Arhaus (ARHS) Stock Forecast & Price Target

Arhaus is benefiting from a clear reacceleration in demand, with Q2 demand comp improving to +12.5% Y/Y from -5.7% in Q1, delivered sales rising +4.0%, and broad-based strength across upholstery, outdoor, and connected home supported by strong traffic, AOV, UPT, and order counts for large-ticket sales. Its fundamental case is further strengthened by better inventory execution and a healthier merchandising backdrop, as “up to 50% off” promotions helped clear older stock and drive traffic without materially diluting margins, while in-stock positioning is the best in over a year and inventory turns are now a key operational focus. Arhaus also has improving earnings power and visible financial upside from $37.8M in IEEPA tariff refunds, raised 2026 guidance for adj. EBITDA to $160-171M and net income to $71-80M, and late-stage systems investments that should add a $4-5M transportation run-rate benefit while supporting longer-term efficiency and scale.

Arhaus is facing a negative fundamental setup because its apparent operating strength in Q2 was heavily flattered by a $55M normalized EBITDA base versus reported $70M, with gross margin of 44.7% boosted by a 400bps tariff refund benefit rather than underlying pricing power or durable cost leverage. The company’s demand picture remains fragile despite a better Q2, as Q1 written comp fell 5.7% Y/Y, Q2 guidance for adjusted EBITDA of $40-49M was below consensus $57.9M, and management now expects gross margin to be flat to slightly down Y/Y because higher freight costs are offsetting prior margin expansion expectations. Even with full-year guidance for comp sales of roughly flat to +3% and adjusted EBITDA of $150-161M, quarter-end inventory was up about 23% Y/Y and management had to lean on promotions to reaccelerate demand, suggesting the business is still reliant on external boosts and discounting rather than consistent organic momentum.