We came across a bullish thesis on Arhaus, Inc. (ARHS) on Value Investing Subreddit Page by Icy_Agent_266. In this article, we will summarize the bulls’ thesis on ARHS. Arhaus, Inc. (ARHS)’s share was trading at $8.57 as of March 28th. ARHS’s trailing P/E was 17.49 according to Yahoo Finance.
Modern furniture in the showroom of a furniture retailer.
Arhaus has experienced a 36% decline YTD, but its long-term investment thesis remains intact. While 2024 presented headwinds—comparable sales down 8%, margin compression, and net income falling to $69M from $125M—the company’s fundamentals remain solid, and the stock price does not reflect its true strength. Arhaus maintains a strong balance sheet with no long-term debt and $198M in cash, providing financial flexibility to navigate temporary challenges. Signs of demand recovery are evident, with Q4 demand comps growing 5.7%, indicating a potential turnaround. The company’s showroom expansion strategy, with a long-term goal of reaching 165 locations from its current 103, presents a clear growth trajectory. Despite better revenue trends than competitors RH and WSM (-1.3% vs. the industry average of -3.0%), Arhaus trades at a discount, highlighting an undervaluation opportunity. Leadership remains a key strength, with the original founders and an experienced executive team driving the company forward.
Several structural tailwinds support Arhaus’s growth. The commercial design shift, driven by the return-to-office trend, aligns well with its high-end residential aesthetic, positioning it to benefit from workspace redesigns. Its customer base, primarily upper-middle-class buyers, is less sensitive to economic downturns, ensuring steady demand. Additionally, Arhaus’s domestic manufacturing advantage—bolstered by its expanded NC facility—enhances flexibility and reduces reliance on imports, mitigating tariff risks from China (15%) and Mexico (10%). Its high-touch showroom experience and commitment to craftsmanship reinforce strong brand loyalty. A personal visit to Arhaus showrooms showcased exceptional product quality and customer service, further solidifying confidence in the brand’s market positioning.
Risks remain, including elevated SG&A spending due to brand investments and ongoing supply chain adjustments. However, the market is over-discounting near-term weakness. With strong financial health, a clear growth runway, and a resilient customer base, Arhaus presents an attractive opportunity for patient investors.
Arhaus, Inc. (ARHS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held ARHS at the end of the fourth quarter which was 13 in the previous quarter. While we acknowledge the risk and potential of ARHS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ARHS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.