On Thursday, BofA Securities adjusted its stance on Arhaus Inc (NASDAQ:ARHS), downgrading the furniture retailer's stock from Buy to Neutral and reducing the price target to $11 from the previous $15. The revision reflects a more cautious outlook for the company's performance in the remainder of 2024 and the fourth quarter, citing softening demand trends.
Arhaus reported third-quarter earnings per share (EPS) of $0.07, which fell short of the analyst's estimate of $0.10. Revenue and adjusted EBITDA for the quarter also came in below expectations at $319 million and $23 million, respectively. These figures did not meet the forecasted $333 million in sales and $30 million in adjusted EBITDA, set against the context of last year's significant markdowns.
The company experienced an 11.3% decline in comparable store sales during the third quarter. However, there was a slight improvement later in the quarter, with the decline reducing to a low single-digit percentage in September and October, from a high-teen percentage drop in July. Despite this sequential improvement, the performance was still below anticipated levels.
Looking ahead, Arhaus anticipates comparable store sales in the fourth quarter to decrease by a low double-digit percentage. The company suggests that the risk of a slowdown in home furnishings purchases might be exacerbated by consumers potentially redirecting their spending towards holiday-related items following the election period.
In other recent news, home furnishings retailer, Arhaus, has been at the center of several analyst adjustments. Telsey Advisory Group lowered its price target for Arhaus from $15 to $12, citing subdued demand in the third quarter of 2024.
Similarly, TD Cowen, Baird, and Jefferies have all adjusted their price targets due to a sharper than anticipated decline in demand and a significant reduction in the company's 2024 guidance. TD Cowen set a new target of $14, maintaining a Buy rating, while Baird adjusted its target to $14, keeping an Outperform rating. Jefferies maintained a Hold rating with a steady price target of $12.00, expressing concerns over the company's recent promotional activities.
Stifel, however, initiated coverage of Arhaus with a Buy rating and a price target of $19.50, acknowledging the company's consistent execution and revenue growth. The adjustments are in response to macroeconomic factors affecting the company's revenue and EBITDA forecasts for the second half of the year.
InvestingPro Insights
Recent InvestingPro data provides additional context to Arhaus Inc's (NASDAQ:ARHS) current market position. The company's market capitalization stands at $1.28 billion, with a P/E ratio of 18.57. Despite the recent downgrade and softer demand trends highlighted in the article, InvestingPro Tips indicate that Arhaus has been profitable over the last twelve months, with analysts predicting continued profitability this year.
However, aligning with BofA Securities' cautious outlook, InvestingPro Tips suggest that net income is expected to drop this year. This projection correlates with the company's reported underperformance in Q3 and the anticipated decline in comparable store sales for Q4.
The stock's recent volatility is evident in the InvestingPro data, showing a significant 7.55% return over the last week, contrasted by a 13.47% decline over the past month. This volatility reflects the market's reaction to Arhaus's recent earnings report and the uncertain outlook for the home furnishings sector.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Arhaus, providing a deeper understanding of the company's financial health and market position.
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