ARHS - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to the Arhaus Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal remarks. Please note that this 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 Watson, Senior Vice President of Investor Relations. Please go ahead.

Wendy Watson

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

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

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

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

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

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

the Now turn call I'll over John. to

John Reed

Conference Second Good everyone, morning, Quarter Call. welcome Arhaus the to and

net million. the adjusted $XX and we of showrooms and support strategic EBITDA a to delivered second successful team investments Our quarter development, In $XXX million, of revenue operational of delivered long-term several of another important quarter, growth. $XX million, net our opening, with income solid new product execution new made

mid-single-digits grow a basis, strong of comparable growth on During the decline growth second stacked stacked past the growth several of very increased increased contraction mixed. our related to to softened X%. On proud with term, to basis, our in X-year years quarter comp in stacked as decline metrics We're the and XX.X%. we quarter, comparable low-double-digits growth X.X% demand demand and there decline and second were the to a even quarter trend X-year demand the in comps stacked X-year low-double-digit demand expect long a comp in a saw comp the resulting environment. July's in accelerated demand a comp continue quarter, a over demand increase. a the macro is demand X-year second high-teens near-term Demand

first but the were and and orders traffic down. from sequentially value the Transactions order nicely. up slightly average comp quarter. second were in grow continue to year-over-year, over Our were quarter $XX,XXX $X,XXX Conversions down and positive

total saw growth mid-single-digits. in quarter the solid the was also up. Total and in quarter, traffic a new second increased We customers in second the demand

full-year showroom the new plans. our industry call, the lowering given discuss pleased with consumer are tech be Dawn as to past continue of performance demand expectations trends for the and in as We we the comp months, X the half more in will very backdrop expansion year outlook. but the trends, our showroom and own detail current adjusting second our over well our and later

successfully we right our marketing expected the originally half I continue we grow second are of While earnings revenue time. strategy, the confident am product, the this not and over right net for outlook that year, the what to have to right

growth our on consumer while experience continue allows maintain sheet environments, expense where plans. focus balance our execute strong our strategic extensive us have to cyclical navigating we We to control debt-free

economic During times will and softening, have of and continue to invest in we showrooms. marketing, product,

this us cycle emerge even that approach from this done to enable we before, stronger have confident As an we in are will position.

the making showroom growth to our base, assortment, support elevating our to to strategic improve our growth. expanding tools enhancing continue necessary and product our infrastructure, awareness, strategy this by will advance increasing investments business our and and We upgrade brand

to and formats footprint Our primary brand drive showroom awareness X our long-term with growing continue growth.

our We our have so Arhaus opened their X teams new want opened year XXXth and this far efforts across milestone thank to our I location. X in showrooms for important states in this achieving journey. in

Angeles, which halfway traditional since in traditional in showrooms. late La our Palo in Today, X May, goal through California: new we incredible have of Just opened we in Costa in The our Shopping fabulous Center Stanford and Carlsbad, have showrooms, Grove XX showrooms, only format large are centers Beacon XXX Alto. Los The

identified year. traditional have team. location showrooms more in XXX experienced analytic estate that given execute through choose robust any based work performed Our is real goal and we attractive opportunities have We our we our and markets very on to lists

successful is model about us across we markets us. opportunities all the couldn't In significant allowing excited of ahead in for opportunity geographies, and more a the location of Our expansion. short, variety new be

our As you Peachtree year in and smaller City, know, of we studio week with last opened second concept, design also are thrilled design our the Georgia. studio

this we've has real skilled team studios the balance outperforming growth while are studios. design in seen, Our we identified with journey, locations for we our incredibly XXX footprint, chain. with early with pleased design are And estate of the the performance

studio to City on are North slated Carolina year. Madera, showrooms to traditional this and and later our goal open Oklahoma for Corte in California, in showroom XXXX the meet Lake We with opening area design pace a Norman,

new earlier, mentioned we are and showrooms I pleased new with the economics. performance As showrooms our of our

recommendations more showrooms more The brand our nearly a significant are awareness. because opening is us X opportunity furnishing increased family trends the in Arhaus. with familiar ways top This clients apart generate friends family. from awareness strong factors the and to become the we brand as recommendations new we potential and industry. premium from in our Moving and From home our XX industry, that set and years through

focus matching approach, and their the with and product time clients in-home the showrooms, inspirational and our designers, needs industry. value the and that our and we interior of exceptional on creating livable proposition the to clients' in nature work homes unique the match with luxury represents, the aspirational experience with our to own in-home artisan and complementary Our clients' ease understand our best the wants take experience our our our it the aesthetics, which in we with the designers, ability in

Speaking fall we is cannot meaningfully collections, It see our will new to begin At wait brand to at stunning you the of circulation prospects with increased for arriving fall products, we drive in of catalog, our showrooms arriving which month. the end start same and the have time, homes. catalog a will in awareness.

pieces. success build are We new the on of our some -- some introducing that of collections our most incredible popular

that we are wood about excited finishes in will wonderful very our fabrics curved collections. takes and new new You that see and stunning upholstery

functionality clients defines growth to our livable improving front, continue offering operational We aesthetics. On on for as infrastructure, we the processes. by efficiencies we communicated, our luxury technology, foundation comfort strategic and focus setting design with and long-term the trademark upgraded investment with are on combined that focused high

system visibility and are a We manufacturing new begin the new our capabilities. the pleased inventory ERP to help margin have will next will and production Further, our a to forecast for optimize upholstery to deploy and that our several efficiencies. continue new and operational capabilities facility that planning improve over management implemented opportunities and months, purchases system warehouse refine we will

the hard more will We to stage future efficient for are scalable work create operating a continuing to growth. set environment that

shortages, Asian avoiding Red capacity weeks update increased ocean and are port times on for supply summer on chains from All early the freight. in season shipping are for we to points. this carriers the Sea now the container average, Spot transit are longer our have at inventory Turning which and purchases. planning still X rates congestion peak

During working only with ensure of cost chain our target. the improve were product an say paid I quarter factored second challenges spot is to availability given our impact able we margin quarter, in contract to our bring with don't our supply to during navigate environment. our vendors, pleased current a costs pandemic, not reduce for engineering. in we mistake We advantage higher are the rates also outlook confirmed the diverse year. but vendor am for have our to together the our not the quality into industry. the strong supply is we learn revised do containers in our all to chain for did our we of remainder But that using third to relationship, that rate, hit but successfully Together the clients. This some geographically

to day momentum I and to striving this the extremely to of turn discuss keep strategic I in teams achieving industry-leading Before advancing service all our growth milestones for our you detail, more in key and of client I'm Dawn over proud XXXX. going. I'm our thank of half and initiatives first want the every excited to provide outlooks results in for to

I'll over turn it Dawn. to Now

Dawn Phillipson

compared the in of quarter in second the year decline. in revenue with the to management Net morning. X.X% decrease the $XXX Ohio warehouse good our non-recurrence abnormal revenue a our The and comp and driven was distribution you, system Thank primarily deliveries implementation by of was backlog million center. prior prior-year net

quarter, quarter. comp in the increase mentioned more declines in April's X% the by John with our As the offset earlier, mid-single-digit of demand mid-single-digit than declined balance

delivery footprint, activities, transportation and as Our we expand driven to second and million, to margin showroom promotional our continue quarter gross margin increased $XXX lower as primarily product by to mile higher percent to decreased to product as costs showroom costs related delivery Gross decreased continue revenue final our and by primarily higher invest higher margin and transportation margins, costs. lower a costs, experience. net we in of driven XX.X%,

strategic primarily the selling increased higher in in as the Second our to of quarter million productivity and to SG&A support increased $XX growth and related Dallas initiatives we the implementation. new to by drive expense WMS expenses higher corporate business, expense driven to and expenses related increased warehouse $X showrooms, invest million,

was quarter EBITDA the the XXXX. $XX second XXXX $XX million. versus $XX in income quarter million of Adjusted was quarter in million net Second

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

for As lowering are our morning, we we reported full-year outlook XXXX. this

half downturn. reflection marketing uncompromising is Similar this half has that into start we've last been and will demand experienced starting first times as shopping revenue have and pullback to clients net with In to May to consistent changed as second starting We gross handled performance by past, our trends. improves demand how our our trend impact of other strategy the of during client product homes. typically in consumer the opening and recent negative economic expectations and of margin the the their in the investing to our accelerated is our We capture first was the market and to softening given the introductions, that comps July. return we've furnishing business. allow While share to home showrooms stop believe expectations, a new cycles, again our investments, macro new us seen

believe We year. the about second the marketing sales a demand is we to mentioned, John in as contemplates low-double-digit generally half when this industry in very the for year-over-year campaign. outlook remainder year product the a fall of the the decline our year launches slowing experiences Our election half. relative supported same especially robust first comp prudent of At an by are growth time, excited the

As revenue the we year second the midpoint of X% our in range of approximately versus to decline of the net second the half implies, half expect XXXX.

XXX EBITDA we half points On approximately the deleverage second in the XXXX. expect side, of adjusted profitability of basis

the and and of the We incremental will expectations growth SG&A with slowing to we expect The SG&A. Compared prior investments. net margin for in gross from XX% demand from majority expect important from deleverage second to both now the gross is impact deleverage half, this of revenue, the come which deleverage about our lower margin. balance continued

the anticipate adjusted Our now in around expect of We inflection. In midpoint, XXX costs. the half the to margin gross the decline of balance versus flexibility EBITDA expectation year XXXX, second expect our factors gross well year outlook of the we quarter elevated the in $XXX allows prior $XXX margin for net as in million. approximately of to the promotions range deleverage basis And points third freight at of for million revenue versus year. prior we as

strategic macro strong to XXXX our current please our challenges. refer press to commitment to details strategy our I our For the despite growth closing, to all related release. In want outlook, reiterate other

growth have Our targets long-term not changed.

and expect comparable to as in high-single-digits continue We total grow the revenue we grow high-single-digit mid-single-digits. range growth mid- long-term the sales in showrooms to

long efficiency, will continue improve to low-double-digits also adjusted EBITDA of We operational growth term. driving

home meaningful to that fragmented our responsible furniture investments balance sheet the competitive allows premium to is a make share us advantage in Our build on highly gains the market. $XXX-billion debt-free

thank remarks. navigate our environment position and to prepared value believe service We strength, continue questions. like the of this are take to maintain to for morning, concludes stakeholders. This are and we your we I'd current a for all to With you that, our well-positioned and from us client-first drive joining happy we

Operator

first we Gutman [Operator gentlemen, will from Instructions] conducting question session. a Morgan question-and-answer Ladies Simeon Our comes now Stanley. the be with of line and

Simeon Gutman

into ask, technical summer to straight make It first, that's sure the it's fourth on math, the wanted to that's real then can there been, just change purchases? it's you the I customers mid-teens. like fall I buying? slowed guess, in stopped It's you correct. but occurred, about that and guess, I down quarter comp. Has looks just it backing about customers Was I swoon talk categories? have be may anything been that want a -- it has purchases And can indoor or demand? talk product outdoor all the deferring And

John Reed

question. hasn't we've seeing are It's break that buying Simeon. here. the it they kind from of Good our in of right been. traffic been nice taking been a John whatsoever. little across category product of the part a board. just People on Reed as first had Yes, the seen We're stores. -- morning, as specific much now all, just No, last

been Our so long, strong leads. still buying, business growing so and for we're has

very, are busy. still Our very interior designers

much. really hasn't like the change so in seems just that. been It's So summer are people blues there it -- and huge a traveling

customers a Our are been. had little that from break they certainly they're taking what

Simeon Gutman

then if sneak follow-up. can a in And I

press the mentions be release I activity. think the written. it's It been first promotional may time

new the and it you're coming have you the in and promotions have But gross margin then the much might for of about to approach your backdrop how the talk on and product much You fall, in, back is also talked calls. half. about waiting it, how

John Reed

and I've been product, part Sure. lineup stores, color up. is this of the have it's take the accelerate strongest We're like business They want. excited the stores. excitement as downs what product of them can in we want that And a opposite. in our the of is We they forth. things Jen people the back our their back really exciting in that add Yes, kind come that that ups so is the We're excite very, customer win strategic looks I pull refreshing that, want bringing We're in that? quite back the for that's visits done it. and these times, all if our a can that while, new doing comes our time exciting lot XX the And back. through way we And has always have We really plan and very industry. business We do products. half well. unbelievable. They certainly about bad. years -- keep for to every We've people been times think experiences. when going, you and we now. Jen, because to do anything

Jennifer Porter

a little Hi, to Yes. add to just bit Simeon, color more that.

past. promotional in As you the more in been where we heard, did we've get than QX

there from activity that As we've for we're been years almost peers. speaking our seeing out probably promotional definitely now, last heightened X

really for environment really last our I it's X.X a that. years. hearing the is there been to having lot macro a that. think really We've And out things of an one to interesting really of peers been been tough year, outlier address we've the

it's definitely So continuing going monitoring. we've that We're to to been something monitor. be

of of at But QX. sneak mentioned, our fall a fall happens as the the Dawn some looking here products. we that of really back, us We're what some a consumers elements. really excited in pleased our And year strong the in June. We're seeing coming to definitely comps we We're seeing and traffic stores A really seeing in John positive, stores, we're just said, from saw seeing like. going did of weeks. we're product. end into than July, the positive year really of really, what traffic few last launch And see fall there. weeks at about lower website. just couple preview We that and in for rest engagement in saw We're promotional order are As excited the we we the We're also the be allows May nice guide to engagement lower against values we'd with up marketing. marketing with softening echoing the QX.

at out ready spend, positioning are pull stores, also bit. looking our And the coming a mentioned, but July increasing able to cycle to looking marketing gets all in we that to terms be quite fall our Dawn making forward lot of be we're turns showrooms, But product and So those at we really can decline there and around. of there's levers promotional be, if a to we positive continuing fall. acceleration open us when as up to in a this of are we more to need sure

Dawn Phillipson

Good appropriate. And I to wanted basis from fourth in from your thinking of in lapping margin regards year. Dawn. is correctly the we're the if quarter the gross then down to morning, Simeon, half, price skews confirm that you just comp that this kind remember, second a about last you're action question is with mid-teens

gross seeing margin in that a So as those we're incremental year's into about little second we layered some year-over-year costs container think of half, compression the part, -- driven half, by most half relative But are second of second elevate. there. for to the we margin flat. margin product there's bit the year-over-year, last will investment you think as about year last product versus our And strategy growth in then we showroom that be and rent we deleverage on perspective, think bit showrooms perspective, anticipating new a continued a from from relatively the are a of

Simeon Gutman

Good everyone. luck, Thanks, Dawn.

Operator

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

Maksim Rakhlenko

overall end? first Are as high look categories improvements first, typically perspective, And they on do do shorter how your of given signs we long ahead? John, cycles inflect what for the than then the market? last So typically these

John Reed

big We the what or different which is mean was COVID, 'XX had I is something, which and different. is totally different today. every Yes, totally in crash, than than cycle

on lot as is election Obviously, kinds coming of guess mine of cherry there's news your as a up, news So that. there. in it. There's has which good out all

more know. on out out we plan stay focused our come we things, think I every what anyone. these and We So get very, that and I who market time. fall knows? stronger better plan do competition some don't may our very come share of we know than And And we these our well more is. of off. of executed

So that's that's excited what what focusing on we're we're about. and

Maksim Rakhlenko

how competition in generally dealing if And are reacting, not the with for peers about impacting with nimble So make thinking or that you're how would start is to marketplace? and that you how on changing then about are you, instance, business? maybe you go close philosophically, the price changes

John Reed

Yes, generally we closely. not. compare compare We product, we don't as competition it certainly can we when as product watch goes design quality really But goes. very have any or that the to product to far

look do we ones inferior. the at, think The undercutting people are quality we isn't So It's there. us.

the and of don't are a as customers as too beautiful about designers out incredible the remember long want home. not there. paid who falling they We've not -- so interior an They it's forth. it's aren't business, in apart it's we're that. two comfortable, got incredible worried And ago, they So sales army it best working, what team, for years

the And XX%, won't will not that long with XX%. that prices down our stay that. because to going run, and hurt take that not we quality. do We So back But could I goes easily and quality in we're take compromise down I quality you. cut vision to focus.

Operator

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

Steven Forbes

to as Simeon's start Dawn a with Maybe question. follow-up

profile high. it's by I that's get to our trying sort think really of around. implied the arms margin the think we're You changes, And guidance what decremental through

promotional sort by it simply you much to it decremental activity mentioned marketing. sort management? conversion various of being impacts? given through also is Is any activity, in you you out right, the to investment I frame there mean margin macro? sort had Any think promotional you the And as parse the correction inventory stimulate driven comment, costs, can into so of just profile? And is high explain price the of and/or help how mentioned value to freight way you then this how

Dawn Phillipson

Steve. morning, Good

about we're points as versus expecting So deleverage about half, thinking the we of are basis XXX prior second year.

through margin. that is and So think you that coming about gross through is in as SG&A about XX% about XX% coming of in of that can

around our On side, we've gross -- the year. margin margin good we're there's said, left relative about but still promotions, to you some as ourselves feeling product flexibility prior operating

rents are seeing gross as invest continuing is deleverage through We in growth strategies, our which are we're showroom to rolling new those margin.

SG&A. we're think guided is at balance where ago the today, spend X months we X, consistent. we in really, versus is to still as about our So what And

So initiatives manufacturing we We're showrooms. continuing our are around our to in management invest in growth planning system, strategic to our invest system. new warehouse our continuing ERP,

back in the expenses catalog, going at of to a excited be deeper the the prospecting to beautiful, spend to going launches brand the increase which support bit to ramp our awareness, on and bit this are that drive year. We of then end September productivity. marketing little rolling the warehouse bit Really in in for in of a are continue continuing half product this out month. up really deleverage a dialysis And is

how working we from relative There's be this in will versus back the we it where what for half where would So I with be all you is today. we to year all think along. about said a noise months where math revenue the just we thought some ago perspective, think that think X now we're consistent as spend be will or think year, revenue

Steven Forbes

a maybe for Then John. follow-up

backdrop. this optimistic, You think of sort challenging obviously, and position a of big focus strengthening the a the into being sort about Product, very share of about lean there. during right,

spring? initiatives can on that it's teases breadth, pipeline? to fall what coming some of excited you thoughts are the early sort assortment So on leaning expand for or you're Any What depth? of product expansion, product you into? whether here I about, mean newness are the the

John Reed

Sure. I can talk big about picture that.

of largest is of think every And drives category when it the the all. We it about -- Very, so are launching very forth. which products a drives of the you it, first we rugs, about new lot business, upholstery category, other end in end purchases, tables, lamps, have. excited

really we're incredibly the and part, we're And So as on comfortable, both that designs, of end, -- also looking hitting spend seen new things kind is great bit really will quality on in some that the pushing are great I've we most bring have have or high lifetime. out little and in money far We're focused incredibly products price strong best that and starting of then envelope that save some not point we sides. we've door ever a product, we're to of the my the as clients some feel people rolling quite as much, covered.

we've So think we I upholstery. do think really of that chairs and always strong. and the usually how And gamut come the out our entire again, I how most when dip so and exciting that's -- seen bit, business I've drive, especially little that's And forth. and sectionals got a sofas on what that's probably part includes so that as times

Operator

with Our Barclays. question of from is next Sigman the line Seth

Seth Sigman

comes pushing just is to and point? to have traffic that? consumers it through, Just at that things little bit. versus that deferral measure frame us back out? about business understand a just the maybe is actual some Just If of consumer help and you few Do on conversion I I'm the months, much engagement. better more in to the trying you drop-off that Any the guess drop-off go how think trying way last back perspective you've a seen think

John Reed

time in. going were excited engaged, Yes, are any in where life just coming when they right for things price X other to it. I They they're they in. not Seth. length on wait Yes, they're as anything people years now, coming as their can They're and take be would and any COVID of busy at that, still seem was with still start ago

haven't out We drop. seen huge is this stores doing The are California. The in especially response unbelievable, huge, fantastic. traffic new

And know you to just have going so, I if guys on focusing keep that. to anything else we're say. don't

Dawn Phillipson

order Traffic Yes, comp results we've in decelerated orders components. basis seen second enough, a quarter. of per some from but year, so mixed strength over around Units up, number so different transaction average data the of is really versus were the a The $XX,XXX and slightly. versus year, $X,XXX some last up interestingly on perspective, seeing healthily Number increased last still down transactions there. was though.

really is mixed. data the So

was to So saying. additional folks what often look to it making speaks the in John anything to Jen, consumer? more a on The at transaction. maybe prior are coming things But

Jennifer Porter

Yes.

said and it We're think Dawn I seeing a lot. all. John

think browsing, to seeing renovation, you a have more really both those behavior a urgency $X,XXX when less you John sense timeframe, purchases. that they're drive really for you complete with you seeing and mentioned, and as new and that buying purchase. orders Dawn maybe pleased have They're some But consumer exploring. And I that to $XX,XXX updating doing we of of bought complete we're of are home think those less urgent about to you healthily a above and are furniture. if or performing have if if they're

a we the website they're traffic mentioned, make engagement purchase. with lot spoken that the heightened we're clients they that always are, heightened product. And website. I As that their with We're know to engaging the seeing seeing about, as doing where that exploring, our of before we've that's

out Arhaus And be in to continuing that the else separate they the everybody market. from We're here been less the So to there purchase really to the ready, urgency today. there's strategy. are great products, interest seeing when for we'll of our make on. present them all want they're core reasons convert. level. saying, We clients definitely as be just our focused That that that's here the that we've of then at And are of what I all inspiration, apart and we the wherever all is think to ready

Seth Sigman

there has that seeing of navigate lot a last for up follow been And tough very a of environment right? some just couple guess peers there. your I out have been been And thinking really able Arhaus a years, to time. difficult is It's the about,

talking for guess to Just extent, look competitive to. points you're And not stable something today up think you confidence you a at you question that getting it's actually context. we're business to they now. is anyway, X-year what don't caught big more in that the are swings, real much some need the gives adjust your now. So But it's question you adjusted any I changing? it's on than all more do where price why What is, X, that's to I confidence if the the be you I more gives guess drop-off further? that they basis,

John Reed

but and of this competitors because come product. is out taking we say this think business our of what Yes, should means I the these it we a going lot to an them We've All do. also We've lot got have our quicker ones, to come ones a say, it them mentioned, amazing and We competitors, seen a we we competitors I we're little whatsoever. backwards or don't any by -- absolutely We're the where managers, bit. things well. see as effect earlier. a you were top that of start peep first touch at that our down. heard one literally is forwards. than as to think, do in And about stores, slowing of lot every quicker last I seen always salespeople look our week, our not We with later we've out sales our can store

Jennifer Porter

we a what aggressive in see conversion. bit a effective starting we're that's And with us that confidence purchases. I July, thing and QX it's traffic to particularly that the and And promotional the on actually, to price interesting, driving our add is, looking strategy, driving at little into would we've that less our more never think be although think be what's promos were seen of not speaks we're of to that I factor. going I other factor price is actually

Our want. for price a not it. if can't, They'll a get deal, they are the but everybody and question what purchase, And want clients better likes to make able pay it's obviously the they of, can won't. if they they They point.

you at product the As find John can't mentioned, our competitors. same same quality with the

it's So pricing a conversation. not

to that we're I So slowdown think that. we're macro business and something this monitoring that more to nonpromotional speaks promo continuously seeing But as across the level. fact the

Operator

America. Bank with Our from line next question is Robby of the Ohmes of

Robert Ohmes

showroom up been you pleased couple I environment? to you you any way is in question. to can that share of just performance. the there better there to would historically? question, question relative new Are curious, for guys called here. way months? changes this is you're out that guys the follow-ups the showrooms new There's was be on things with us specifically the they've last expected And promotional would first X the promotional Are just new have the performing Arhaus then And looking performance than follow existing Well, second any at with are you showroom the

John Reed

very phenomenal, we've showrooms And new in very The showrooms has excited. beautiful opening especially we've ever incredibly beautiful, We're response been where well. The The great. absolutely there. response on done. is traffic's some out most are Yes. California performing focused the in

solid, how really stores up for to to them come is doing. see stores. compare business new very to So And we've conservative with other their plan a sales happy we're

because Florida they're Cleveland, size something or So different it's like not store different forth. or that, comparing markets, necessarily and a all totally so them to stores Tampa, Ohio in

Jennifer Porter

then in, plug. for do just and you'll marketing allow to have a second, And a I to me if jump

visited that really as how it's showrooms our in opened features If that a experience, haven't from celebrating it's proud new of showroom so. recently it and these August, some imagery incredible arhaus.com is launched lot a do year. And it I experience is. of business as strongly you it something but encourage of guys we're our how unique to campaign a we've absolutely, and We've you stunning, showroom incredible this celebrates

promotional the periods. always of optimizing of strategy like, we've those we those We're looking last key haven't allow promotional you I weekends, how promotional mentioned to earlier, rest our same about the just those on on changes, of up, We've to calls over the please as are we're messaging visited, any if how does Friday, how promos we're So point looking about how thinking out. marketing make started and look touch going strategy year at those setting rest mentioned, and at periods. the Dawn check for the holiday at what guide our talking if flexibility of us currently about we're lengthening But we're year. We're Black it your those how the those looking been few and promos. go that

our as now, going So to of at strategy. do half. that periods back as to those really we are the ongoing But into continue looking time similar

Operator

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

Sabrina Baxamusa

your team internal what the Can investments, from about over next your progress you gain maybe the on months, is This of Sabrina. and system inventory the when abilities? few expect to talk system forecasting some has purchasing made benefits you launches or the new

Dawn Phillipson

in invest talking to Yes, excited Sabrina. to systems we've morning, continue been we're the about. that Good

and we've efficiencies to management and April, on that some operating of continuing build that the system date. the warehouse launched system in we're seen Our in to refine

continuing So continue and how as tweak that. to excited that's to for we progress

we've phases unlocks a different Our it's to program. before. track on where software we'll with different with we that And couple there's process said is as that be. expect and in have And planning of it

improved level, opportunities and both SKU So a some forecasting with granular demand geographically a on great to that then basis. is more

some So some labor really looking getting driving teams unlocks forward there, to efficiencies here. the with

of over several bit phase our to launching capability so the increased visibility a which production the quite we'll be margin first provide going enhancement. next of is And and manufacturing that. And then months, ERP,

So that months. several launch to slated the next is over also

really want can that extensive, ERP a we're and different to for As doing that correctly making sure are deploying an benefits that entire facility is sure you through and manufacturing make it imagine, and thinking we the responsibly. lifting we

I no would anything out that those for launch, delays call major all excited or So here. things to

the yes, And those for to so, up forward and getting running team. looking

Sabrina Baxamusa

you the other a in brands landscape. thoughts along And regional back seeing premium business independent lift with space? going been of Have would be to then quickly there out Any from maybe the the helpful. competitive mom-and-pops local

John Reed

in that. so seen I on to I here, And seen anything now. I anything not Yes, more That and We're and have here. seen be heard many That's would any forth. haven't anybody different or haven't don't locally hard anything. report markets on so see. data local marketing I've

Operator

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

Peter Keith

different with competitor take I'm to angle. the a question going

they've a competitor to do off product you large So like have tried in your knock the some lines. space. It of seems

business direct or at month your on you've so maybe in overlap copied, the where area And that you last any seeing you X? are of been as look impact that

John Reed

not question, not. referring feel, seen quality, We incredible have again, products Good your may change that great we've we particular those morning, a answer product be our no, To pricing, any to. is in you Peter. and

Peter Keith

then wondering for and And play the maybe model such comp off Dawn, large I'm a QX. just there's why and around sales trying in drop to with

down a the just of to QX through XX% So revenues midpoint to guide, of is you down comp X% I outlook? imply QX and seems why QX the if that it proper QX. comp can a us I guess, take below walk the

Dawn Phillipson

Yes.

Peter. timing, it's mostly So

a if low about, are As a of that just the product decline, double-digit delivered, comp think bit a to you anticipating timing get there's demand we lag.

you So just up to really, abnormal the demand realization, last remember a really backlog. against then of timing year think about deliver the strong as also and

So every a had quarter, delivering. abnormal as were we through backlog we last higher we that progressed of amount year,

still So just the by year-over-year component. compare skewed is that

Operator

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

Jeremy Hamblin

around And margin. want to gross to commentary the come back

the QX. in you're the was noted QX you some back deleverage what you to deleverage. bit I half able hoping around of a that year, expecting versus Dawn, think, provide might guardrails I more be you expect

Dawn Phillipson

Yes, absolutely.

are I thing is the that same. reasons the to note So important think the

the versus quarter, to isn't continuing think in spike think strategic in and back another about to necessarily invest As quarter, a in new significant about third one half. expansion, our the we invest we the continuing think quarter showroom about we There as fourth investments.

note to as to would incremental we incremental been through the the moved the last deleverage, or sorry, abnormal So higher year, continue year year. just would is leverage from helpful. I have we that getting backlogs last that extent

incremental in just deleverage keep abnormal year. And backlog the fourth versus the quarter that you're there of when mind third driven in last margin we we a quarter. getting about the looking of just So in June on by rate quarters, were as price then basis quarter the might the in those those the were and have been in last the would action of as third year versus deliveries deploying that fourth think skews heavier be delivered,

of little a I we there, those price versus say, of deliveries just timing bit between on when would the noise So actions. quarters deployed

Jeremy Hamblin

for And I but to want conversion messaging how July, sense off get conversion you sense term. if sounds then share just those and that more less traffic a seeing terms trends think in May, in to much for here And just are a traffic there purchasing bit -- in because the come down. June, or not of get the wanted a to shopping, from second, you're fallen has window could near what mixed to traffic is a was back like of little

Dawn Phillipson

first Yes, second quarter interestingly the quarter. the over enough, than in down year in traffic more was year

quarter, So while in traffic, up. sequentially it down on a still second comp the was basis, was

second So call interesting, mid-single decline it digit the I for quarter. in the

Jeremy Hamblin

And what started about as you in QX?

Dawn Phillipson

disclosed haven't We that.

month either. I no metrics, make seeing, meaningful in recognize change quarter And so, X we're a would say, but that doesn't

on the daily it, we what's but paying see third we're We each the on demand that those happening we're So tracking in very basis look at to more quarter. to report we'll when showroom, attention a report close metrics.

Operator

Our next question is Group. Telsey Cristina from Advisory the line Fernandez of of

Cristina Fernandez

seen XX months? in the clean over ask to remain months, trends here the if X what the at adjusting you've demand next you to a is about And inventory in position inventory to few wanted flow. in your flexibility I look past your

John Reed

Yes. Again, make less our we've we where And to partners to ask make products. if we been upcycles through need products. many having them we're a more then downcycle,

it's straightforward. partners. We're So flexible. fairly meaningful suppliers very, and our our We're incredibly very they're to

both everything that and So they reality. work can just with the isn't make they us And pieces but is single exactly everything, ideally, amount if every in ways. of perfect same month,

in close it with we understock help and they'll out them and We've a flexible. issues a vendors, very team get great to the an power planning out great in work can that. If whatever very, their to level very are and don't with out. inventory. we position team smoothing to sourcing great and team any position, that they a they're fix overstock product an got see it us We do So or with

Cristina Fernandez

conversion? train the to willing them second for the balancing, making promotion, going like question are or the promotions back ] second you brand the as consumer especially It then you [ effective quarter driving And the promotions traffic step increased the don't seems to damage up. wait is in being are How the if not sure to that and in promotions. and you are

Jennifer Porter

the that's Yes. at question. day what Good here. morning, every of and talk Cristina. great about we heart That's And focus on a single

is we've we in we've starting and love we're the the fall approaching that as to the way the the the that our we product are to marketing. There ever forward believe we're X great I always we the investment catalog product are that looking great, to reasons marketing was our approached campaign way we we're that why is one fall product, And are see looking have into forward offset so much, to it think we're the looking launch, to fall we're best now proud is increased launching forward right and that the campaign: put truly because the but the macro; really in well. what other out market. of we fall

lose sure of making is really opportunity conversations don't those having or any it point, needs your to our think I we're we decisions so, long-term balancing And making. and that and short-term sight that with

of to markets but X a us what how have the speaking on work. and the proven messaging to that they years want. promotional emphasizing the how assortment, the there, to the we know the They smart. promotions as be put be clients differentiation, do, you without flipside, now the brand, damaging If we is the something and very we to mentioned. want that when to balance, and allows our and know the over it are is majority They They that know work. we the that by that want showroom stories, do out artists quality, last though, product experience think we I the marketing everything X in

to our be we the what months. works going for so, the of our closely strategy us that's which year. doing And line. we'll We're And what half to overreact X towing And here going the into way. next launch we're We're that keep going very best. reading in and not constantly do fall back any

Operator

from question with the [Operator line Benedict is Baird. Instructions] Peter next of Our

Peter Benedict

been system the a that I was to of little could asked. in clarify so is you from But late have either these went implementation the just, revenue headwind apologize management join, my April? warehouse I if first question

Dawn Phillipson

Peter. morning, good Yes,

certainly, little on from of there had about just calls, impact, talked which So a a timing we prior was an perspective. bit

shifted So into was different revenue a it, week, period. that about of time X call

Peter Benedict

investments flattish. level the your given ahead making growth revenue EBITDA and what pushing guys margins Obviously hold systems, curious you stores then half of would you're with investments. back in And in the you this the are think be just required to of year,

make more or maybe towards think you to adjustments the XXXX, as on do question, you related a do that any path a persists, impact? try you As cushion if margin demand continue soft environment to

Dawn Phillipson

Yes.

X that things say to would I in So response I your would there's question. out call

firmly campaigns The first strongly in are believe even incredibly downcycle. to product is marketing important, and our we that continuing that a introductions, in and invest new expansion, showroom

downcycle a build think we in about need to the as in of in our to share, particular. to investments in invest strong market a out we share X those gains, position components to continue come very on and So continue market organization, take the

that. we So will to continue do

we in broader growth are As mode. I question, think your investment still about a

talked our system. management system, efficiencies we've about future planning to months talked as order today organization as last to office, what the been we're be making top to system our warehouse deployed So the ERP. continue and the about in assessing We've the support drive the line. need several changes other investments about size scale of over then the back think you in manufacturing We've also we

term, So would think that. investments. would corporate We've we're said thinking that in our investments are margin going encourage in there's we to it $XX $XX going million to strategic I about you be this about to near-term near to investing say the to need expansion. in drive year But million longer-term be additional I that investments.

more plans refine number little that our will not that confirm as and give be those. continue anticipate internally if You could a year, And timing into bit to we higher. next insight on and we'll detail comparable

reminder, on between I would XX%. as down XX% out, flow-through that of flow-through call and revenue, EBITDA The just the that other incremental item is is a to adjusted

the that's helpful, that's out if models, flow-through. as you're So your building

Operator

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

Jonathan Matuszewski

about changes on observe to just consumers ask trying I'm that But to maybe trigger so and the maybe varies. decision that the perspective observing make you'll visit purchase visit just maybe a to and consumer flow-through standard to consumer purchase, been year. sure and in need I that showroom dynamic the when initial between there But lately. just later more to on a a maybe typical length demand process decision, think time or wanted decision about decides being to you've and whether see is website are you that is the pull any cycle, initial any choiceful more where the this it an a

John Reed

model, need start if of they Yes, come with want things, things go typically help, Jonathan, out can interior put a more I like that, our touch, what they back, and in the can feel them swatches store designers. jump home, that. And we could they And together store, then folks take and in. figure one Jen they they In need. then they

go with goes people that. things together, on most what are Certainly, thing, at X part, what more But not there's to come So at an it, or certainly they fabric measure. thoughtful. and a I walk in tomorrow. sofa, say, have so. buy colors it what They days experts like people sofa the need they They're buy twice in and average. back we as deliver that hey, least And before they rug

So it's a longer process.

sometimes X decision because they on lot how the beautiful. really really, process. this of project They're they'll And fixing to times, love X their come depending be people back sometimes twice, them. important home And much a sometimes depending -- a on and times, up for it's

take it they seriously. So

quicker a times. than the that's process. sometimes other now, Jen the little they're And you they than normal, on but in slower can buying buy fill rest. And little a Right

Jennifer Porter

No, think see And totally furniture look definitely And said. Jonathan. a is Hi, different I that we just everything really Yes. what John you agree at, with purchase. I considered behaviors.

are goods the because see the But of and really to out because build we the our ability buy clients, and consider So or your a we a quality, of people decor believe, attracted home or Arhaus and for in walk years soft who definitely to website buy come. accessories. family chair or go to for to

later. These built aren't Our is making to months are that just people looking furniture to X then purchases and redo last.

spectrum interesting in think we look some I remember I is interesting heavily are at you that space of when of the you also to really those average it's versus about pieces, our the as think thing Arhaus weighted remember values. behaviors. think order to those well to more larger that's One So those larger peers if furniture

a truly home providing with they and proud take really clients it that be experience but really be and about with for is allowing, space inspired people time going to with online, think how that purchase. And are, promotions little in a effective spur-of-the-moment great those that or mix things see does so, of terms do drive of trying We around to I things build impulse that success play effective like that can to bit that their of. and how a

Operator

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

Peter Keith

So two follow-ups.

The for first John. one's

this seem like retraced a you've decades. bit soft been this a Does one You've a in just Have you of back had business months this familiar where period normal you had were hiccup of for business pace slowdown to a quite backdrop unprecedented? two the before, then trends? or that that seen a and is or number

John Reed

happened the And vacations so their before. have, traveling, They're summer it like it's things. other forth. months a It get outdoors, folks all seems Peter. focusing in they're hiccup. Yes. trying untypical. not are with on Typically, This has just I it's their happens to No, in where kids and

We so haven't COVID because forth. seen of it and lately

But and homes absolutely people past, the past, all typically So it come spoiled were then for the in and it seeing no, back when holidays fall month. back seen in -- getting for double-digit ready sure. the comes pretty And we are has I have back in forth. so increases in on it every the their strong

Peter Keith

So final that's my good question Dawn. for to

point, July I To vacation seasonally really a tough of it's a had you've your don't as relevant month think month. July. a furniture. for So

guidance, this. like to the July, on trends don't holding EBITDA promote. gross given coming some then be of with wiggle of And XX% it But guess I yourself room you've construct understand that. out help if upside the sounds also the you're us year, margin, it promote. down for you've So the taken could Stacked demand the you

guide this summer one of soft magnitude the understand to month. trying down Just after

Dawn Phillipson

Yes.

So bit. I'd clarify a little

Certainly stronger in We the those months. deceleration was have deceleration have would timeframe. July. in than May-June into what seen That we accelerated anticipated

months second we've of the was XX while about down So quarter X%, X days, comp deceleration. had demand

on And as with can so, I half the a there's year, towards which think back we going lot it's of on the look economy, going distracting. prudent a with the be there's the election, very lot

ball. So of don't certainly, I know is don't a exactly how going I year balance have play crystal the out. to this

I this a seeing. to business, that think is the think responsible we're about the about think trends way

little information competitive are have longer persist we don't And telling August. a that this a of We for customer lot that July additional than and maybe us those publicly reasons. could bit indicators share just

of back responsible in for there's the at the to the environment, is that going evidence the want world, it. we very return case. activity great have And be some is a couple We we perfect a In We half. through won't think we in need to that a a year. months, in but as move room strongly opportunity. I the the any through think nice will business this that don't promotional consumer So to wiggle ourselves numbers leave look a way

So the we're I organization this a and business, thinking this consumer a just prudently think the trends managing watching reasonable as the time. daily basis, on expectation at about is we're for

Peter Keith

want companies up. their flag? maybe hurricane, that quick in comp a Anything July to then you demand of follow have quirky one that lot very CrowdStrike outage. And that just for refining is a that season, may you'd impacted earnings had Okay. sort month

John Reed

that Not we on, seen, Nothing no. our we've Peter. put fingers can

Operator

our now conference her session. Thank this closing over hand Wendy Watson the for comments. you. gentlemen, Ladies I concludes would to question-and-answer and

Wendy Watson

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

Operator

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

disconnect your now You may lines.

Arhaus (ARHS) 8 Aug 242024 Q2 Earnings call transcript