Arhaus 4Q25 Immediate Call Postmortem
High level it seems the story is Arhaus doesn’t want to be like all the other shitty furniture retailers and instead wants to break out of the group’s reputation like Williams Sonoma did.
It certainly does seem like the furniture industry fell off a cliff QTD given 1Q26 guidance for comps of (5)%-1% (easiest compare of the year too). Arhaus did slightly beat the high end of a much worse guidance range for 4Q25 (down 7% to up 1%) though so suppose bulls can make the case for conservatism. Amazingly Sigman tried to ask in Q&A if we were at an inflection point in sales with that kind of guidance. Ugh.
I find it fascinating how merchants often float between traditional apparel brands and furniture brands. End of the day, as long as John sticks around then not really worried who is in that seat. Just checked and the company still has a lawsuit against the former Chief Merchant Lisa Chi (they dropped the suit against Restoration Hardware) that apparently looks like it will persist into 2027.
New showroom openings of 4 to 6 planned for 2026 is below the long term algo of 5 to 7. Not a major deal but it’s a signal that management wants to be a little bit more conservative this year. Likely related to “a measured stance given the ongoing macro uncertainty”.
Miss on gross margin included an increase in reserves for “inventory obsolescence”. Seems like there is a lot of that obsolescence going around these days. Matuszewski was all over this in Q&A. Bit of a rambling answer but seems like the message is new CFO wants to start clean.
I love this slide in today’s presentation. The definitions here can be different depending on the furniture company you look at. If only Restoration Hardware would put out a similar slide to explain their comp store sales…oops…they are the only retailer in practically the entire world that doesn’t report comp store sales (in this case it would be akin to “comparable delivered sales”).
They will no longer report comparable written sales on a monthly basis. So far, I like this new CFO Michael Lee (breath of fresh air in retailing) but the last time we heard a retailer will no longer given comp demand was Restoration Hardware and that lasted for only one quarter before they went right back to it. Michael gets an A+ for effort on transparency so far though. Speaking of Restoration Hardware, they’ve never have given a special dividend. Of course, they also aren’t debt free these days, are they?
Simeon gets first question and can’t be bothered to join the call. Must be nice day in San Diego. His associate Pedro did a great job though and asked the main question which is first quarter guidance. They had softness QTD that they attribute to weather (including some store closures). Also some delays in the spring catalog mailing.
Forbes pretty much asking them in Q&A if they going to start opening RH sized stores following Pasadena. “No strategy to go to 40k square feet stores but more to come on that”. “We can go from 14k to 40k and they all work and are profitable”. But then Forbes actually tried to exclude the inventory write-down to find “core gross margin” and asked them why they are so awesome at expansion. Ugh.
The US Retail Hardline sell-side analysts today did not bring their A game. Winner was Simeon’s junior Pedro followed by Matuszewski.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Arhaus and other retail/consumer research) at our website here: M Squared Capital
Originally posted on X and Substack.