Arhaus beat Q2 expectations on the back of a one-time tariff refund, but underlying margin pressure and rising SG&A costs leave investors skeptical despite a rebound in new order volume.
Arhaus reported strong Q2 results boosted by a one-time tariff refund, but underlying SG&A growth and declining free cash flow raise sustainability concerns.
Arhaus reported second-quarter revenue of $385 million, beating guidance behind a $37.8 million tariff refund. While Comparable Written Sales surged 12.5%, signaling strong future demand, investors remain wary of rising SG&A expenses and declining free cash flow. The stock faces significant short interest as the market questions the sustainability of profit growth without non-recurring windfalls.
The tariff refund contributed $23.8 million to the cost of goods sold, significantly inflating the reported Adjusted EBITDA and masking underlying operational expense growth.
Investors are concerned that SG&A expenses are growing at more than double the pace of revenue, while free cash flow has declined compared to the previous year.