market watch | Oct 7, 2021 |
Arhaus is going public

Arhaus is going public. On October 4th, the Ohio-based home furnishings retailer filed documents with the SEC outlining its plans for an IPO. A share price and a date for the listing were not announced.

Founded in 1986 by current CEO John Reed as a shop in Cleveland, Arhaus has achieved considerable scale over the past three decades, now encompassing 75 showrooms nationwide and more than 1,400 employees. According to the SEC filings, the company is far from done expanding: It plans to more than double its showroom footprint over the next 15 years. That kind of growth takes cash, and an IPO is one way to raise it. Arhaus’s timing, too, is good.

“It’s the confluence of two really hot trends right now: the booming home furnishings business and Wall Street's appetite for new public offerings,” says Warren Shoulberg, veteran retail journalist and host of the Retail Watch podcast. “The home business, particularly the upper end of it, is doing quite well. … Arhaus plays in that space, and it makes perfect sense for them to take advantage.”

Though by now it’s accepted wisdom that the pandemic has been good for home brands, it’s still eye-opening to see COVID growth in real numbers. According to the filings, Arhaus brought in $355 million in net revenue in the first half of 2021, compared to $224 million during the same period in 2020, a growth rate of 59 percent. What’s more, it brought in that money more efficiently, with an adjusted EBITDA of $60 million, as opposed to $31 million in the first half of 2020. The company’s e-commerce data shows growth as well, with the online slice of the pie growing from 11 percent to 18 percent from 2019 to 2020.

The numbers are good. What will Wall Street make of them? That’s hard to say. Though companies like RH and Williams-Sonoma saw their stocks surge in the first year of the pandemic, the growth seems to have plateaued since the spring of this year, despite consistently impressive quarterly reports. Investors seem to be taking a wait-and-see approach to home stocks as the market figures out what life will look like once COVID is well and truly behind us. How those calculations will impact Arhaus’s IPO is yet to be determined. However, when the company’s stock does make its market debut, its performance will surely be seen as a bellwether for low long we can expect the home boom to last.

Homepage photo: Courtesy of Arhaus

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