On the surface, premium home furnishings retailer Arhaus had everything going for it as it made its debut on Wall Street early this month – strong profitable growth in the rapidly expanding furniture market. But investors weren’t necessarily buying it.
It originally aimed for a $2.38 billion valuation with shares priced between $14 and $17. But the share price was reduced to $13 the night before and then opened for trading at $12.50. On Friday, November 12, it closed at $11.41.
In what he described as a downbeat opening, Marketwatch editor Tomi Kilgore reported at that price, it would reach a valuation of only $1.75 billion.
On the plus side, Arhaus competes in the home furnishings market, which has been on a tear since the pandemic. Furniture and home furnishings retail sales were up 22% through June 2021 compared to same period 2019, according to the Census Advanced Monthly Retail Trade report.
Arhaus grew more than twice as fast, with sales rising 51% for the first six months in 2021 compared with pre-pandemic 2019, reaching $355.4 million from $235.9 million in 2019.
Even while many of its 75 stores, called showrooms, were closed for months on end, Arhaus also enjoyed growth in 2020 as year-end sales reached $507 million, up 3% from $495 million in 2019. Much of the credit goes to its vibrant e-commerce platform that advanced 64% year-over-year and represented 18% of total sales in 2020.
After 35 years of operating successfully in the highly-fragmented $340 billion U.S. home furnishings business, CEO John Reed believes Arhaus has mastered the formula to keep on growing.
“We’ve been able to grow across the country with our footprint of showrooms which are being revamped into a retail-theater experience. Every detail is carefully designed to inspire people to come in. We want them to say, ‘Wow, I want my home to feel like this,’” he says.