Arhaus (ARHS) Stock Forecast & Price Target

Arhaus Inc. demonstrated robust growth with a 34% increase in ticket sales during 4Q24, primarily driven by the growing trend of customers utilizing interior designers, which leads to significantly higher order volumes. The company's inventory grew by 17% year-over-year, reflective of strategic investments aimed at enhancing store growth and ensuring availability of key collections, particularly in outdoor merchandise. Moving forward, Arhaus projects sales for 1Q25 to rise between 3% and 9%, reinforcing a positive outlook bolstered by a differentiated product offering and a notable 30% expansion in showroom count over the past three years.

Arhaus Inc is experiencing a concerning trend in profitability, as evidenced by a significant decline in EBITDA of 34% in 2024 despite only a 1% decline in sales year-over-year, highlighting potential inefficiencies within its operations. The company's guidance for 2025 EBITDA, projected at $140MM-$150MM, falls short of expectations and indicates ongoing margin compression, with a gross margin decrease of 107 basis points year-over-year to 40.0%. Compounding these issues, the firm faced weakened demand following pricing changes, reflecting a substantial drop in comparable sales growth for the fourth quarter of 2024, which may further erode investor confidence.