ARHS - Earnings call transcript Q1 2024

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Operator

Good afternoon, and welcome to the Arhaus First Quarter 2024 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Wendy Watson. Wendy Watson, please go ahead.

Wendy Watson

Good morning, and thank you for joining the Arhaus First Quarter 2024 Earnings Call. On with me are John Reed, Co-Founder, Chairman and Chief Executive Officer; and Dawn Phillipson, Chief Financial Officer. will eCommerce by session. Officer they Chief Porter, remarks, and Marketing for prepared be Jen joined our After the Q&A

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

additional for the ended queue. have If today. to market XXXX, quarter please earnings release our March the you press We questions, before issued opened XX, return

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

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

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

the to call Now I will turn John. over

John Reed

to to substantial, driving we capitalize initiatives to small, and Good are call our want market start to on strategic for and and large strategy we strategy. Conference today both team executing that morning, begin staying proven it. with have opportunities and on by our everyone, priorities, is supporting The Quarter key XXXX on growth a have welcome established First the solid X-pronged a the and focused Arhaus Call. I congratulating our

to base, execute increasing support our motivated expanding upgrade our and technology highly investing growth. infrastructure, enhancing and are brand awareness, on our our initiatives, tools improve capabilities omnichannel and business our showroom to We these

lot get it, At a levels advantage how they the to and so we expected it to results balance our debt-free our same is initiatives mortgage deployments. is maintain current luxury quarter. to interest of home do below sheet commitment with well to us we continuing staying quarter control questions expense well paying home are to a sales environment, and time, many I progress the as on and our competitive longer. answer, for build remains their sustained in prudent as ongoing clear enjoy stay about see we and dividends after the our Our on capital focus In of pre-pandemic them. clients flexibility across these are rates The want higher affords

replacing they're So remodeling, or refreshing furniture. simply their

trade with in-home and designers never small projects to ranging large. have been busier Our from

place this Our homes our they holidays clients or are going also second clients' third better assisting clients' include well. improving our are their their live given projects continues to enjoying appetite crews, clients make to And demographics, strong. with at as or time. of summer our our Many design a the be their same European their on our to home homes but

Lake call, we studio Norman. adding this and Connecticut. design exceptionally state sales It's as the our year, this a awareness of the and expanding with data Carolina, luxury and how consumer. increasing very we both with showing our showroom and new XXXX. year in Peachtree, growth. in that of the Later continues very our So I into home for to last about already well. a are know, balance footprint we quarter, our this pleased North Greenwich, are optimistic wonderful are in -- location enthusiastic opened I'm And we listings latest you studios Huntersville, long-term in Georgia design performing Since drive and brand near

concept square and large a within we or before it's home. tools out October for markets. Jersey design in such We California. design smaller New showroom, proving lower Locations assist a second Princeton, home outside developed opened designers footprint concept, imagining pockets and the and studio the preferred as latest markets to very pandemic, affluent We are our working XXXX, the perfect In footage where clients our of in is staffed their in-home first studio high-tech Carmel, design with well.

year end to by expect runway the XX ahead of long We have this of with us. a

We also in Pittsburgh. outlet opened Arhaus recently locked

Florence, of X few weeks, locations And more Los ] this Angeles. in Grove of Cincinnati. just showroom and be Kentucky, We at one in â€“ we'll opening are outside Denver quarter, in the amazing [ adding in new one a just an

our We one expect and wait to experience see clients be for it cannot of to flagship and locations it.

the discussed, As we West on the Carlsbad, and more And significant Coast. showrooms growth, Alto California have this have to Corte addition we opening year, opportunities are in growth Madera. Palo X in we

our of is how the Oklahoma also and exciting varying opening showroom this so Arhaus the a States, goal team quite XXX-plus we first such in showrooms our through locations are traditional We showroom well locations. is halfway are perform for me and gratifying year. across our United What and not

our Turning advantage product. differentiator. key to Product a big is competitive and one of

and products. Our design, incredible to with teams sourcing delight merchandising new clients continued our

full warmth Our our luxury product simultaneously, livable and and eclectic, aesthetics in reflects of family-friendly comfort.

and product designed Clients in client had reception an last reaction new both This product and newness a year, unique the spring consistent are spring outperforming loving focus our best introductions credible year's confidence are handcrafted unparalleled with from comes product. on we this our quality. have pieces the materials and Our new using feel performance.

our modern I of our best this is regions. keys But to our styles aesthetics. across traditional, also one transitional depth selections. mentioned are our the be across sellers product breadth well of We very and new to the our proud the well products, of that continues bestsellers. showrooms performed Alongside of iconic and

And our based catalog new we And in on channels. to the is to refresh able see are with our clients wait you for sizes fall across these product believe experience strategic our are system out. the in arhaus.com. first incredible operational [ seem want long-term our our foundation ways areas On D.C., fabrics, the new amount ] management with call launched up coming a Ohio, in Congratulations finishes initiative X to we new across and our to We and team. and the them areas. bushel and are warehouse we our value. We and demand One, growth. beautiful cannot I of designs trends, inspiring us shapes, set This product several consistently our agree. our to an this present of key piece representing new Chevron's growth for front, there is to will work improve upgrades mostly just a enable that efficiencies of system tremendous all

out also to I Second, call want final mile team. our

improvements the final survey ever the we that mile to past and highest some are processes in scores execution better with -- have year, delivery have several received. in-home client Over performance we of and evident our made delivery

and We net quarter, and million. commitments, are first the consistent income adjusted million in of extremely I our team grateful extremely for in the revenue busy each am of our $XX EBITDA In delivered client delivering business work while of requires hard service per every unrelenting million, and results we investing growing $XXX $XX day. net and the and day puts

shift executed have pleased to warehouse as benefited our morning, well this from top first the our from line implementation we management for in quarter the bottom and exceeded and outlook system to are April reported new we teams As quarter March.

track on full outlook. on our to year first are and deliver We half

remarkable Moving to It's achieving are current truly demand. teams the in what our environment. macro

weather-related February's highlighted to industry, growth, first by continue mid-single-digit and single-digit are high decline. quarter results our outpace offsetting comp meaningfully single-digit January's demand comp than demand the we March's high As more

up Our demand in digits. comp mid-single April was

Before to the reiterate outlook more outlook results these for our to I company the we this want reaffirm of call our I over full XXXX, confidence discuss in turn year detail, our for Dawn to which balance in and the morning.

continue strategic our the Operating believe who capitalize I'd extend crafted John to in advantage on We clients competitive our our joined a to to with to us warm Officer bright. furniture. spaces is like artisans Moran, future beautiful Chief live as positions of to curated welcome aspiration unique was us the us, leadership He Goose an business the for significant brings and and scale important Officer the joining as realize execution team to our of to Operating addition Prior Monday. wealth a Chief potential functions. in on operational we is supporting across John growth of experience growth. and Canada Our transformation

feel have. out, ago, Arhaus have almost with no like As are the no quarter, collections There generally I people. we alone. not there envision the I I still potential, today no collections. we There Arhaus incredible When are I people potential potential like years is said founded Arhaus stands XX last Arhaus our like our could our stands

turn it over Dawn. I'll Now to

Dawn Phillipson

a last first comp comparison morning, Thank everyone. quarter you, the Net a with was quarter million against good the X.X% XX% $XXX first of comp John, in decline and revenue growth year. in

of our also and see the included on deliveries value significant increase. in backlog $XX,XXX. orders abnormal were we in and order X.X% up as year pleased not over in continues of repeat the in program have a demand and deliveries did continue average returned to penetration comp our to caught pleased quarter XXXX this strength to growth We're prior We normal as backlog. with that $X,XXX in-home demand we Our designer year

driven of footprint. primarily primarily showroom a revenue quarter to Gross we costs. net continue driven lower deleverage costs transportation gross higher decreased related net margin as first by the lower decreased as our higher to costs, and increased to expand revenue and million, revenue Our percent the XX%, $XXX by to showroom margin

$XX increased expenses as strategic business related growth expense Dallas corporate showrooms to support $XX and increased the the quarter First drive to SG&A of million new continues increased we productivity. by invest expense location to increase driven selling warehouse and strength, primarily in expenses and our increased our demand initiatives as million, to

First $XX the $XX XXXX. quarter of million. EBITDA million the quarter in $XX was first Adjusted XXXX income million versus was quarter net in

and of revenue million in net adjusted of EBITDA in quarter adjusted margin $XX the quarter. a resulted $XXX million X.X% First EBITDA

are Next, pleased year as we XXXX. morning, for to we full reported reaffirm our this outlook

not will Our rather the in our changed going expectations in in have we March. provided than March, warehouse year outlook April since apart management the system initially for how live progress from

reminder, XXXX. expect lower margins adjusted we be full As a than year EBITDA to

investments $XX Strategic our further of add and investments from in other is as and driven in The new include we includes manufacturing expect software, note experience. a by allocation and $XXX a $XX to in prior year. revenue expect color, planning and e-commerce Deleverage corporate trade backlog range ERP strategic our $XX and capabilities growth at million also our million investments as improves are term of amount strategic system, higher drive to deleverage of wanted million upholstery anticipate we gross our million and $XX in-home as delivery making XX% about the initiatives corporate come this the delivery We long management million to to designer margin. To facility $XXX our new such this the to deleverage of our strategic enhance SG&A, lesser Dallas. success warehouse to in-home investments year we investments well operational distribution comping program. expense quarter million. year of as productivity XXXX, second centers in our net to have In at we in with

points growth adjusted basis X/X due the to The the balance center. a Dallas deleverage footprint, XXX from from chain higher the showroom program showroom to action second due deleverage costs our to approximately and of the ramp P&L. and is expect our distribution primarily delivery new extent, in investments quarter. in-home pressure, our price Approximately impact continued costs primarily of strategic in product investments is gross in of related to of EBITDA growing showrooms, in margin We SG&A, lesser supply

implementation line year be full first from system relative expect we performance April, to in expectations shared QX in the financial Given offset original management in with shift warehouse half our upside we March. to to the QX March in earnings new expectations anticipated with

noted this balance we growth continue I quarter, the As expect last year. in net revenue of to

price complete. We expect in impact the share half half Revenue action drive expand P&L, from new margin XXXX product the expansion. and from and the our impact earnings inflect the market as positively the deleverage in to showrooms of second year first is to SG&A P&L the we in brand awareness continue both our gross and June and

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

strategic XXXX compelling want and billion refer execution necessary our related growth I strategy closing, details build focus to strategic performance to gains sheet investments our press outlook, market. solid our proud I what while premium other our in so home believe balance and furniture release. team competitive our make highly and please debt-free strength. their retaining the the of investments. In to am for and financial are our balance growth advantages, fragmented enabling thank all we accomplishing We are $XXX priorities our our of delivering share to on to sheet strong X-part us For

a We remarks. you commitment we environment to current the clients With morning, our concludes we to stakeholders. thank take delay to happy for believe maintaining position are navigating are of and this that, to questions. while from are our we prepared value positioned and for driving strength, like our all unwavering joining us I'd well your This

Operator

Instructions] [Operator with from William the Your comes Blee question line Phillip first Blair. of

Sabrina Baxamusa

early will of on that through internal in investments Can of some you signs design is trade Phillip. This team flow any and in made rest for the capabilities home the on year? And e-commerce the those about for how Sabrina has improvement of your talk and then progress programs? system like

Dawn Phillipson

for Dawn. these and see this We which warehouse system, through a starting on systems. of to efficiencies We're Sabrina, we're is nice talked really warehouse some we how in about progressing the there. some management excited deployed

a talked with about So days regards that. to for program. pleased little It's with early and planning that the bit allocation systems other we've our still

that the really Our during responses. in-home some in portion of is investments and seen launch ERP underway survey kind changes making. client our design well We've delivery great manufacturing we're

systems pleased course, there to And that are the all -- we our these really quarter software we'll efficiencies. evaluating deployed, drive next efficiency be the platform. in platforms. the last of organization And systems teams adopt full new get So of from as that financial with efficiencies Well, really, see to then launched. the learning a as we to curve we're all perspective, help level, these areas to mentioned we investments infrastructure we will start some and then, financial -- making some a need really the get

We're few look at continue and system financial working through things the about of business that. vendor platforms, will confident packages. But that do and inventory also management we're certainly are launching to to we management we're So that launching. These process the continuing systems in those. needs different platforms, excited like

for will So expectations want coming continues investments e-commerce But to on refine more on we're our come the management quarters those the that. and did like. you to in as to making? pleased look organization anything Jen, those with what add

Jennifer Porter

as every optimize what into really our to site -- We're and doing with pretty -- platform. year we're John X day. We're ] [ Yes. echo now And new we're the to excited we about e-com much on well. single learn continue deploy and honestly

what's of with on to really [indiscernible]. of those up the enhancements on engaging We the where pleased So are and us in And getting site. making some arhaus.com engagement terms think they and traffic on majority really, results the the great end know I clients e-com are of regardless the people that about we're we'll site really seeing also of with in transacting. be of terms as sales e-com, improvements when both to our

products of able So clients, that the really getting we're It's drive new we're so not assortment, they're to results more such of the in only Arhaus the and getting and complete terms and seeing and what really their great nice as seeing as came responding really there a behavior seeing a as product really which our and to. people explore excited that improvements people picture also and with sales, just tool brand and to conversions understand these John and sales, monitoring in being mentioned, to some we're well. online but differentiation engage

this may every going see not on but into happening scenes, enhancements, and site a the the future years. of day, lot because continue that that been [ see of behind you lot could has they're lot come you're the more a ] So single that may if lots lot you a a on year to

Sabrina Baxamusa

provide assortment. recently? some product That's with the then AOB particularly Great. been on any Could quarter, assortment throughout consumers question [ And really trends if you there's helpful. new of product the resonating with that items quick have or a color ] specific on kind

John Reed

are we're curvy color are not [ little last about in more type seeing lot softer, and of where their there's and are But in ], homes one in things can Yes. Gosh. fashion people years. great trending. business, is The more that business not a lighter, things out We're shapes season, getting things. a wanting or it's is Yes, -- always trendy things thing get our wood dark a so of we fresher great

spring. great this And so have this fall we launched the year, hit about then we've very coming it's some products call, as some we that yes, constantly some excited said And evolving. But on really up. on last new

lot as probably to in have September. busy product. new of we launch everything team speak We is a ready shooting The getting fall and photo

So but yes. --

But So are were, and again, in them, lighter, I'd brighter, after. they're sterile, that's it's opinion. people COVID out a call more pretty And moving of kind type coming comfortable target. going curvy a so forth, and now straight lot changing. my we're products, of dark what Things

Operator

Your with of line Guggenheim next Partners. Steven the comes Forbes from question

Julio Marquez

Julio Marquez for is Forbes. This on Steve

better Just XXXX? a after product any way follow-up thinking is coming maybe the understand then plans expansion next you're help that. a product to contribution over there new for you about on quick growth follow-up on years? expand product. how And assortment And Can

John Reed

of the to there. Alabama although and you are everywhere, always country in Yes, colors mean, different different there's of And one and so our textures, offer taste pieces core big tastes. I a forth. bet. sellers Yes. out focus Cleveland arrangement best a and broader styles, is It's There's L.A.

But of little who more years. some the seeing modern, coming back gone even we're more swing markets are pieces. transitional are over big a Some traditional people modern. has Everything to fairly contemporary a

a country, category is We've really to X been been assortment. each across focus offer broader the the we different like phenomenal. in and then So response X or has carry testing product take some stores our

the And the we something massive it. is to assortment business big, the -- just want big sometimes we'll business, a grow be that, rooms house. on living they X course, So bedrooms, for and -- of bedrooms, tire all probably products it's people to And categories, us. wood from different furnish the XX keep growing top to able of bedrooms, have or upholstery, X entire

But the So we're under it our and taste. fits brand. and hard to look working all just feel expand our Arhaus

So and hard that, in working things to bring On brighten forth. coordinate making really so together between things color to it top up that, or a throws, core without something. can sectional bright fold room big commitment of like we're all really goes the pillows, pattern that a

So of you'll going in that today. time fall more And really the something growing that's a and big in see we're after well. as actually

Julio Marquez

Great. And there any actually. over is think about upholstery is to contextualize very the years? mix maybe past being within versus made you changed helpful, That's way third the And if few manufacturing party? Arhaus much how can has how facilities

John Reed

street in Carolina all one forth North and part Yes. the again, the domestic business. is The in quite not facilities of all half close It's our it or down of Arhaus business, and we're facility on. it's is of And different working that. great -- making and a we're the whether but shapes other with the to manufacturers product that the significant forms part the our a couple in -- so

of pretty into ago, be business hard harmony. our short custom, happen. X the in been really get or years So of back which much, think, out now it couple We're getting to I and and lead working to X, back down, think, of it's business at a where weeks, I was customer's upholstery much a huge to really working is thrilled we're proud of. that window weeks the home, XX making time, part They've we're quicker to so a which

Operator

Group. Your comes the Capital from Jeremy next of line from question Hamblin Craig-Hallum

Jeremy Hamblin

QX. on warehouse business. here wanted just and management the update, on shift system congrats And the momentum come in the the the to I strong thinking impact about to

And gone of think kind revenue in that's best that's lingering in or total little whether guess or put has if you if delivered to on a see So I more you delays the something around in then the range along $XX not expectations? color on in that. X quarter, smoothly those any having million I it lines? could Are of the impacts resulting deliveries. wanted

Dawn Phillipson

Sure.

we shifts from with So of impact quarter, launching start -- the at more it to a warehouse to timing the provides related revenue the ] as closure. the pertains WMS us [ certainly, to up make second it the the flexibility little quarter, bit any

in range feel for So about revenue net $XXX $XXX to guided we second million good we've the what quarter. million

implementation, As go April just never platform actual to it it pertains ensured as from were we implementations prudently March as to perspective. And prepared back expect be it's gone pushed to we the that expected. as We a smoothly. to from the office software possible

we a what pop as And and flexible when we to then can. very best So in dynamic have very things is constantly different kind options us have that we're of we fortunate up. prepare we that team evaluating leadership available

well very the navigated a from it from nonissue. my client perspective, really perspective. we And So

getting clients we exactly experience in impact they when system expect what These way. that's are their should not back-office want. any client and the implementation So negatively product

Jeremy Hamblin

taken linger way at impacted gross how the margin, material long through in actions what then summer, from the here. that to of pricing you to your margin Got expect be no point pricing expect in -- last quick to a it. in actions? terms follow-up you would And when of that flow any just The longer were gross terms

Dawn Phillipson

Sure.

see price So we of some quarter took June in XXXX. the from we did the first impact that in actions

through any quarter. expect quarter of year. see a in in inflection as kind the second noted And of we impact, the second expect We meaningful which half by some then really the we of lesser the we'll end have to cleared second the amount

the action clearing to the of those component P&L. is of price through kind One due

assortment, ones they're action all to are the and all that kind SKUs pricing. So back pre-price their the of back we have those go-forward of a to home

year. we're the how into of feel as the positioned about last good X we And quarters so head we

Operator

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

Simeon Gutman

question. guess, I ask, to wanted I X-part

First, I of I role? think, the Can months hire, it, then And know ago, talked John, started, the it know we role, but about in the as need not -- wasn't, the X.X about COO we the can to years, call these DC of I'm us lay Dawn of this you what X expect you just it, as give X next, systems warehouse teed in land of going curious capacity, I a that we business up. for talk about, few the upgrades, news forward? to it. kind a part scale

John Reed

Well, we to as help speaking the new we've a side planning the sure. of and brought so orchestrating that's we the to implementation lot COO side Yes, warehouse been logistics new And of, the side forth. he'll systems. are orchestrate then IT of the launching that. side the to to really be and guy all

systems, I in me great don't what that to forward. is great keep the have about am And about. IT time product having I going driving get business I be one So in thing which and be to for is about the an on spend which I love, to finding meeting

And so been short for job time doing phenomenal very just he's he's far, the a here. been

think So lot it. of that He's excited we're field him experience of it's and got in be orchestrator world, the is this looking and something that to have team a leadership. for I the

Simeon Gutman

center have? you that's things, capacity if any automation, of and the part I distribution but guess I know it's as then don't other enhancements other more that, to needed

John Reed

in now, good shape. we're Right

all We've to And small of in weeks, out start work great and implemented the good those is in next centers a or our Now X growing. there out worked just over to have enough go got team out system, the there's this we to here. system. that large going we everything get we're We'll few kinks any if capacity. distribution

Simeon Gutman

Can part I longer that question. ask hopefully, other one was a as follow-up, of a

a Just backdrop furnishings. for

COVID ticket some Can more product weather of And getting call chatter we're last, of maybe Curious the lot it or about, had the weeks. the assortment, reverted bottomed better? X the along of like the to consumer, the weakening does in bouncing X about any there's you your talk there's biggest has on guess, diagnosing been feel now income a demand volatility. that? even side bottom lower post in it, that's industry terms in items I You've if and

John Reed

I'm and the our at people first X, X, not on the very know I'm hearing change That's do. We've it's in other I that. what seen business, X anything weeks All not expert of an all. is strong. last

answer our can't they're that. plan I getting coming and what homes it their it executing we're out using in to [ we're ] systems I them. then with buying it executing to how and into and coming stick delighted yes, and So with And customers' doing delivering we're and the product, they're well, incredible neighbors friends it. telling are and

on anything I've know. things especially end. don't are lower I So out, bottoming about not the heard

Jennifer Porter

changes base, Yes. in And notable just to seen speaking. ] customer our and specifically add or definitely to differences any that, [ looking we haven't like at our consumer

to very really steady going [indiscernible] since We're strong. see pre-pandemic. customer Our XXXX continuing that

mentioned sort new really seeing the XX-XX share, and of response, existing split Looking we're still with at the really really, on the well. call about pleased we're new all prospects of ] in particularly our Dawn as that between sort stats value our the and earlier that well, as both activities, of from been coming [ acquisition we as customer things have customers pleased

So really we're doing as to focus John what on get mentioned, we doing.

is Our working. product

working. messaging is working, are showrooms Our our

to and see beginning results. So on we're good that focused

Operator

Cristina comes Next from question Telsey. the Fernandez with line of

Cristina Fernandez

on promotions? the Day Anything lot that about leading of change and your competitors products a ] introducing Some up ask we the are environment and to seeing? new to wanted promotions. Memorial of also expect you're the I should weekend? Any competitive [ important

Jennifer Porter

yes. Cristina,

promotional elevated see to continue out market we which So is there, interesting. the really

the starting promos see those loyalty of month. early You now some start to already very in

We're we're money. terms mentioned, is what as at, as just really John referenced spending working, customers looking that. In our of are our and dealing really, what with and product pleased we're Dawn you

that a to focus and product marketing continuing and shine we're promotional on put introduce continuing those our clients We're their same. new letting take continuing on as decisions. to spoken promos and when remained We're branding sharing So we sensor We're messaging has really I've run really clients. with the [ focused ] results our and that from like perspective, calls, the really health out around brand to we letting journey And differentiation. seeing still prior make weekends, have on about their strategy promos. around shopping

longer the bit promo, And seeing X seeing. we're really to be really but right just X the what doing that around we're little no happy with days a So longer.

doing it's terms So strategy, on I But we're as we're our what just continuing working we're mentioned, of what for and doing, now. in doing monitoring focusing very closely. it

happy So we're with that. really

Cristina Fernandez

my And stores. second question is the new then around

You locations I right to have and it staffing have the sure a store new stores, new you the you Are in moving process other more those of coming markets? training is of the up. employees make for people and Or for from stores? kind and managers what's designers. see lot wanted about those you how ask looking to exciting

John Reed

that we a most on a only new is, manager but want experienced last or Good be of a, of great are question. understand manager, most have looking depends stores, folks to stores them X move and we few forward works we always how they to -- Sure. an existing and a the proven not culture. opened in new for store new manager, -- quite -- to have in we location, move the them. of a just as few are, we're it typically, Yes, but our And With months to store X, a that, opening, we stores well. leader to us a handful the it has where

So we'll experienced well. some folks there move as

of We've they that hire doors. university a if X training team then, gives whole before that, of phenomenal have staff. Arhaus course, weeks to to open a new believe, of them, the I addition training In got we

are the work thoroughly they to So go of store. to learning and and on not trained. them another only We'll behind our write They'll the sale out get floor, but clients. forth up assisting then talking so and getting clients, desk how the

in. by they come we and So the well day up X are trained door our let very, clients when very open

Operator

Your Jeffrey the from next of Jefferies. question comes ] with line Walker [

Unknown Analyst

has momentum the within sounds with Matuszewski. the continued designers on presence Can of opportunity to business? kind trade build. interior for any It and Walker This update for design is deepening you discuss trade contract Jeffrey just Jonathan the us plan like then channel near-term on

John Reed

trade that and their the folks have their These to that is clients clients, we're encouraging them own their continue grow. Yes, focus one bet. own business you we our Yes, are and business have to showrooms. they to themselves into and bring

to them got that, with the to for do buy lighting. vendors all. room. seamless, can it. internally nothing but that's make assist it a make do sale, with to one-stop We're help it if a they And We help of don't we They're to of spend folks lot different we've them. easier got just the to furniture We've time have time-crunched. And product sure. XX the got on We've have for a have the They trade we what We've got go don't this learned. for these added shop their kind we things it can rugs. so to folks

nicely. of issues So we the guarantee any growing We growth business immediately quite do they're month. of we're adding total. it's take outpacing it. single a all, it few And it We're average or repaired, trade fixed is care gets exchanged. our members every new business if seeing trade it The we

runway and see a started huge we that. think a We future we've in us. of big, think ahead So we've big only we got that,

we is something are very on and focusing definitely about. it excited So

Operator

of Your America. line next Ohmes from question of comes with the Robby Bank

Unknown Analyst

for This is ] Check Ohmes. [ Matti Robby on

high February digits in highlighted on exit Just in rate? mid-single March. give trended first, that strong digits given you April any color grew you that comps single how Can demand and

Jennifer Porter

was digits. Yes. mid-single up April

the have [indiscernible], is well. we seeing doing we're really of in the new pleased some So which outdoor, collections, to response our particularly with

very high-end well. collections are Our performing

to very not introductions. month. impacted by colder, furnishings home So to we're snowy but excited know product about continuing the We be we it's don't decide January also because know folks X was weather, purchase

come they come will in. back. They So will

So we -- and that country. across in we resonate know the various markets

we -- we continue drive as to up, see some brand awareness expect do results. to great continue so And to our

to I'm year. looking So the April the with we're balance and of pleased trending, how very forward and it's

Unknown Analyst

the maybe products plans Great. tops, goods, Are a table AUV as just assortment little e-commerce with lower soft online, showrooms into maybe a of business this the SKUs then well, AOV you have people opening relationship products? actual larger adding like dive you And deeper stores year. to your e-commerce as online? in your a growth are building and And then awareness, buying in new between seen you're maybe given

Dawn Phillipson

answer I there's Great ], simple so much the think [ question. And about the with e-commerce. just our There opportunity. of is we're everything excited is rest business as

earlier, working we're as new see website. at, that you assortments, products John some those on on So mentioned will the and as introducing that categories of are looking growing we

and In we present addition to constantly as our be to product as digitally how evaluating clients and the we're I'll well. that, testing learning talking,

day be launch, not that getting how product to those how right those smarter during So the clients product only serve every journey. we'll we seasons but time online at also new better about that we're bring as we to and can the single the and retention so assortment introducing products

that show people [indiscernible] speedy it get as little one assortment. are surface wild also their think the and more people which to on incredible variety items, really John the color amazing, They're core in color of all I like shows and exciting a to basis. inspire are digitally, more really then people-call mentioned, bit ways a to things sorts like the starting and maybe is but easier of

to out looks [ lot more and it a ] So as specialty just there we like. figure come assortment, product both the what

type that mix tabletop as at our is e-com. product is and competitors question assortment. our for the you of about specifically than we have to categories core in or smaller have much the don't mentioned. We looking your We reasons to how haven't our What talked the items of the all specific spoken both AOB about AOV higher

furniture. monthly on weighted marked are We [indiscernible]

introduce to As I brand but we our use ] continuing for channels omnichannel there. everywhere. really the full also happy a now, health a special, as to our as experienced to we're on assortment to really really our can full our we're focused only makes not where what sales see [ also mentioned, support but awareness channel, opportunity there's channels channel, trying channel our clients digital be brand. We But we're -- digital

us when we're making conversion e-com our to improve so on decisions. on and and want those in looking both with to interact However, clients showrooms

So a lot more come. to

know touched of I ]. parts [ question, let on me if I both think I there can your anything but

Operator

comes Baird. question of from Next Justin the Kleber with line

Justin Kleber

one Dawn, benchmarks the of me. maybe First sit just you the us time today, penetration. in-home relative updated Kind where provide how Can you to evolved on for mentioned that? the the increase IPO. in you that's of any designer

sense you what in it driver here. nice because is that business a like inning think get to trying the Just for initiative remains a seems it for

Dawn Phillipson

Yes.

it's So about we really actual pleased the disclose grow. we don't is demand But continuing are how to what penetration.

that trying in And have, we're different see how continuing locations we're test we various high. so is high as the levels staffing to volume to

that creative a a you business. some that program, thinking say with or designer collaboration drive space. the And and folks digging but really we're I so about nice X, in-home our And trade We're when would There's pleased And in as room the great we're we trade probably the how John also, into seeing. get we performance mentioned, continue program. happens in deeper X that overlap. really know inning client there's that can like-minded some to

designer business as program that continue as we some So program nice in in-home the program. to fine-tune the but and just staffing growth our trade we do with expect evaluate model also to in increases, regards

are at but to programs excited come, performing. really, how both So more really those

Justin Kleber

then let if years? this your ends into through? flow to demand plan, forward us investments That's assumes the pull demand. you year are demand And future would perspective? could is from exceeding what upside a your sense there certain you And or follow-up up for if would let's say, guidance us you choose great remind comp my maybe to give Or on internal And a just hear. from

Dawn Phillipson

Yes.

great a question. that's So

have demand. guided We to not

move perspective we and the for converge make But to as comp and clarity. to So investments bit processes from designer, that a growth we that think give need next trade haven't corporate well. a the initiatives a to whole organization, whether and we as kind more there's we're systems really little as it's comp e-commerce, make like or whether contract in-home that the excited us to strategic of investments about started it's even year, in as into such into in dive host we better to demand you for growth-driving want opportunity of

as will a that it's go. So be we management making decision

to the being consumer? out optimistic I'm to we person. the with we're industry? in so there we for the said, happen that What's That feel And good year, about very guide and have a going the what's very happen in conservative going

in we what our contemplating So the I'm balance But of is. strength great sheet. always downside kind have

great position. have cash We

feel making But and we're later more And and the come to how our the might good to we in or investments what changes the for So guide really perform. that about any think contemplated confident year, in this at that this we're quarters achievable, going moment say is in year. point I'd time, feel at have. about we we we

Operator

question from with next Your line of TD Cowen. comes Rakhlenko Maksim the

Maksim Rakhlenko

I not the just what with And peters if and some proposition of gaps permanently you're value your earlier. I just for hopped if maintaining missed this their sorry it's you then comfortable like brand on, price and response to could prices cut promotions? And but your succeed? about how thinking are holiday that your look

Jennifer Porter

Yes.

So turn proposition. our aesthetic, in how our believe we second, strongly positioned great we we're quality, But we're but competitive We're want product John value over constantly it to... in the I'll feel to a great set. about how very John, feel about do evaluating and within positioned. you But we

John Reed

Yes.

trucks who who on don't containers way make products, royalty We has that. right every out and business buy of manufacturers If comes don't understand to huge to we We buy in comes into It some go we direct up folks expensive -- any either want it model. -- then marked like use things from middlemen, sell, actually people our always one piece them. the centers consumer. product or been from you whatsoever. our distribution is that designer the on with very single It

forth and because values. so we So people. if buy are their best prices looks incredible to products And it's value. we different. prices, incredible going it's our to worried not competitors quality still be folks The you cutting our the high-end there, exclusive cut and in us. And incredible other really about business. can't out great an the certainly give from It's other It's we model have We're an believe value.

great best, So a truly incredible focusing we quality. really value we great have that on and product what do and we're is

to ]. strategy hard -- it's just we're be So No, our ahead. it's I our Go beat with hard [ to sticking product. think

Maksim Rakhlenko

luxury great home I now follow-up, And it. for increase a that's sales No, color. so seen we've appreciate months. as then consecutive X

demand So as curious, early next that the show as -- start start your in that if do to months? few should potentially should we up comps you think

Wendy Watson

Wendy. Max, in this. this I'll on is weigh

sure stats. look those obviously, sign. And some aware than in to even You recently, that's are more thing up like -- that of And those which listings other is positive home sales I'm are market you're at up a market. of, I the that saw

remodeling. a are sales things, So are sales by that's room, so factors. but just smaller remind light than would most you I a other driven But much of our repainting a nice X trend. that those they're Home other refreshes, driver,

Operator

Sandler. the line Keith comes from with of last Peter Our question Piper

Peter Keith

And bigger exposure, becoming place go here. also, a a in into that to have in don't was you're adjust did the the address we could just thinking furniture I maybe how ton how can you it? as quantify about tariffs through went are I year if back but that. of know you wondering And XXXX? Tariffs China topic you you results. Nice if

John Reed

in product didn't far, Back on. was working our And because price we competitors. out XX% of Sure. immediately tariffs. had certainly we very you, we were increases moved product with, pissed and XXXX, had start in we and we just a did we getting little our accepted China to have far begin in on China. less it clients to them, if did than take remind China What like But we to

that move if big And won't moved have a that loyal to North incredibly again, the some then fair moving go America. forth if we the now XXX%, adjust beat. which they're products in out. Asian of If position us, our guys countries. we in were things, say they've incredibly heard most doing was to and back on hard quickly. amount and want Indonesia, to some on. worked to miss good with be get know in loyal like of shape to, Cambodia at they China, They to to if do that. Vietnam, for other that working to business Quite we We'll great we're, the So they're us, And tariffs that been so very countries things need vendors they've we're day and not, hard other moved a to. and a need

Peter Keith

And towards and Okay. guidance. Dawn maybe secondarily, the the question directed

the the guidance, But management half I positive new in back the the are And I'm pressure from comps heavy what's is heavier be to hard the in having half. one that yet warehouse guess is comp know to understanding With backlog to first time thing the at heavy half. a bit compares I in I the back flat same implied first a some time, think the in system. very which the pressure then half, the leading of

as comp So can improvement year? or really we help us through nice through what's the you helping acceleration go comp this just walk

Dawn Phillipson

Yes.

quarter a more and ended a way. bigger of we bit a one with nice normalized demand perspective of kind So the coming in the being from little impacts just year last quarter our first year of rate it January into months backlog of second [indiscernible], with meaningful the in a

back comp in more look is new to side that of feel kind the in, showroom just of half of as what's our to at demand, copper kind we new weather year little based and side, January of on flowing off able we opening. to the it the deliver the on and [ we're the in bit [ the softer So being and the with demand then how ] a be showrooms ] both delivered,

that just it's by mostly top Peter. line, So driven

Operator

the speakers Q&A session. remarks. the back I now concludes turn That to closing our for conference will

Wendy Watson

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

John Reed

Thanks, day. a everyone. good Have

Operator

Thank today's Ladies call. you that gentlemen, concludes and all for joining.

disconnect. now may You

Arhaus (ARHS) 9 May 242024 Q1 Earnings call transcript