Last Update 11 Dec 25

ARHS: Future Showroom Expansion And Design Services Will Offset Macro Uncertainty

Analysts have modestly reduced their price target on Arhaus, trimming expectations by a few dollars per share to reflect a slightly higher discount rate and more conservative valuation assumptions following recent Street research updates.

Analyst Commentary

Street research updates reflect a nuanced view of Arhaus, with analysts adjusting price targets lower but maintaining a constructive stance on the company’s underlying fundamentals and execution.

Bullish Takeaways

Bullish analysts highlight that, despite trimmed price targets, the stock still offers upside from current levels. They suggest the recent reset is more about adjusting risk assumptions than a loss of confidence in the long term story.
They point to resilient demand trends and the company’s differentiated brand positioning as supportive of continued revenue growth, even in a more challenging macro environment.
Profitability and margin execution are viewed as key strengths, with analysts noting that disciplined cost control and merchandising should help Arhaus defend earnings power relative to peers.
Some see the more conservative valuation framework as creating a cleaner setup for potential future beats and raises, as expectations better align with achievable growth and execution milestones.

Bearish Takeaways

Bearish analysts emphasize that lower price targets reflect increased uncertainty around discretionary spending and the potential for softer order trends, which could weigh on revenue growth in the near to medium term.
There is concern that a higher discount rate and more conservative multiples are warranted given macro risk, competitive intensity, and the possibility of normalization in pandemic era tailwinds.
Some caution that an Equal Weight stance is appropriate while visibility on backlog conversion, showroom productivity, and broader consumer health remains limited.
Valuation is seen as less compelling after the run up in the shares. This leads more cautious voices to wait for a better entry point or clearer evidence of sustained outperformance versus the broader home furnishings category.

What's in the News

Opened a new 12,006 square foot showroom in Bozeman, Montana, the company’s first in the state, offering curated furniture, decor, and complimentary design services in Gallatin Crossing (Key Developments).
Updated full year 2025 outlook by raising the low end of prior guidance, now expecting net revenue of $1.35 billion to $1.38 billion, net revenue growth of 6.2% to 8.6%, and net income of $58 million to $68 million (Key Developments).
Issued fourth quarter 2025 guidance with projected net revenue between $336 million and $366 million, net revenue growth ranging from negative 3.3 percent to positive 5.4 percent, and net income of $6 million to $16 million (Key Developments).
Opened its largest showroom to date, a 38,600 square foot location in Old Pasadena within the historic Penn Oil Building, expanding its California footprint and providing complimentary in store and online design services (Key Developments).

Valuation Changes

The discount rate has risen slightly, moving from approximately 9.34 percent to about 9.45 percent, reflecting a modestly higher risk premium in the updated model.
Revenue growth remains effectively unchanged, holding near 6.83 percent in both the prior and updated assumptions.
The net profit margin is essentially flat, staying close to 5.29 percent with only immaterial rounding differences in the updated forecast.
The future P/E has increased marginally, ticking up from roughly 23.76x to about 23.83x, indicating a slightly higher valuation multiple applied to forward earnings.
Fair value per share is unchanged at approximately $11.23, as small shifts in inputs offset each other in the overall valuation framework.

Focus on premium, customizable, and sustainable furnishings supports revenue growth, pricing power, and showroom expansion in both established and new markets.
Investments in omnichannel platforms and supply chain efficiency drive higher margins and position Arhaus for continued market share gains.
Heavy U.S.-centric expansion, high fixed costs, unpredictable demand, and rising competition and input costs create risks to revenue growth, margins, and long-term profitability.

Catalysts

About Arhaus

Operates as a lifestyle brand and premium retailer in the home furnishings market in the United States.What are the underlying business or industry changes driving this perspective?

Arhaus is well positioned to benefit from the long-term shift in consumer preferences toward home-centric lifestyles and increased investment in premium home environments post-pandemic, as evidenced by record net revenue and expanded product lines (e.g., Bath Collection), which can drive sustained revenue growth.
Rising affluence in target U.S. demographics and growing willingness among upper-middle and high-income consumers to spend on customizable, quality furnishings is supporting high average order values and robust showroom expansion, likely leading to continued revenue and earnings growth.
Enhanced focus on artisan-crafted, sustainably sourced inventory-aligned with increasing demand for eco-friendly and transparent supply chains-further differentiates the brand and justifies pricing power, positively impacting long-term gross margins.
Ongoing investment in omnichannel platforms, digital content, and supply chain efficiency-including successful in-sourcing of distribution and implementation of new inventory/ERP systems-are expected to improve operating leverage and expand net margins as scale increases.
The successful execution of showroom expansion in both mature and underpenetrated markets, paired with high-contribution-margin design studio concepts and a growing national footprint, creates a significant runway for revenue growth and EBITDA margin improvement as Arhaus gains market share in a fragmented industry.

Arhaus Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Arhaus's revenue will grow by 6.7% annually over the next 3 years.
Analysts are assuming Arhaus's profit margins will remain the same at 5.3% over the next 3 years.
Analysts expect earnings to reach $85.3 million (and earnings per share of $0.59) by about September 2028, up from $71.2 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $71.6 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.1x on those 2028 earnings, up from 22.1x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.05%, as per the Simply Wall St company report.

Arhaus Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent macroeconomic and geopolitical volatility-including shifting tariffs, macro pressures, and consumer sentiment uncertainty-was cited as creating frequent, unpredictable fluctuations in demand, which could lead to revenue instability or prolonged slowdowns in net revenue growth.
Significant investments in showrooms, distribution centers, and digital transformation (ERP, manufacturing, inventory systems) add a high fixed cost structure, potentially compressing long-term net margins and earnings if top-line growth or traffic does not meet projections.
The company's growth strategy is heavily focused on U.S. showroom expansion, with minimal mention of international diversification, increasing vulnerability to domestic economic cycles and potentially limiting longer-term revenue expansion if the U.S. market matures or household formation slows.
Rising input and transportation costs driven by global supply chain pressures, regulatory changes, and tariffs (with $12M in 2025 impacts already expected), may erode gross margins if price increases are not accepted by consumers or sufficient cost offsets are not achieved.
Heightened competition from DTC brands, digital disruptors, and potentially other premium/luxury or circular-economy furniture offerings could pressure Arhaus on pricing, customer acquisition, and product differentiation, threatening market share and leading to reduced revenue growth or higher marketing and SG&A expenses for retention.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $12.083 for Arhaus based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $14.0, and the most bearish reporting a price target of just $10.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $85.3 million, and it would be trading on a PE ratio of 26.1x, assuming you use a discount rate of 9.0%.
Given the current share price of $11.17, the analyst price target of $12.08 is 7.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Consumer Preference Will Reshape US Premium Home Environments