by BOSTON HEIGHTS, Ohio — Lifestyle retailer Arhaus reported a 9.2% drop in revenue for its third quarter ended Sept. 30.
The company’s net revenue of $319 million compared with $320.2 million the same period last year. It attributed this to the non-recurrence of prior-year abnormal backlog deliveries and lower total demand in the marketplace.
Net income also decreased to $10 million, or 7 cents per share, compared to $20 million, or 14 cents per share, last year.
It reported a gross margin of $123 million, compared to $131 million the same period last year, which the company said was primarily driven by lower net revenue and higher showroom costs “as we continue to expand our footprint.”
SG&A expenses were slightly higher at $112 million compared to $107 million in the same period last year, which the company said was primarily driven by legal costs, marketing investments along with strategic investments “to support and drive growth of the business, including supply chain and technology improvements.” It said this was partly offset by the non-recurrence of last year’s donation to The Nature Conservancy.
Its adjusted EBITDA was $23 million, or 7.2% of net revenue, compared with $34 million, or 10.3% of net revenue, last year.
Company co-founder and CEO John Reed said that the third-quarter results demonstrate the team’s commitment to operational excellence in a challenging environment.
“We remain focused on our long-term growth strategy grounded in our premium, livable luxury offerings and exceptional client experience,” Reed said. “With 10 new showrooms opened already this year and an 11th opening tomorrow in Corte Madera, California, we remain committed to expanding our presence in key markets.
“While demand trends improved throughout the third quarter, we’re adjusting our full-year sales and earnings outlook to reflect a continued tempered consumer environment, which we believe is temporary given our innovative product offerings and compelling marketing campaigns. Despite near-term headwinds, our strong, debt-free balance sheet enables us to continue prudent investment in strategic priorities.”
“Our long-term success is driven by our teams’ dedication to delivering the best products and an inspiring showroom experience. I want to thank each of them for their ongoing commitment, which highlights the resilience of our growth strategy and our commitment to creating value for our shareholders.”
Other highlights of the report were as follows:
+ The company reported cash and cash equivalents of $178 million, with no long-term debt as of Sept. 30.
+ Net merchandise inventory rose $41 million to $295 million, compared with $254 million as of Dec. 31, 2023.
+ Client deposits rose $50 million to $224 million, compared to $148 million as of Dec. 31.
+ The company also ended the third quarter with 101 total showrooms across 29 states.
+ For the nine months ended Sept. 30, net cash used in investing activities was about $89 million. Company-funded capital expenditures were about $62 million and landlord contributions were about $27 million. This compares with $59 million of net cash used in investing activities, company-funded capital expenditures of $47 million and landlord contributions of $12 million for the nine months ended Sept. 30, 2023.
