Arhaus has filed to go public—taking aim at Restoration Hardware, CB2 and other players in the $60 billion premium home furnishings market.
The Ohio retailer of upscale furniture and décor on Oct. 4 filed SEC paperwork for an IPO targeting $100 million, the placeholder figure often seen in S-1 filings.
The seller of $6,000 sofas, $399 duvets and $2,269 sheepskin rugs would be the latest industry company to test the public waters this year after investors pulled back during 2020’s pandemic disruption. On Running, Poshmark, Mytheresa.com, Dr. Martens, and ThredUp have all gone public in the past year. Solo Brands and Rent the Runway are currently in the process of shedding their private-company status. By contrast, ABC Carpet filed for bankruptcy last month after struggling to weather the pandemic and get customers through its doors to purchase luxury furniture and décor where rugs can go for $9,500 and a sectional is priced at $13,880.
In 1986, chairman and CEO John Reed co-founded Arhaus with his father, Jack, with the ethos that “furniture should be responsibly sourced, lovingly made, and built to last.” Today the omnichannel company has 75 stores, or “showrooms,” in 27 states where artisan-crafted, handmade furniture and décor fill spaces averaging 17,000 feet. In addition to its three outlet stores, e-commerce and semi-annual catalogue, Arhaus last year tested a studio format that first launched in the tony enclave of Carmel, Calif.
Reed described the Arhaus Studio concept as the “next extension” of its mission to serve clients’ needs. “With Arhaus Studio, we set out to create an even higher-end and more exclusive Arhaus experience, providing a ‘white-glove’ level of personal service and furniture customization,” he said of the 4,000-square-foot concept.
Prior to the pandemic, Arhaus achieved 10 consecutive quarters of positive comparable growth, it said. More than 400 vendors help the vertical company, which notably eschews rainforest sourcing, create exclusive, high-margin merchandise. Gross margin as a percentage of net revenue was 42 percent for the six months through June 30, it said.
An in-home designer services program is expected to expand from 58 to 70 experts by the end of December. An Arhaus upholstery manufacturing program drove 40 percent of upholstery merchandise revenue and 16 percent of overall merchandise sales in 2020.
For the six months ended June 30, net revenue rose 59 percent to $355 million from $224 million, with comparable growth up 53 percent for the period. Net income grew 19 percent to $16.2 million from $13.6 million.
Net revenue for fiscal year 2020 was $507.4 million, with e-commerce sales representing about 18 percent of total net revenue for the fiscal year. In fiscal year 2019, net revenue was $494.5 million, while e-commerce sales were 11 percent of total net revenue for the fiscal year.
Arhaus said it aims to open five to seven new stores annually as its “model has proven successful throughout a variety of markets and economic cycles.” It primarily goes after consumers with $100,000+ in annual household income, a “highly attractive demographic” that’s “more insulated from economic downturns,” it said. Last year’s mass exodus to the leafy suburbs could be a windfall for Arhaus, as home owners find a need to fill their more spacious dwellings with new furnishings.