Arhaus' 4Q22 Strong But FY23 Outlook Disappoints, Says Analyst

  • Telsey Advisory Group analyst Crisna Fernandez reiterated an Outperform rating on the shares of Arhaus Inc ARHS with a price target of $16.00.
  • Q4 sales increased 49.6% to $356 million versus TAG at $355 million, driven by comparable brand growth of 47% versus TAG at 46.0%.
  • By channel, retail sales rose 51% and e-commerce sales rose 44% to 17.4% of sales versus 18.0% last year.
  • Arhaus had a very strong 4Q22, as it delivered more of its backlog and demand remained relatively strong, up 10% in 4Q22, the analyst said.
  • The company had pre-announced better-than-expected sales in early January; therefore, the incremental details today were on profitability.
  • However, the company's 2023 sales and EBITDA guidance fell short of expectations.
  • Year-to-date, demand remains solid, up high single digit, reflecting good reception to its products, said the analyst.
  • The company seems to be taking a cautious outlook with regard to demand trends for the year, given the uncertain macro environment and softened housing market.
  • Arhaus also is absorbing incremental capacity and distribution costs that are weighing on profitability, added the analyst.
  • Price Action: ARHS shares are trading lower by 18.7% at $10.41 on the last check Thursday.
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