quarter. follow-up. It's I'm year. more wrong. think, at the think Yeah, then I me I that's it's end first were follow two

it related of created biggest or first have the about even thinking was hurdle there business? in then this disruption comps high-single-digit of the some you of so And benefits outcome? just risks expecting is quarter, talk your get demand XX you I'm in that based? to better that or the type is for pose this WMS to comparison and to have enough terms could to that could this, ERP you're of any rollout. Can systems terms then the from Why that negative just a in the about So investments anatomy throughput January.Meaning, to you not getting mines with prior a

Dawn Phillipson

Sure.

XXXX backlog because from is clean So That year-over-year comp that remind a I base of not it. would has -- calculation in a demand clean comp you has year-over-year a the basis. that's calculation the

a So more be because backlog we the as two those demand of in going divergence comp hit move through there's XXXX between in will XXXX the be we clear XXXX, tandem. to Once number and the we 'XX. still and comp

disparity I So ERP, our the ERP. there.With manufacturing there is it just to would is still regards some remind everyone

ERP. it's So the -- not retail not it's of the kind

on has not when of a impact it impacting not lesser it impacting organization's overall its it's So day-to-day. the organization kind retail deliveries, comes to the

Some visibility just costing product to the and going the better which the to to team. benefits some give manufacturing going increased some we're have to teams is benefits teams, really product operational great to actual visibility they're costing, as other

no it, that the we're meaningful meaningful -- anticipating. So not but it's would it, risk no monitoring I managing from say. significant organization, We're risk overall to closely

Unknown Analyst

on [ Chuck Hi, Robbie this is for Maddie Holmes. ]

outlets? XQ, think this It's that XQ. heaviest showroom response openings openings do to to part these? a compare how overall in count. are is the But out year. three economics I showroom these of on And be to in just And the you to still where deciding wanted you expect should outlets, called ask where put showrooms? demand pretty the -- I the How traditional specifically how small So you you

John Reed

more business mean, I our in than doubled we've haven't of the growth. kept as years, Yes. Sure. with just last couple up the outlet we

keep with up at is really the what we is substantial product sold needed discount. balancing So The just outlet product. this a to outlet out

forth. things the to as and not look compared if job at not better what store. actually certainly, so returning of happened, need are adding means So has strong a a doing it are actually as delivering we near you anywhere sales, sales less much add as to percent economics how growth But we're people our traditional we're a things, which

So And think second three good believe. ones shape. just it'll Colorado, Kentucky. on. we Once we opening, ones think move and open, get I And in we're in steady I in far in as locations, we are ones Pittsburgh, can three so quarter then things out, as these all believe I

Unknown Analyst

is question And my last promotions. about maybe

and You the in on assumptions just are margins the helped of maybe rest level? some of the high What dialed back year XQ November. promotions, promotional for environment your in which

John Reed

We're we Yes. some promotions run at has change point. I this changed certainly of mean, haven't the really been. to We at certain high what level, strategy not it dramatically of looking times from year. our that

But promotions; it's plenty been we'll And need has turn memorial already to to Yes. have that. to. weekend, as or year we Well, whatever's it some do -- coming of is now next do levers we right We if hasn't the be that's up so. like as last going happened, on things it?

it's been no, off, coming is But some But that typical Is and promotions. do about we'll have Jen? of anyway, right, doing. up. what on or everything so we So,

Jennifer Porter

morning. What have last spoke this Yes. would add, hasn't promotions. changed what been point, hi, strategy call focusing with on Maddie, And well. I of good is messaging To to to really would we as we the promotions doing our John's the No, that on something and agree those I that.

close about changed. really on attention So how our we sales how in example, echo approach assort focusing spoke we has not elements. we promotional those our on But website, section the to paying speak promotions, about point John's really for overall to

Operator

Our next Blee Blair. Phillip question is William from with the line of

Phillip Blee

Hi, good morning.

you continue remodel lot past in guys a or and Can demand. relocations in years You maybe kind over a done have talk you've experience, on your still the which following your plan what many to elevated clearly how and of XXXX. is store are few remodels And showrooms nice of a a you tailwind Thank see and legacy of you. about format reload? lift having

John Reed

have right, Yes. halfway Does Dawn, through but don't we about be. want to I that specific where about think I numbers, Dawn? we're sound

Dawn Phillipson

Yes, think does. it I

John Reed

Yes.

of renovate Do because want hall, to move to to move we to again, it? the want So -- set do we the down have a a do lot it landlords. we don't we're we trying When with Street, Do store? stuff across whatever. the schedule leases,

retailers we We it's doing many them want like The we existing gotten, thing. to just to stay where do well see many are have stores areas don't set thing it and in sales. you a And point that helps. and So do late that committed a stale, to absolutely get there's we seen good in at. long-term lift remodel remodel definitely are investment. a know can't to But we we you've of do too too a to all It's remodel last want them. is to because

big better they And that's I Again, to our years and get oh this up really sets our of time.We a certainly client, is inspired our sets for that's that clients walk into I up did my the for future. fresh, This to driven curve that both mean, come helps the do think remodeling, us look. I so a say, of mean, what how great, it in refreshing. females get males, so great, great my thing, So competitors very staying inspired, in. ahead really, come. they for staying when they than see stores, you home by staying Gosh, us and it And appropriate. they many want store? anybody, future female we're any And biggest I we're

Phillip Blee

is how talk helpful. Okay, on how then a about dollar inventory maybe much great. question Can then positioning Dawn, And maybe very some action the of and your you. you you the through then the growth and about on down Thank a And the price That's freight XX% the expect driven basis. is XXXX, heading of end year unit muted at feel should half versus inventory newness. first into more around particularly we year?

Dawn Phillipson

Yes.

price through we the as us exited XXXX pretty great and have still a XXXX. we little which the positioned we that clear in half, of There's June talked feel well So we really delivered actions that bit about. took in to first

have largely we I XXXX. saw that to So and the inventory think we feel normalized has spikes of in XXXX relative good costs freight kind in container the largely,

little or we with approach taking that launch be and where earlier in I we as newness. team say to have that price those that is the of and So excited this a launched going clear launched as of is action spoke then the half for the buying year into was feeling fall sitting inventory through very newness year this good kind first is we about read well.And really make slightly SKUs would we that around responsible to about is that a the do how it's a that continue willing We product. unique. As making and that exciting, a sure wait And newness clients longer know solid quarter into times that for because pre-pandemic, think it's into before business right? it backlog the on it's really purchases different, that that getting to meaningful higher was are than newness how last that buy can we're we bit lead we normalizing

about good the we'll where the and feel quarter for next I in So be buy the plan positioned year.

Operator

Group. Advisory next is with Fernandez of go ahead. question the Telsey line Cristina from Please Our

Cristina Fernandez

to then a on this as we buyback? to decision the And consider going dividend regular quarter. special you congratulations forward, a good that. dividend dividends, about of Should how and pay ask think I and share one-time? morning wanted Good the perhaps would or

John Reed

a start. Sure, one-time thing. I can is This

last We've of continue lot years. to a plans done no on consistent have basis. We great of done the -- we've couple

year, how We be we're cash and future out much next you to do year it going Dawn, after, add if we could to to are don't year, very need well able on the very I planned to anything this felt know time. have the that. happy we in do to this

Dawn Phillipson

a pleased to capital just the to really we able I reiterate sheet. And would strong just have Yes. was that we to -- Board return shareholders. balance really be

this the be have future don't fortunate do able time.But a office plans some to We investments these comes considering -- in strategic position, be in showroom new the nature. the of anything to when and special and heavily dividend, expansion we in interestingly great to special position have at in function. enough, other in we're it do we cash back very are a one-time invest dividend, business We point in to a dividend, additional the the very to to still which continue

this our and really So the pleased to value with return the shareholders. within that seen ability to really, company we've performance

Cristina Fernandez

Thank can most like through I as those kind but of know Have you are comment you where of SKUs. as SKUs? you you question deliveries, to taking more in go the you. then price the action what to was on the my far XXXX. wanted on do other timing orders And here still or the from of gotten there's

Dawn Phillipson

through majority the demand taking of it order from cleared perspective. the the perspective, We've

still wouldn't a there's not it's So I it's And little say left. meaningful. bit --

cost the and and to sequentially of nice products margin see clients kind expansion then get product delivered gross start back half. these So in homes we're excited some to in

Operator

questions, Watson would over Ladies gentlemen, conference you. now Wendy? I Thank comments. the and there as further are no for hand closing to her Wendy

Wendy Watson

to you our and in participating for today, forward talking everybody, you, call next to Thank again quarter. we look

John Reed

everybody. Thanks

Operator

has Arhaus The your you. Thank of you now participation. conference concluded. Thank for

line. your disconnect now may You

Dawn Phillipson

Goodbye.

Arhaus (ARHS) 7 Mar 242023 Q4 Earnings call transcript