Arhaus Reports Third Quarter 2026 Financial Results

Revenue and sales rose, but profit margins shrank as costs outpaced growth.

What the company is saying

Arhaus, Inc. (NASDAQ:ARHS) frames its Q3 2026 results as a period of strong client demand and continued expansion, emphasizing a 6.8% increase in net revenue to $368 million and an 8.2% rise in gross margin to $144 million. The company highlights double-digit growth in Comparable Written Sales (13.9%) and points to investments in new collections and customization as drivers of momentum. Leadership, including CEO John Reed and CFO Michael Lee, stress their focus on long-term profitable growth, disciplined expense management, and operational efficiencies. The narrative acknowledges ongoing investments in people, infrastructure, and technology, and positions these as foundational for future gains. While the company raises its full-year net revenue and Comparable Delivered Sales outlook, it maintains net income and Adjusted EBITDA guidance, citing continued fuel and transportation cost pressures and increased marketing spend. The tone is confident, but the messaging downplays the 36% drop in net income and the 12.3% decline in Adjusted EBITDA.

What the data suggests

Q3 2026 net revenue rose 6.8% year-over-year to $368 million, while gross margin increased 8.2% to $144 million, indicating some improvement in product profitability. However, selling, general and administrative expenses jumped 14.8% to $134 million, outpacing revenue growth and leading to a 36% drop in net and comprehensive income to $8 million. Adjusted EBITDA fell 12.3% to $27 million, confirming margin compression. Comparable Delivered Sales grew 2.6%, and Comparable Written Sales surged 13.9%, suggesting strong order activity, but the conversion to delivered sales is more modest. Liquidity remains robust, with cash and cash equivalents at $318 million (up 25.5% since year-end), no long-term debt, and client deposits up 37.7% to $325 million. Operating cash flow for the first nine months was $173 million, while $58 million was used in investing activities, including $46 million in company-funded capital expenditures. The company forecasts full-year 2026 net revenue of $1.465–$1.485 billion, net income of $71–$80 million, and Adjusted EBITDA of $160–$171 million, but these targets are maintained rather than raised for profitability metrics. The data shows sales growth and strong liquidity, but profitability is under pressure from rising costs.

Analysis

The announcement presents a positive tone, highlighting revenue and gross margin growth, increased showroom activity, and a raised outlook for the remainder of 2026. However, the underlying financials show that net income and Adjusted EBITDA both declined year-over-year, and SG&A expenses rose faster than revenue, indicating margin pressure. While the company provides detailed realised figures and specific forward-looking guidance for Q4 and full-year 2026, much of the optimism is based on projections rather than current profitability improvements. The language around 'disciplined expense management' and 'long-term profitable growth' is not directly supported by the reported drop in net income and EBITDA. Capital expenditures are significant but not excessive relative to cash flow, and the benefits of new showrooms are expected within the next 12-24 months, keeping execution distance near-term. The gap between narrative and evidence is moderate: realised sales growth is positive, but profitability is under pressure, and some qualitative claims lack direct substantiation.

Risk flags

• ●Margin pressure is evident as selling, general and administrative expenses increased 14.8%, outpacing the 6.8% revenue growth, which led to a 36% decline in net income and a 12.3% drop in Adjusted EBITDA. If this trend continues, profitability will remain under strain despite top-line gains.
• ●The company is increasing investment in marketing and infrastructure, with $46 million in capital expenditures year-to-date and a full-year forecast of $70–$90 million. While these investments support growth, they also raise the risk that returns may not materialize quickly enough to offset higher costs.
• ●Guidance for net income and Adjusted EBITDA is maintained rather than raised, despite higher revenue targets, due to continued fuel and transportation cost pressures and increased marketing spend. This signals ongoing external cost risks that could further erode margins if not managed effectively.
• ●Growth in Comparable Written Sales (13.9%) is strong, but the smaller 2.6% increase in Comparable Delivered Sales suggests potential fulfillment or supply chain bottlenecks, which could delay revenue recognition and impact cash flow if not resolved.

Bottom line

Arhaus delivered solid revenue and sales growth in Q3 2026, but rising costs sharply reduced profitability, with net income down 36% and Adjusted EBITDA off 12.3%. Liquidity is strong, with $318 million in cash and no long-term debt, and client deposits have surged, reflecting healthy demand. The company is investing heavily in marketing, new showrooms, and infrastructure, but these costs are compressing margins and offsetting revenue gains. Management's raised revenue outlook is positive, but the decision to hold net income and EBITDA guidance steady highlights persistent cost pressures and execution risks. Investors should focus on whether Arhaus can translate strong order growth into delivered sales and improved margins in Q4 and beyond. The most important takeaway is that top-line momentum is real, but sustained profit growth will require tighter cost control and successful execution of expansion plans.

Announcement summary

(NASDAQ:ARHS) Arhaus, Inc. reported third quarter 2026 results for the period ended September 30, 2026. Net revenue for the third quarter increased 6.8% to $368 million compared to the third quarter of 2025. Gross margin rose 8.2% to $144 million, while selling, general and administrative expenses increased 14.8% to $134 million. Net and comprehensive income decreased 36.0% to $8 million. Adjusted EBITDA decreased 12.3% to $27 million. Comparable Delivered Sales increased 2.6% in the third quarter, bringing year-to-date Comparable Delivered Sales to 1.8%. Comparable Written Sales increased 13.9% in the third quarter, bringing year-to-date Comparable Written Sales to 6.7%. At the end of the third quarter, Arhaus operated 109 Showrooms across 31 states. During the quarter, the company completed 2 Total Showroom Projects, including 1 relocated Showroom in Charlotte, North Carolina, and 1 renovated Showroom in Atlanta, Georgia. The Charlotte, North Carolina showroom now spans approximately 35,000 square feet and is Arhaus’ second-largest Traditional Showroom. As of September 30, 2026, Arhaus reported no long-term debt, cash and cash equivalents of $318 million (a 25.5% increase from December 31, 2025), net merchandise inventory of $360 million (a 6.4% increase), and client deposits of $325 million (a 37.7% increase). Net cash provided by operating activities was $173 million for the nine months ended September 30, 2026, while net cash used in investing activities was $58 million. Company-funded capital expenditures were $46 million and landlord contributions were $12 million. For full-year 2026, Arhaus raised its net revenue and Comparable Delivered Sales outlook, now expecting net revenue of $1.465 billion to $1.485 billion and Comparable Delivered Sales growth of 2.5% to 4%. For Q4 2026, net revenue is projected at $398 million to $418 million, with Comparable Delivered Sales growth of 6% to 12%. Full-year net income is expected to be $71 million to $80 million, and Adjusted EBITDA is forecast at $160 million to $171 million. Q4 net income is expected to be $21 million to $30 million, and Adjusted EBITDA is projected at $44 million to $55 million. Other estimates for 2026 include company-funded capital expenditures of $70 million to $90 million, depreciation and amortization of $50 million to $55 million, and approximately 142 million fully diluted shares. The effective tax rate is estimated at approximately 29.0%. The company expects 4 to 6 new showroom openings and 10 to 14 Total Showroom Projects in 2026, representing mid-single-digit Net Unit Growth. John Reed is Co-Founder and Chief Executive Officer, and Michael Lee is Chief Financial Officer. The company continues to focus on disciplined expense management, operational efficiencies, and long-term profitable growth.

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