ARHS: Strong Q3 growth, digital transformation, and B2B expansion set the stage for 2026

What Happened?

A number of stocks jumped in the afternoon session after comments from a key Federal Reserve official boosted investor optimism for a potential interest rate cut. New York Federal Reserve President John Williams, a voting member of the rate-setting committee, suggested he sees room for "further policy easing," which sent a strong signal to the markets. Following his remarks, the probability of a December rate cut, as measured by the CME FedWatch Tool, surged from 39% to 71%. Lower interest rates can stimulate the economy by making borrowing cheaper for both consumers and businesses, which often translates to increased consumer spending. This prospect is outweighing recent reports of lower consumer confidence, as investors bet that a more accommodative Fed policy will support retailers through the holiday season.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Discount Retailer company Burlington jumped 5%. Is now the time to buy Burlington? Access our full analysis report here, it’s free for active Edge members.
• Apparel Retailer company Urban Outfitters jumped 5.2%. Is now the time to buy Urban Outfitters? Access our full analysis report here, it’s free for active Edge members.
• Large-format Grocery & General Merchandise Retailer company Target jumped 5.6%. Is now the time to buy Target? Access our full analysis report here, it’s free for active Edge members.
• Home Furniture Retailer company Arhaus jumped 5.2%. Is now the time to buy Arhaus? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Target (TGT)

Target’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 25 days ago when the stock gained 3.2% on the news that optimism surged over a potential trade truce between the U.S. and China. Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.

Target is down 36.1% since the beginning of the year, and at $87.61 per share, it is trading 38.5% below its 52-week high of $142.50 from January 2025. Investors who bought $1,000 worth of Target’s shares 5 years ago would now be looking at an investment worth $493.38.

Arhaus delivered third quarter results that met market expectations, with revenue growth attributed to a strong product lineup and disciplined execution. Management highlighted the success of the Fall 2025 Collection, which achieved record demand, particularly in upholstery and custom orders. CEO John Reed emphasized the impact of new product launches on client engagement and order values, noting that the in-home design program continued to boost customer loyalty and conversion rates. The company's ability to control design and production through domestic sourcing also played a role in maintaining lead times and margin discipline despite ongoing tariff challenges.

Is now the time to buy ARHS? Find out in our full research report (it’s free for active Edge members).

Arhaus (ARHS) Q3 CY2025 Highlights:

• Revenue: $344.6 million vs analyst estimates of $337.7 million (8% year-on-year growth, 2% beat)
• Adjusted EPS: $0.09 vs analyst estimates of $0.08 (12.8% beat)
• Adjusted EBITDA: $31.24 million vs analyst estimates of $29.46 million (9.1% margin, 6% beat)
• Revenue Guidance for Q4 CY2025 is $351 million at the midpoint, above analyst estimates of $344.1 million
• EBITDA guidance for the full year is $140 million at the midpoint, in line with analyst expectations
• Operating Margin: 4.8%, up from 3.3% in the same quarter last year
• Locations: 103 at quarter end, up from 101 in the same quarter last year
• Same-Store Sales rose 4.1% year on year (-9.2% in the same quarter last year)
• Market Capitalization: $1.31 billion

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Arhaus’s Q3 Earnings Call

• Julio Marquez (Guggenheim Securities) asked about the initial feedback on the new Bath collection and its influence on future product expansions. CEO John Reed said early results were positive, with plans for further development based on customer insights.

• Andrew Carter (Stifel) questioned the drivers behind October's demand softness and the impact of promotional calendar shifts. CFO Michael Lee explained that timing changes and purchase pull-forward influenced results, and emphasized continued high engagement from core clients.

• Jeremy Hamblin (Craig-Hallum Capital) probed the reduction in capital expenditure guidance and its implications for showroom growth. Lee attributed the change to project timing and management changes, reaffirming plans for 5–7 new showrooms annually.

• Seth Sigman (Barclays) asked about the volatility in monthly demand and the sustainability of recent growth rates. Lee stated that macroeconomic uncertainty contributes to demand choppiness, while Porter emphasized demand is often deferred rather than lost.

• Mattie Chick (Bank of America) inquired about the allocation of systems investment and tariff costs across Q3 and Q4. Lee clarified that a portion of both technology spend and tariff impact fell in Q3, with the remainder expected in Q4.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the sales performance and client reception of new product collections and expanded categories, (2) the execution and benefits of the digital transformation initiative aimed at driving operational efficiencies, and (3) Arhaus' ability to manage tariff pressures through sourcing flexibility and pricing strategies. The pace of showroom expansion and evolving macroeconomic trends will also be important indicators of sustained growth.

Arhaus currently trades at $9.30, down from $9.73 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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