Arhaus (ARHS) Stock Forecast & Price Target

Arhaus is viewed positively because its Q2 showed clear demand acceleration, with demand comp rising to +12.5% Y/Y from -5.7% in Q1, revenue increasing 7.4% to $385 million, and adj. EPS of $0.28 beating estimates. The business also demonstrated stronger profitability and operating leverage, as gross margin expanded to 44.7% and adj. EBITDA reached $70 million, while management raised 2026 adj. EBITDA guidance to $160-$171 million and net income to $71-$80 million. Fundamental confidence is further supported by broad-based category strength, improved in-stock positioning, positive written order growth in April-May, and a valuation that remains at a meaningful discount to specialty high-growth peers.

Arhaus is facing a weakening fundamental backdrop as Q1 written demand comps decelerated to -5.7% y/y, signaling softer underlying consumer demand even as revenue of $314.3M and adjusted EBITDA of $18.0M slightly beat expectations. Gross margin fell to 36.4%, missing consensus and reflecting freight-related pressure, while management lowered full-year gross margin expectations to flattish y/y, implying limited pricing power and persistent cost headwinds. Although SG&A leverage helped results, the reliance on promotional-driven demand recovery and risks tied to high-income consumers, housing trends, vendor disruptions, and showroom execution support a cautious outlook.