Q1 2026 Arhaus Inc Earnings Call

May 7, 2026

Operator 1: Recorded and that the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Tara Atwood-Saja, Vice President, Investor Relations. Please go ahead.

Operator: Recorded and that the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Tara Atwood-Saja, Vice President, Investor Relations. Please go ahead.

Speaker #1: Recorded and that the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Tara Atwood.

Speaker #1: Sega Vice President of Investor Relations, please go ahead.

Speaker #2: Good morning and thank you for joining us for the Arhaus First Quarter 2026 earnings call. Joining me on today's call for prepared remarks are John Reed, our founder, chairman, and chief executive officer, and Michael Lee, our chief financial officer.

Tara Atwood-Saja: Good morning, thank you for joining us for the Arhaus Q1 2026 earnings call. Joining me on today's call for prepared remarks are John Reed, our Founder, Chairman, and Chief Executive Officer, and Michael Lee, our Chief Financial Officer. Jennifer Porter, our Chief Marketing and eCommerce Officer, will join us for the Q&A portion of the call. During Q&A, we kindly ask that you limit yourself to one question only. This will allow us to get to as many callers as possible within our 1-hour window. You are welcome to re-queue for additional questions if time permits. We issued our earnings press release in Form 10-Q for the quarter ended 31 March 2026 before the market opened today. Those documents are available on our investor relations website at ir.arhaus.com. A replay of the call will be available on our website within 24 hours.

Tara Atwood-Saja: Good morning, thank you for joining us for the Arhaus Q1 2026 Earnings Call. Joining me on today's call for prepared remarks are John Reed, our Founder, Chairman, and Chief Executive Officer, and Michael Lee, our Chief Financial Officer. Jennifer Porter, our Chief Marketing and eCommerce Officer, will join us for the Q&A portion of the call. During Q&A, we kindly ask that you limit yourself to one question only. This will allow us to get to as many callers as possible within our one-hour window. You are welcome to re-queue for additional questions if time permits. We issued our earnings press release in Form 10-Q for the quarter ended 31 March 2026 before the market opened today. Those documents are available on our investor relations website at ir.arhaus.com. A replay of the call will be available on our website within 24 hours.

Speaker #2: Jennifer Porter, our chief marketing and e-commerce officer, will join us for the Q&A portion of the call. During Q&A, we kindly ask that you limit yourself to one question only.

Speaker #2: This will allow us to get to as many callers as possible within our one-hour window. You are welcome to requeue for additional questions if time permits.

Speaker #2: We issued our earnings press release in Form 10Q for the quarter ended March 31st, 2026, before the market opened today. Those documents are available in our investor relations website at ir.arhaus.com.

Speaker #2: A replay of the call will be available on our website within 24 hours. I would like to remind everyone that our remarks today concerning future expectations, events, objectives, strategies, targets, trends, or results constitute forward-looking statements.

Tara Atwood-Saja: I would like to remind everyone that our remarks today concerning future expectations, events, objectives, strategies, targets, trends, or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties. For summary of these risk factors and additional information, please refer to this morning's press release and the cautionary statements and risk factors described in our most recent annual report on Form 10-K and subsequent 10-Qs, as such factors may be updated from time to time in our filings with the SEC. The forward-looking statements are made as of today's date. Except as may be required by law, the company undertakes no obligation to update or revise these statements. We will also refer to certain non-GAAP financial measures. This morning's press release includes the relevant non-GAAP reconciliations. Now, I will turn the call over to John.

Speaker #2: Actual results or events may differ materially due to a number of risks and uncertainties. For a summary of these risk factors and additional information, please refer to this morning's press release in the cautionary statements and risk factors described in our most recent annual report on Form 10K and subsequent 10Qs.

Speaker #2: As such, factors may be updated from time to time in our filings with the SEC. The forward-looking statements are made as of today's date and accept as may be required by the law.

Speaker #2: The company undertakes no obligation to update or revise these statements. We will also refer to certain non-GAAP financial measures in this morning's press release includes the relevant non-GAAP reconciliations.

Speaker #2: Now I will turn the call over to John.

Speaker #3: Thanks, Tara. Good morning, everyone, and thank you for joining us. I want to start by discussing our first quarter performance. How we view the current environment and why we remain confident in the long-term opportunity ahead of us.

John Reed: Thanks, Tara. Good morning, everyone, thank you for joining us. I want to start by discussing our Q1 performance, how we view the current environment, and why we remain confident in the long-term opportunity ahead of us. We have been in business for over 40 years, when you have operated through as many cycles as we have, you learn that quarter-to-quarter fluctuations matter, but they do not define a business. We are building Arhaus for the long term. The Q1 marked the highest Q1 net revenue in our history. This reflects the strength of our operating model, the resilience of our client base, and the disciplined execution across all our teams. We delivered this performance despite several temporary headwinds. First, more than half of our showrooms experienced weather-related disruptions at some point in the Q1, including temporary closures in several key markets.

Speaker #3: We have been in business for over 40 years. And when you have operated through as many cycles as we have, you learn that quarter to quarter fluctuations matter but they do not find define a business.

Speaker #3: We are building our house for the long term. The first quarter marked the highest first quarter net revenue in our history. This reflects the strength of our operating model, the resilience of our client base, and the discipline execution on across all our teams.

Speaker #3: We delivered this performance despite several temporary headwinds. First, more than half of our showrooms experienced weather-related disruptions. At some point in the quarter, including temporarily closures in several key markets, we also saw a delay in our spring catalog release, which shifted some demand timing in addition, just 48 hours after our previous earnings call, the conflict in Iran began, creating a broader macro uncertainty and contributing to more cautious consumer sentiment.

John Reed: We also saw a delay in our spring catalog release, which shifted some demand timing. In addition, just 48 hours after our previous earnings call, the conflict in Iran began, creating a broader macro uncertainty and contributing to more cautious consumer sentiment. That caution was most visible in our comparable written sales, which decreased a little over 5% during the quarter. We believe that our pressure was primarily driven by those temporary factors: weather disruption, delayed catalog timing, and of course, the broader macro uncertainty. Importantly, we review this as short-term pressures, not structural changes. When we look at H2 of March and trends continuing through April and into May, we saw meaningful improvement and stronger momentum. That gives us confidence as we move through Q2.

Speaker #3: That caution was most visible in our comparable written sales. Which decreased a little over 5% during the quarter. We believe that our pressure was primarily driven by those temporary factors, weather disruption, delayed catalog timing, and of course, the broader macro uncertainty.

Speaker #3: Importantly, we reviewed this as short-term pressures, not structural changes. When we look at the second half of March, and trends continuing through April and into May, we saw meaningful improvement and stronger momentum.

Speaker #3: That gives us confidence as we move through the second quarter. As we have for four decades, we navigate cycles by staying focused on what we can control.

John Reed: As we have for four decades, we navigate cycles by staying focused on what we can control. Our long-term strategy remains unchanged, and we continue to execute with discipline across the key drivers of our business. Short-term volatility can create noise, but it does not change who we are, the strength of our brand, or the opportunity ahead of us. Our future is incredibly bright. We believe we are exceptionally well-positioned with our product, our design leadership, and our ability to stay ahead of where the customer is going. We continue to deliver differentiated collections that set us apart and strengthen our competitive position. Let me walk you through five key growth drivers. First, we remain focused on product innovation, which is the foundation of our brand and the one of our strongest competitive advantages.

Speaker #3: Our long-term strategy remains unchanged and we continue to execute with discipline across the key drivers of our business. Short-term volatility can create noise, but it does not change who we are, the strength of our brand, or the opportunity ahead of us.

Tara Atwood-Saja: A replay of the call will be available on our website within 24 hours. I would like to remind everyone that our remarks today concerning future expectations, events, objectives, strategies, targets, trends, or results constitute forward-looking statements. Actual results or events may differ materially due to a number of risks and uncertainties. For a summary of these risk factors and additional information, please refer to this morning's press release and the cautionary statements and risk factors described in our most recent annual report on Form 10-K and subsequent 10-Qs, as such factors may be updated from time to time in our filings with the SEC. The forward-looking statements are made as of today's date, and except as may be required by law, the company undertakes no obligation to update or revise these statements.

Speaker #3: Our future is incredibly bright. We believe we are exceptionally well-positioned with our product, our design leadership, and our ability to stay ahead of where the customer is going.

Actual results or events May differ materially due to a number of risks and uncertainties for summer, of these risk factors and additional information, please refer to, this morning's press release in the cautionary, statements and risk factors described in our most recent annual report on form 10K and subsequent 10 cues.

Speaker #3: We continue to deliver differentiated collections that set us apart and strengthen our competitive position. Let me walk you through five key growth drivers. First, we remain focused on product innovation.

As such factors may be updated from time to time in our filings, with the SEC.

Tara Atwood-Saja: We will also refer to certain non-GAAP financial measures, and this morning's press release includes the relevant non-GAAP reconciliations. Now I will turn the call over to John.

Speaker #3: Which is the foundation of our brand and one of our strongest competitive advantages. We continue to invest through cycles in livable luxury heirloom quality and artisan crafted pieces.

The forward-looking statements are made as of today's date and except as may be required by law, the company undertakes, no obligation to update or revise. These statements, we will also refer to certain non-gaap Financial measures and this morning's press release includes the relevant non-gaap reconciliation.

John Reed: Thanks, Tara. Good morning, everyone, and thank you for joining us. I want to start by discussing our Q1 performance, how we view the current environment, and why we remain confident in the long-term opportunity ahead of us. We have been in business for over 40 years, and when you have operated through as many cycles as we have, you learn that quarter-to-quarter fluctuations matter, but they do not define a business. We are building our house for the long term. The Q1 marked the highest Q1 net revenue in our history. This reflects the strength of our operating model, the resilience of our client base, and the disciplined execution across all our teams. We delivered this performance despite several temporary headwinds.

Now, I will turn the call over to John.

John Reed: We continue to invest through cycles in livable luxury, heirloom quality, and artisan-crafted pieces that are built to last for generations. Our assortment and quality is exclusive to Arhaus and cannot be purchased or replicated elsewhere, reinforcing the uniqueness of our brand and the emotional connection our clients have with our brands. Our aesthetic breadth spans traditional, transitional, and modern designs with a level of customization that is meaningfully differentiator for us. A key competitive advantage is our custom upholstery, with the majority of our upholstery sourced domestically. This gives us greater control over quality, cost, lead times, and the client experience. We believe we are in one of the strongest periods of product innovation in our history, with 2026 featuring some of our most expressive designs to date. We are seeing a shift from neutral-only palettes towards richer colors, patterns, architectural silhouettes, and layered textures.

Thanks Tara. Good morning everyone. And thank you for joining us.

I want to start by discussing our first quarter performance.

Speaker #3: That are built to last for generations. Our assortment and quality is exclusive to Arhaus and cannot be purchased or replicated elsewhere. Reinforcing the uniqueness of our brand and the emotional connection, our clients have with our brand.

How we view the current environment and why we remain confident in the long term opportunity ahead of us.

We have been in business for over 40 years.

Speaker #3: Our aesthetic breath spans traditional, transitional, and modern designs. With a level of customization that is meaningfully differentiated for us. A key competitive advantage is our custom upholstery.

And when you have operated through as many cycles as we have, you learned that quarter to quarter fluctuations matter but they do not sign it Define a business.

We are building our house for the long term, the first quarter marked, the highest first quarter, net revenue in our history.

Speaker #3: With the majority of our upholstery sourced domestically. This gives us greater control of our quality, cost, lead times, and the client experience. We believe we are in one of the strongest periods of product innovation in our history.

This reflects the operating model, the resilience of our client base and the discipline execution.

On a cross, all our teams.

John Reed: First, more than half of our showrooms experienced weather-related disruptions at some point in the quarter, including temporarily closures in several key markets. We also saw a delay in our spring catalog release, which shifted some demand timing. In addition, just 48 hours after our previous earnings call, the conflict in Iran began, creating a broader macro uncertainty and contributing to more cautious consumer sentiment. That caution was most visible in our comparable written sales, which decreased a little over 5% during the quarter. We believe that our pressure was primarily driven by those temporary factors: weather disruption, delayed catalog timing, and of course, the broader macro uncertainty. Importantly, we review this as short-term pressures, not structural changes. When we look at the second half of March and trends continuing through April and into May, we saw meaningful improvement and stronger momentum.

We deliver this performance. Despite several temporary head. Headwinds

Speaker #3: With 2026 featuring some of our most expressive designs to date. We are seeing a shift from neutral-only palettes towards richer colors, patterns, architectural silhouettes, and layered textures.

First more than half of our showrooms experience, whether related disruptions at some point in the quarter including temporarily closures in several key markets.

We also saw a delay in our Spring catalog release.

Speaker #3: We have been ahead of this trend, a traditional evolution, refining classic silhouettes for modern living with pieces that feel collected, over time, rooted in craftsmanship, and layered in character.

John Reed: We have been ahead of this trend, a traditional evolution, refining classic silhouettes for modern living with pieces that feel collected over time, rooted in craftsmanship, and layered in character. You see it in our tailoring trim, fringe, distinctive textiles, materials that create a warmth and individuality in your home. At the same time, we continue to expand our customization capabilities with hundreds of silhouettes and more than 700 fabrics and leathers, allowing clients and our designers to create something truly personal and uniquely special. Our vertically integrated sourcing model further strengthens our quality standards. We work directly with artisans across North America, Europe, and South Asia, many of which we have partnered with for decades using time-honored craftsmanship and responsible sourcing practices. Since our founding more than 40 years ago, we believe furniture should be responsibly sourced, lovingly made, and built to last.

Which shift shifted some demand timing in addition, just 48 hours. After our previous earnings call, the conflict in Iran began, creating a broader macro uncertainty and contributing to more cautious consumer sentiments.

Speaker #3: You see it in our trim tailoring trim, fringe, distinctive textiles, materials that create a warmth and individuality in your home. At the same time, we continue to expand our customization capabilities.

That caution was most visible in our comparable written sales.

Which decreased a little over 5% during the quarter.

We believe that our pressure was primarily driven by those temporary factors whether disruption.

Speaker #3: With hundreds of silhouettes and more than 700 fabrics and leathers, allowing clients and our designers to create something truly personal and uniquely special. Our vertically integrated sourcing model further strengthens our quality standards.

Delayed catalog timing and of course the broader macro uncertainty.

Importantly, we reviewed this as short-term pressures. Not structural changes.

Speaker #3: We work directly with artisans across North America, Europe, and South Asia. Many of which we have partnered with for decades. Using time-honored craftsmanship and responsible sourcing practices.

John Reed: That gives us confidence as we move through Q2. As we have for four decades, we navigate cycles by staying focused on what we can control. Our long-term strategy remains unchanged, and we continue to execute with discipline across the key drivers of our business. Short-term volatility can create noise, but it does not change who we are, the strength of our brand, or the opportunity ahead of us. Our future is incredibly bright. We believe we are exceptionally well-positioned with our product, our design leadership, and our ability to stay ahead of where the customer is going. We continue to deliver differentiated collections that set us apart and strengthen our competitive position. Let me walk you through five key growth drivers. First, we remain focused on product innovation, which is the foundation of our brand and the one of our strongest competitive advantages.

When we look at the second half of March and Trends continuing through April and into may, we saw make meaningful Improvement in stronger, momentum.

That gives us confidence as we move through the second quarter.

As we have for 4 decades, we navigate Cycles by staying focused on what we can control.

Speaker #3: Since our founding more than 40 years ago, we believe furniture should be responsibly sourced, lovingly made, and built to last. And because of our unique model, we are extremely competitive in our pricing in most cases, lower retails and better quality than many of our competition.

Our long-term strategy remains unchanged and we continue to execute execute with discipline across the key drivers of our business.

Short-term volatility can create noise.

John Reed: Because of our unique model, we are extremely competitive in our pricing, in most cases lower retails and better quality than many of our competition. We remain committed to investing in product innovation during periods of uncertainty because we have consistently seen that strong product cycles positions us to capture sales when consumer confidence improves. Second, we remain committed to our showroom growth strategy. These are longer-term investments with attractive returns, and we continue to see meaningful white space opportunities. Since 2019 through 2025, we have grown our showroom footprint for more than 50%. Showrooms opened during this period represented 37% of our net revenue growth, reinforcing the long-term value creation of our disciplined approach. As of today, we operate 108 showrooms, including our new traditional showroom in Ashburn, Virginia, which opened just last month.

But it does not change who we are the stren of our brand, or the opportunity ahead of us.

Our future is incredibly bright bright.

Speaker #3: We remain committed to investing in product innovation during periods of uncertainty because we have consistently seen that strong product cycles positions us to capture sales when consumer confidence improves.

We believe We Are exceptionally well, positioned with our product, our design leadership, and our ability to stay ahead of where the customer is going.

We continue to to deliver differentiated collections that set us apart and strengthen our competitive position.

Speaker #3: Second, we remain committed to our showroom growth strategy. These are longer-term investments with attractive returns. And we continue to see meaningful white space opportunities.

John Reed: We continue to invest through cycles in livable luxury, heirloom quality, and artisan-crafted pieces that are built to last for generations. Our assortment and quality is exclusive to Arhaus and cannot be purchased or replicated elsewhere, reinforcing the uniqueness of our brand and the emotional connection our clients have with our brand. Our aesthetic breadth spans traditional, transitional, and modern designs with a level of customization that is meaningfully differentiator for us. A key competitive advantage is our custom upholstery, with the majority of our upholstery sourced domestically. This gives us greater control over quality, cost, lead times, and the client experience. We believe we are in one of the strongest periods of product innovation in our history, with 2026 featuring some of our most expressive designs to date. We are seeing a shift from neutral-only palettes towards richer colors, patterns, architectural silhouettes, and layered textures.

Speaker #3: Since 2019 through 2025, we have grown our showroom footprint for more than 50%. And showrooms open during this period represented 37% of our net revenue growth.

Let me walk you through 5 key growth drivers. First, we remain focused on product Innovation which is the foundation of our brand and the 1 of our strongest competitive advantages. We continue to invest through Cycles in livable luxury, heirloom quality and Artisan crafted pieces.

That are built the last for Generations.

Speaker #3: Reinforcing the long-term value creation of our disciplined approach. As of today, we operate 108 showrooms, including our new traditional showroom in Ashburn, Virginia, which opened just last month.

Our assortment and quality is exclusive to our house and cannot be purchased or replicated elsewhere.

Reinforcing the uniqueness of our brand and the emotional connection.

Our clients have with our brands.

Speaker #3: We were particularly excited about this location in Ashburn one of the most affluent areas in the country. It is a premium lifestyle destination that aligns exceptionally well with our client base and our showroom growth strategy.

John Reed: We were particularly excited about this location in Ashburn, one of the most affluent areas in the country. It is a premium lifestyle destination that aligns exceptionally well with our client base and our showroom growth strategy. Just this week, we completed the expansion of our Park Meadows showroom in Lone Tree, Colorado, an important market for us. Park Meadows is a premium luxury retail destination supported by affluent demographics and premium co-tendency. Expanding this showroom reflects strong local engagement, showroom productivity, and an opportunity to deepen client relationships through greater product presentations, design services, and more expansive showroom experience. For 2026, we continue to expect to complete approximately 10 to 14 showroom projects, including 4 to 6 new openings, 6 to 8 relocation renovations or expansions. We remain confident in our long-term showroom strategy because proximity matters.

Our aesthetic breath spans, traditional transitional and modern designs.

With a level of customization that is Meaningful, meaningfully.

Differentiated for us.

Speaker #3: And just this week, we completed the expansion of our Park Meadow showroom in Lone Tree, Colorado. An important market for us. Park Meadows is a premium luxury retail destination supported by a fluent demographics and premium cotendency.

A key competitive advantage is our custom upholstery, with the majority of our upholstery sourced domestically.

And the client experience.

Speaker #3: Expanding the showroom reflects strong local engagement. Showroom productivity and an opportunity to dip deep in client relationships through greater product presentations. Design services and more expansive showroom experience.

We believe we are in 1 of the strongest periods of product innovation in our history with 2026 featuring. Some of our most expressive designs to date,

John Reed: We have been ahead of this trend, a traditional evolution, refining classic silhouettes for modern living with pieces that feel collected over time, rooted in craftsmanship and layered in character. You see it in our tailoring trim, fringe, distinctive textiles, and materials that create a warmth and individuality in your home. At the same time, we continue to expand our customization capabilities with hundreds of silhouettes and more than 700 fabrics and leathers, allowing clients and our designers to create something truly personal and uniquely special. Our vertically integrated sourcing model further strengthens our quality standards. We work directly with artisans across North America, Europe, and South Asia, many of which we have partnered with for decades using time-honored craftsmanship and responsible sourcing practices. Since our founding more than 40 years ago, we believe furniture should be responsibly sourced, lovingly made, and built to last.

We are seeing a shift from neutral, only pallets towards richer colors patterns, architectural, Silhouettes, and layered textures.

Speaker #3: For 2026, we continue to expect to complete approximately 10 to 14 showroom projects, including four to six new openings, six to eight relocation renovations or expansions.

We have been ahead of this trend, a traditional Evolution. Refining classic Silhouettes for modern, living with pieces. That feel collected over time rooted in craftsmanship, and layered and character.

Speaker #3: We remain confident in our long-term showroom strategy because proximity matters. Our showrooms are often the front door to the brand. Driving client engagement, conversion, and long-term relationships.

John Reed: Our showrooms are often the front door to the brand, driving client engagement, conversion, and long-term relationships. Third, we remain committed to the investments in our infrastructure needed to grow our business. We are making meaningful progress across initiatives focused on modernizing our distribution network and technology infrastructure, which are foundational to our long-term growth, improved operational efficiencies, and an enhanced client experience. At our core, we believe that investing with discipline, even during periods of uncertainty, will help us emerge with stronger, more durable competitive advantages. I'll let Mike dive deeper into the progress of our strategic investments shortly. Fourth, we remain focused on our client. This includes delivering an exceptional client experience across three primary channels: our core customers, our clients that are engaged with Arhaus interior designers, and our trade partners.

You see it in our trimmed tailoring. Trim Fringe distinctive, textiles materials that create a warmth and individuality in your home.

Speaker #3: Third, we remain committed to the investments in our infrastructure needed to grow our business. We are making meaningful progress across initiatives focused on modernizing our distribution network and technology infrastructure.

At the same time, we continue to expand our customization capabilities with hundreds of Silhouettes and more than 700 fabrics and Leathers allowing clients and our designers to create something, truly personal and uniquely special.

Speaker #3: Which are foundational to our long-term growth. Improved operational efficiencies, and an enhanced client experience. At our core, we believe that investing with discipline, even during periods of uncertainty, will help us emerge with stronger, more durable, competitive advantages.

Our vertically integrated sourcing model further. Strengthens our quality standards. We work directly with Artisans across North America, Europe and South Asia.

many of which we have partnered with

for decades.

Using time-honored craftsmanship and responsible sourcing practices.

since our founding,

Speaker #3: I'll let Mike dive deeper into the progress of our strategic investments shortly. Fourth, we remain focused on our client. This includes delivering an exceptional client experience across three primary channels.

John Reed: Because of our unique model, we are extremely competitive in our pricing, in most cases, lower retails and better quality than many of our competition. We remain committed to investing in product innovation during periods of uncertainty because we have consistently seen a strong product cycle positions us to capture sales when consumer confidence improves. Second, we remain committed to our showroom growth strategy. These are longer-term investments with attractive returns, and we continue to see meaningful white space opportunities. Since 2019 through 2025, we have grown our showroom footprint for more than 50%. Showrooms opened during this period represented 37% of our net revenue growth, reinforcing the long-term value creation of our disciplined approach. As of today, we operate 108 showrooms, including our new traditional showroom in Ashburn, Virginia, which opened just last month.

more than 40 years ago, we believed Furniture should be responsibly sourced lovingly made and built to last

Speaker #3: Our core customers, our clients that are engaged with our house interior designers, and our trade partners. These relationships are central to how we build loyalty, deepen engagement, and capture market share, particularly during periods of macroeconomic uncertainty.

And because of our unique model, we are extremely competitive in our pricing, in most cases, lower retails and better quality than many of our competitions.

John Reed: These relationships are essential to how we build loyalty, deepen engagement, and capture market share, particularly during periods of macroeconomic uncertainty. Our interior designers continue to be one of the most powerful drivers of demand across the brand. Designer-supported projects generate meaningful higher order values, drive stronger repeat engagement, and provide greater visibility into our future projects. In Q1, Arhaus interior designers represented a significant percent of our total written sales, and we expect this to continue to grow. We are seeing similar momentum with the trade, which represents another attractive long-term demand channel for us. We recently launched our newly redesigned Arhaus Trade program, which was built in collaboration with the feedback from our trade community and designed to strengthen the relationship with design professionals, builders, and developers.

We remain committed to investing in product innovation during periods of uncertainty because we have consistently seen the strong product cycles.

Positions us to capture sales when consumer confidence improves.

Speaker #3: Our interior designers continue to be one of the most powerful drivers of demand across the brand. Designer-supported projects generate meaningful higher-order values drive stronger repeat engagement and provide greater visibility into our future projects.

Second, we remain committed to our showroom growth St, strategy.

These are longer term investments with attractive returns.

And we continue to see meaningful white space opportunities.

Speaker #3: In the first quarter, our house interior designers represented a significant percent of our total written sales and we expect this to continue to grow.

Speaker #3: We are seeing similar moments with the trade. Which represents another attractive long-term demand channel for us. We recently launched our newly redesigned our house trade program.

Since 2019 through 2025, we have grown our showroom footprint, for more than 50% and showrooms open during this period. Represented 37% of our net revenue growth reinforcing, the long-term value creation of our disciplined approach.

Speaker #3: Which was built in collaboration with the feedback from our trade community and design to strengthen the relationship with design professionals, builders, and developers. Additionally, the program provides personalized order support, access to our exclusive products, and a customized trade dashboard that empowers professionals to build to better serve their clients.

John Reed: We were particularly excited about this location in Ashburn, one of the most affluent areas in the country. It is a premium lifestyle destination that aligns exceptionally well with our client base and our showroom growth strategy. Just this week, we completed the expansion of our Park Meadows showroom in Lone Tree, Colorado, an important market for us. Park Meadows is a premium luxury retail destination supported by affluent demographics and premium co-tenancy. Expanding this showroom reflects strong local engagement, showroom productivity, and an opportunity to deepen client relationships through greater product presentations, design services, and more expansive showroom experience. For 2026, we continue to expect to complete approximately 10 to 14 showroom projects, including 4 to 6 new openings, 6 to 8 relocation renovations or expansions. We remain confident in our long-term showroom strategy because proximity matters.

As of today we operate 108 showrooms including our new traditional showroom in Ashburn Virginia Which opened just last month.

John Reed: Additionally, the program provides personalized order support, access to our exclusive products and a customized trade dashboard that empowers professionals to build to better serve their clients, including design tools for 3D and 2D planning, room planning. U.S. interior design market is approximately $27 billion. We see significant long-term opportunity to grow our reach within this channel. Lastly, we remain focused on building out our integrated omni-channel model. Our omni-channel model allows us to meet our clients wherever they choose to engage, whether online or in one of our showrooms. Our showrooms, we curate immersive, traditionally inspired spaces that feel layered, warm, and aspirational. Clients don't simply see a piece of furniture. They feel transported into a home that reflects their own. Digitally, we extend the same emotional experience through enhanced storytelling, ensuring a seamless connection across e-commerce platforms and showroom experience.

We were particularly excited about this location in Ashburn, 1 of the most fluent areas in the country. It is a premium lifestyle destination, that aligns exceptionally well with our client base

and our showroom growth strategy.

And just this week, we completed the expansion of our Park Meadow showroom. In Lone Tree Colorado.

An important market for us.

Speaker #3: Including design tools for 3D and 2D planning, room planning, US interior design market is approximately 27 billion dollars. We see significant long-term opportunity to grow our reach within this channel.

Park Meadows is a premium luxury, retail destination supported by a fluid demographics.

And premium code tendency.

Speaker #3: Lastly, we remain focused on building out our integrated omnichannel model. Our omnichannel model allows us to meet our clients wherever they choose to engage.

Expanding the showroom, reflects strong, local engagement showroom productivity and an opportunity to dip in deep deepen, client relationships through greater product presentations Design Services and more expansive showroom experience.

Speaker #3: Whether online, or in one of our showrooms. Our showrooms we curate immersive traditionally inspired spaces that feel layered, warm, and aspirational. Clients don't simply see a piece of furniture.

For 2026, we continue to expect to complete the approximately, 10 to 14, showroom projects.

Including 4 to 6, new openings, 68 relocation Renovations or expansions.

We remain confident in our long-term struggle.

John Reed: Our showrooms are often the front door to the brand, driving client engagement, conversion, and long-term relationships. We remain committed to the investments in our infrastructure needed to grow our business. We are making meaningful progress across initiatives focused on modernizing our distribution network and technology infrastructure, which are foundational to our long-term growth, improved operational efficiencies, and an enhanced client experience. At our core, we believe that investing with discipline, even during periods of uncertainty, will help us emerge with stronger, more durable competitive advantages. I'll let Mike dive deeper into the progress of our strategic investments shortly. We remain focused on our client. This includes delivering an exceptional client experience across three primary channels: our core customers, our clients that are engaged with Arhaus interior designers, and our trade partners.

Speaker #3: They feel transported into a home that reflects their own. Digitally, we extend the same emotional experience through enhanced storytelling. Ensuring a seamless connection across e-commerce platforms and showroom experience.

Because proximity matters. Our showrooms are often the front door to the brand.

Driving client engagement conversion, and long-term relationships.

Speaker #3: 40 years in, we have navigated recessions, market disruptions, supply chain shocks, and a pandemic. The long-term strategy for our house remains intact and we are focused on the discipline, execution across five key drivers of our business that I had just shared.

John Reed: 40 years in, we have navigated recessions, market disruption, supply chain shocks, and a pandemic. The long-term strategy for Arhaus remains intact. We are focused on the disciplined execution across 5 key drivers of our business that I had just shared. At the same time, we are making strategic adjustments to thoughtfully navigate the near-term environment. These include being more deliberate with the pace of our investments, taking a more measured approach to headcount growth, and in near term, implementing new promotions to help accelerate the client journey from aspirational to conversion. Increasing our marketing efforts to further increase engagement and conversion while keeping an eye on cost to protect margins. In closing, our product is exceptional. Our client continues to invest in their home. Our showrooms are very productive. Our balance sheet remains a competitive advantage.

Third, we remain committed to the investments in our infrastructure. Needed to grow our business, we are making meaningful progress across initiatives focused on Modern modernizing, our distribution Network and Technology infrastructure.

Which are foundational to our long-term growth, improved operational efficiencies and an enhanced client experience.

Speaker #3: At the same time, we are making strategic adjustments to thoughtfully navigate the near-term environment. These include being more deliberate with the pace of our investments, taking a more measured approach to headcount growth, and a near-term implementing new promotions to help accelerate the client journey from aspirational to conversion.

At our core. We believe that investing with discipline even during periods of uncertainty will help us emerge with stronger, more durable, competitive advantages.

I'll let Mike dive deeper into the progress of our strategic Investments shortly for us. We remain focused on our clients.

Speaker #3: And increasing our marketing efforts to further and increase engagement and conversion. While keeping an eye on cost to protect margins. In closing, our product is exceptional.

Experience across 3 primary channels.

John Reed: These relationships are essential to how we build loyalty, deepen engagement, and capture market share, particularly during periods of macroeconomic uncertainty. Our interior designers continue to be one of the most powerful drivers of demand across the brand. Designer-supported projects generate meaningful higher order values, drive stronger repeat engagement, and provide greater visibility into our future projects. In Q1, Arhaus interior designers represented a significant % of our total written sales, and we expect this to continue to grow. We are seeing similar momentum with the trade, which represents another attractive long-term demand channel for us. We recently launched our newly redesigned Arhaus Trade Program, which was built in collaboration with the feedback from our trade community and designed to strengthen the relationship with design professionals, builders, and developers.

Our core customers, our clients that are engaged with our house and Cherry designers and our trade partners.

Speaker #3: Our client continues to invest in their home and our showrooms are very productive. Our balance sheet remains a competitive advantage we are debt-free and operating from a position of strength.

These relationships are Central to how we build loyalty, deep and engagement and capture market share particularly during periods of macroeconomic uncertainty.

John Reed: We are debt-free and operating from a position of strength. This gives us flexibility to invest through the cycle while maintaining a disciplined approach to allocate capital. Investing in the business, returning value to shareholders, and maintaining financial flexibility. Now I'll turn it over to Mike.

Speaker #3: This gives us flexibility to invest through the cycle while maintaining a disciplined approach to allocate capital. Investing in the business, returning value to shareholders, and flexibility.

Our interior designers continue to be 1 of the most powerful drivers of demand across the brand designer, supported projects generate meaningful of higher order values.

Drive stronger, repeat engagements.

And provide greater visibility into our future projects.

Speaker #3: Now I'll turn it over to good morning, everyone. As I reflect on my first year in this role, I'm proud of what we have accomplished across the business and the discipline with which our teams have continued to execute.

Michael Lee: All right. Thanks, John, and good morning, everyone. As I reflect on my first year in this role, I'm proud of what we have accomplished across the business and the discipline with which our teams have continued to execute. Even in a more challenging environment, we remain focused on strengthening our operations, investing in the business, and positioning Arhaus for long-term profitable growth. That perspective gives me continued confidence in the strength of our model, the resilience of our client base, and our ability to navigate near-term volatility while staying committed to our long-term strategy. Net revenue was $314 million in Q1, up 0.9% year over year and above the midpoint of our guidance range, making the largest Q1 net revenue in our history.

In the first quarter, our house in charity, designers, represented a significant percent of our total written sales and we expect this to continue to grow.

We are seeing similar moments of, with the trade.

Which represents another attractive long-term Demand channel for us.

Speaker #3: Even in a more challenging environment, we remain focused on strengthening our operations, investing in the business, and positioning our house for long-term profitable growth.

We recently launched our newly redesigned our house trade program.

John Reed: Additionally, the program provides personalized order support, access to our exclusive products, and a customized trade dashboard that empowers professionals to better serve their clients, including design tools for 3D and 2D planning, room planning. US interior design market is approximately $27 billion. We see significant long-term opportunity to grow our reach within this channel. We remain focused on building out our integrated omni-channel model. Our omni-channel model allows us to meet our clients wherever they choose to engage, whether online or in one of our showrooms. Our showrooms, we curate immersive, traditionally inspired spaces that feel layered, warm, and aspirational. Clients don't simply see a piece of furniture. They feel transported into a home that reflects their own. Digitally, we extend the same emotional experience through enhanced storytelling, ensuring a seamless connection across e-commerce platforms and showroom experience.

Speaker #3: And that perspective gives me continued confidence in the strength of our model. The resilience of our client base, and our ability to navigate near-term volatility while staying committed to our long-term strategy.

This was built in collaboration with feedback from our trade community, and it is designed to strengthen our relationship with design professionals, builders, and developers.

Additionally, the program provides personalized order supports access to our exclusive products.

And a customized trade dashboard that empowers professionals to build.

Speaker #3: Net revenue was $314 million in the first quarter, up 0.9% year over year, and above the midpoint of our guidance range. Making the largest first-quarter net revenue in our history.

To better serve their clients.

Including design tools for 3D and 2D planning, room planning.

Speaker #3: This performance is particularly notable as we lapped a prior-year period that did not face the same tariff uncertainty, macro volatility, or geopolitical disruption. And despite these ongoing headwinds, including conflict, we continue to deliver net revenue growth through a volatile environment.

Michael Lee: This performance is particularly notable as we lapped a prior year period that did not face the same tariff uncertainty, macro volatility, or geopolitical disruption. Despite these ongoing headwinds, including the recent escalation in global conflict, we continue to deliver net revenue growth through a volatile environment. Gross profit was $114 million, down 1% versus last year, with gross margin decreasing 70 basis points to 36.4%, driven by higher fuel prices of 40 basis points, and showroom occupancy costs of 40 basis points. Selling, general, and administrative expenses increased 1.9% to $112 million, driven by a $1.9 million increase primarily related to strategic investments to support and drive the growth of the business, including supply chain and technology improvements, and other corporate expenses.

Us interior design Market is approximately 27 billion dollars, we see significant long-term opportunity to grow our reach within this channel.

Lastly, we remain focused on building out our integrated Omni Channel model.

Speaker #3: Gross profit was $114 million, down 1% versus last year, with gross margin decreasing 70 basis points to 36.4%, driven by higher fuel prices of 40 basis points, and showroom occupancy costs of 40 basis points.

Our Omni Channel model allows us to meet our clients wherever they choose to engage, whether online or in 1 of our showrooms. Our showrooms, we curate immersive, traditionally inspired spaces, that feel, layered, warm and aspirational.

Clients don't simply see a piece of furniture.

They feel transported into a home that reflects their own.

Digitally, we extend the same emotional experience through enhanced storytelling.

Speaker #3: Selling general and administrative expenses increased 1.9% to $112 million. Driven by a 1.9 million increase primarily related to strategic investments to support and drive the growth of the business, including supply chain and technology improvements, and other corporate expenses.

John Reed: 40 years in, we have navigated recessions, market disruption, supply chain shocks, and a pandemic. The long-term strategy for Arhaus remains intact, and we are focused on the disciplined execution across five key drivers of our business that I had just shared. At the same time, we are making strategic adjustments to thoughtfully navigate the near-term environment. These include being more deliberate with the pace of our investments, taking a more measured approach to headcount growth, and in near term, implementing new promotions to help accelerate the client journey from aspirational to conversion. Increasing our marketing efforts to further increase engagement and conversion while keeping an eye on cost to protect margins. In closing, our product is exceptional. Our client continues to invest in their home, and our showrooms are very productive. Our balance sheet remains a competitive advantage.

Ensuring a seamless connection across, e-commerce platforms, and showroom experience.

40 years in, we have navigated recessions market Des disruption supply chain, shocks, and a pandemic.

Speaker #3: As a result, SG&A load increased 40 basis points to 35.7%. Net income was $2.2 million, and within our guidance, an adjusted EBITDA was $18 million, and within our guidance range.

Michael Lee: As a result, SG&A load increased 40 basis points to 35.7%. Net income was $2.2 million and within our guidance, and adjusted EBITDA was $18 million and within our guidance range. Adjusted EBITDA margin decreased 30 basis points year over year. As a reminder, there is a seasonal impact to margins in Q1, which carries lower net revenue as a result of less operating leverage. Turning to our comparable metrics, comparable delivered sales decreased 1.7% above the midpoint of our guidance range. Performance during Q1 was impacted by severe weather, our delayed catalog, as well as broader consumer softness tied to macroeconomic uncertainty, which weighed on overall delivery volumes. Comparable written sales decreased 5.7%, driven by a combination of factors.

The long-term strategy for our house remains intact, and we are focused on the discipline execution across 5 key drivers of our business that I had just shared.

At the same time, we are making strategic adjustments to thoughtfully navigate the near-term environment.

Speaker #3: Adjusted EBITDA margin decreased 30 basis points year over year. As a reminder, there is a seasonal impact to margins in the first quarter, which carries lower net revenue as a result of less operating leverage.

These include being more deliberate with the pace of our investments.

Taking a more measured approach to headcount growth and a near-term. Implementing new promotions to help accelerate the client's Journey from aspirational to conversion.

Speaker #3: Turning to our comparable metrics, comparable delivered sales decreased 1.7% above the midpoint of our guidance range. Performance during the quarter was impacted by severe weather, our delayed catalog, as well as broader consumer softness tied to macroeconomic uncertainty, which weighed on overall delivery volumes.

And increasing our marketing efforts to further and increase engagement and count conversion.

While keeping an eye on cost to protect margins in closing in closing, our products is exceptional.

Speaker #3: Comparable written sales decreased 5.7%, driven by a combination of factors. Weather-related disruption in key markets reduced traffic during important promotional periods, including our semi-annual store-wide sale in January.

Our client continues to invest in their home, and our showrooms are very productive. Our balance sheet remains a competitive Advantage. We are debt-free and operating from a position of strength.

Michael Lee: Weather-related disruption in key markets reduced traffic during important promotional periods, including our semi-annual storewide sale in January. In total, more than half of our showrooms experienced temporary closures at some point during the quarter due to adverse weather conditions. Additionally, the delayed timing of our spring catalog release, as well as macroeconomic and geopolitical uncertainty, including the war in Iran, impacted comparable written sales. While comparable written sales were pressured during the quarter, trends improved meaningfully in the back half of March, where elevated promotional activity drove stronger engagement and improved conversion. That trend continued in April and into May. Turning to our balance sheet and liquidity. We ended the quarter with $177 million in cash and cash equivalents, a decrease of 30% from 31 December 2025. This primarily reflects the $49 million special cash dividend paid in March.

This gives us flexibility to invest through the cycle while maintaining a disciplined approach to allocate.

Capital.

Speaker #3: In total, more than half of our showrooms experienced temporary closures at some point during the quarter, due to adverse weather conditions. Additionally, the delayed timing of our spring catalog release as well as macroeconomic and geopolitical uncertainty including the war in Iran impacted comparable written sales.

Michael Lee: All right. Thanks, John, and good morning, everyone. As I reflect on my first year in this role, I am proud of what we have accomplished across the business and the discipline with which our teams have continued to execute. Even in a more challenging environment, we remain focused on strengthening our operations, investing in the business, and positioning Arhaus for long-term profitable growth. That perspective gives me continued confidence in the strength of our model, the resilience of our client base, and our ability to navigate near-term volatility while staying committed to our long-term strategy. Net revenue was $314 million in Q1, up 0.9% year-over-year and above the midpoint of our guidance range, making the largest Q1 net revenue in our history.

Investing in the business, returning value to shareholders and maintaining Financial flexibility. Now, I'll turn it over to Mike.

All right. Thanks John and good morning everyone. As I reflect on my first year, in this role I'm proud of what we have accomplished cross the business and that discipline with which our teams of continue to execute.

Speaker #3: While comparable written sales were pressured during the quarter, trends improved meaningfully in the back half of March, where elevated promotional activity drove stronger engagement and improved conversion.

Speaker #3: That trend continued in April and into May. Turning to our balance sheet and liquidity. We ended the quarter with $177 million in cash and cash equivalents, a decrease of 30% from December 31, 2025.

Even in a more challenging environment we remain focused on strengthening, our operations investing in the business and positioning our house for long-term profitable growth. And that perspective gives me continued confidence in the strength of our model, the resilience of our client base, and our ability to navigate near-term. Volatility while staying committed to our long-term strategy.

Speaker #3: This primarily reflects the $49 million special cash dividend paid in March. Net merchandise inventory totaled $369 million, up 9% from December 31, 2025, and the increase reflects higher product costs, including the impact of tariffs, as well as inventory investments, including increased depth in bestsellers, as well as new product introductions, in addition to outdoor assortments ahead of the seasonal ramp.

Michael Lee: Net merchandise inventory totaled $369 million, up 9% from 31 December 2025. The increase reflects higher product costs, including the impact of tariffs, as well as inventory investments, including increased depth in best sellers, as well as new product introductions in addition to outdoor assortments ahead of the seasonal ramp. Excluding tariff impact, net merchandise inventory would be up approximately 6% from 31 December 2025. Turning to strategic investments. We continue to make meaningful progress on numerous initiatives to modernize our distribution network and our technology infrastructure. This initiative is aligned with our long-term strategy designed to improve operational efficiency, enhance the client experience, and strengthen our internal controls and support profitability. Simply put, these investments are foundational to supporting our next phase of growth.

Michael Lee: This performance is particularly notable as we lapped a prior year period that did not face the same tariff uncertainty, macro volatility, or geopolitical disruption. Despite these ongoing headwinds, including the recent escalation in global conflict, we continue to deliver net revenue growth through a volatile environment. Gross profit was $114 million, down 1% versus last year, with gross margin decreasing 70 basis points to 36.4%, driven by higher fuel prices of 40 basis points and showroom occupancy costs of 40 basis points. Selling, general and administrative expenses increased 1.9% to $112 million, driven by a $1.9 million increase primarily related to strategic investments to support and drive the growth of the business, including supply chain and technology improvements and other corporate expenses.

Net revenue was $314 million in the first quarter, up 0.9% year-over-year and above the midpoint of our guidance range, making this the largest first quarter net revenue in our history.

As we elapsed a prior year period, that did not face the same tariff uncertainty.

Macro volatility or geopolitical disruption. And despite these ongoing headwinds, including the recent escalation in global conflict, we continue to deliver net revenue growth through a volatile environment.

Speaker #3: Excluding tariff impact, net merchandise inventory would be up approximately 6% from December 31, 2025. Turning to strategic investments, we continue to make meaningful progress on numerous initiatives to modernize our distribution network and our technology infrastructure.

Gross profit was 114 million down 1% versus last year with gross margin. Decreasing, 70 basis points to 36.4% driven by higher fuel prices of 40 basis points and showroom occupancy costs of 40 basis points.

Speaker #3: This initiative is aligned with our long-term strategy, designed to improve operational efficiency, enhance the client experience, and strengthen our internal controls. And support profitability.

Selling General and administrative expenses, increased 1.9% to 112 million.

Speaker #3: Simply put, these investments are foundational to supporting our next phase of growth. A recent milestone was a go-live of phase one of our transportation management system in April.

Michael Lee: A recent milestone was the go live of phase one of our transportation management system in April. This is an important foundational step in modernizing our distribution network and strengthening our transportation capabilities across the business. We are now live with the new TMS system and are nearing the end of our hypercare phase, at which point we will be fully operational. As with any large-scale implementation, there is continued work underway, and our teams remain focused on execution and long-term success. Our TMS is expected to deliver several meaningful benefits over time. First, improved cost efficiencies through better load optimization, route planning, and carrier selection, helping us to reduce transportation expense and improve network productivity. Second, greater operational visibility through real-time tracking and system-driven planning, replacing manual processes and giving us stronger control across the delivery journey.

Michael Lee: As a result, SG&A load increased 40 basis points to 35.7%. Net income was $2.2 million and within our guidance, and adjusted EBITDA was $18 million and within our guidance range. Adjusted EBITDA margin decreased 30 basis points year over year. As a reminder, there is a seasonal impact to margins in Q1, which carries lower net revenue as a result of less operating leverage. Turning to our comparable metrics, comparable delivered sales decreased 1.7% above the midpoint of our guidance range. Performance during the quarter was impacted by severe weather, our delayed catalog, as well as broader consumer softness tied to macroeconomic uncertainty, which weighed on overall delivery volumes. Comparable written sales decreased 5.7%, driven by a combination of factors.

Speaker #3: This is an important foundational step in modernizing our distribution network and strengthening our transportation capabilities across the business. We are now live with the new TMS system and are nearing the end of our hypercare phase at which point we will be fully operational.

Driven by a 1.9 million increase, primarily related to strategic Investments to support and drive the growth of the business including supply chain and Technology, improvements, and other corporate expenses. As a result, sgna load increased 40, basis points to 35.7%,

Net income was 2.2 million and within our guidance and adjusted. EBA was 18 million. And within our guidance range

Adjusted ebit Dom margin, decreased 30 basis points year-over-year.

Speaker #3: And as with any large-scale implementation, there is continued work underway and our teams remain focused on execution and long-term success. Our TMS is expected to deliver several meaningful benefits over time.

As a reminder, there is a seasonal impact to margins in the first quarter, which carries lower net revenue as a result of less operating leverage.

Speaker #3: First, improved cost efficiencies through better load optimization, route planning, and carrier selection. Helping us to reduce transportation expense and improve network productivity. Second, greater operational visibility through real-time tracking and system-driven planning replacing manual processes and giving us stronger control across the delivery journey.

turning to our comparable metrics comparable, delivered sales decreased 1.7% above the midpoint of our guidance range,

Performance during the quarter was impacted by severe weather.

Our delayed catalog as well as broader consumer softness, tied to macroeconomic uncertainty, which weighed on overall delivery volumes.

Speaker #3: And third, stronger integration and scalability across our broader distribution network, creating efficiencies through connectivity with our warehouse management systems and other platforms. We are encouraged by the progress and excited about the long-term value this platform can create as we continue to expand capabilities across the network.

Michael Lee: Third, stronger integration and scalability across our broader distribution network, creating efficiencies through connectivity with our warehouse management systems and other platforms. We are encouraged by the progress and excited about the long-term value this platform can create as we continue to expand capabilities across the network. Additionally, we continue to make meaningful progress on our order management system and enterprise resource planning initiatives. Our OMS investment is critical to enhancing the client experience and improving the purchase journey across our omni-channel model. While our ERP investment is designed to modernize our core financial and operational systems. Execution across our distribution network and technology infrastructure investment remains our top priority, and success is delivering these initiatives on time, on budget, and within scope. Equally important is the cultural shift underway.

Comparable written sales decreased 5.7% driven by a combination of factors weather related disruption and key markets, reduced traffic during important promotional periods, including our semianual storewide sale in January.

Speaker #3: Additionally, we continue to make meaningful progress on our order management system and enterprise resource planning initiatives. Our OMS investment is critical to enhancing the client experience and improving the purchase journey across our omnichannel model, while our ERP investment is designed to modernize our core financial and operational systems.

In total, more than half of our showrooms experienced temporary closures at some point during the quarter due to adverse weather conditions. Additionally, the delayed timing of our spring catalog release, as well as macroeconomic and geopolitical uncertainty, including the war in Iran, impacted our results.

Speaker #3: Execution across our distribution network and technology infrastructure investment remains our top priority, and success is delivering these initiatives on time, on budget, and within scope.

Impacted comparable written sales.

While comparable, written sales were pressured during the quarter Trends, improved meaningfully and the back half of March where elevated promotional activity drove stronger engagement, and improved conversion.

That trend continued in April and into May.

Speaker #3: Equally important is the cultural shift underway. As we implement these systems, we are increasing accountability and standardization across our house, building a more scalable and disciplined operating model.

Michael Lee: As we implement these systems, we are increasing accountability and standardization across Arhaus, building a more scalable and disciplined operating model. Overall, we view these strategic investments as essential to strengthening our foundation and positioning Arhaus for long-term profitable growth. Turning to tariffs and sourcing. Trade policy remains fluid, particularly following the recent Supreme Court ruling on certain IEEPA related tariffs and the rollout of the CBP refund process. We are actively evaluating the potential implications, including the administrative process required to pursue refunds. Separately, the 10% global tariff implemented under Section 122 is currently scheduled to expire in July, though the path forward remains uncertain. Given this evolving backdrop, we continue to take a disciplined and measured approach. Importantly, our diversified sourcing strategy and meaningful domestic manufacturing footprint position us well across the range of potential policy scenarios.

Turning to our balance sheet and liquidity. We ended the quarter with the 177 million in cash and cash equivalents. A decrease of 30% from December 31st 2025

Speaker #3: Overall, we view these strategic investments as essential to strengthening our foundation and positioning our house for long-term profitable growth. Turning to tariffs and sourcing.

Michael Lee: Net merchandise inventory totaled $369 million, up 9% from 31 December 2025, and the increase reflects higher product costs, including the impact of tariffs, as well as inventory investments, including increased depth in best sellers, as well as new product introductions, in addition to outdoor assortments ahead of the seasonal ramp. Excluding tariff impact, net merchandise inventory would be up approximately 6% from 31 December 2025. Turning to strategic investments. We continue to make meaningful progress on numerous initiatives to modernize our distribution network and our technology infrastructure. This initiative is aligned with our long-term strategy, designed to improve operational efficiency, enhance the client experience, and strengthen our internal controls and support profitability. Simply put, these investments are foundational to supporting our next phase of growth. A recent milestone was the go-live of phase 1 of our transportation management system in April.

This primarily reflects the 49 million special cash dividend paid in March.

Speaker #3: Trade policy remains fluid, particularly following the recent Supreme Court ruling on certain IEPA-related tariffs and the rollout of the CBP refund process. We are actively evaluating the potential implications, including the administrative process required to pursue refunds.

Net merchandise, inventory totaled. 369 million up 9% from December 31st 2025 and the increase reflects higher product costs including the impact of tariffs as well as inventory Investments, including increased depth in Best Sellers, as well as new product. Introductions, in addition to outdoor assortments ahead of the seasonal ramp

Speaker #3: Separately, the 10% global tariff implemented under Section 122 is currently scheduled to expire in July, though the path forward remains uncertain. Given this evolving backdrop, we continue to take a disciplined and measured approach.

Impact. Net merchandise inventory would be up approximately 6% from December 31, 2025.

Speaker #3: Importantly, our diversified sourcing strategy and meaningful domestic manufacturing footprint position us well across the range of potential policy scenarios. Based on current policy, we continue to estimate 2026 tariff impacts to be in the range of 30 to 40 million.

Michael Lee: Based on current policy, we continue to estimate 2026 tariff impacts to be in the range of $30 to $40 million. This reflects some benefits from vendor negotiations, sourcing shifts, and operational efficiencies. We will continue to assess pricing over the coming months and quarters and plan to respond quickly and thoughtfully as conditions evolve. Turning to our outlook. While we continue to operate in a challenging environment, we remain confident in our full year 2026 outlook. In Q1, we achieved results within our expected range, we continue to believe our long-term strategy and operating model position us well to navigate near-term volatility. We recognize that the consumer has been pressured by broader economic uncertainty, geopolitical tensions, and shifting consumer sentiment. That being said, we also see several meaningful factors supporting the balance of the year.

Turning to strategic Investments, we continue to make meaningful progress on, uh, numerous initiatives to modernize our distribution Network, and our technology infrastructure. This initiative is aligned with our long-term strategy designed to improve operational, efficiency and enhance the client experience and strengthen our internal controls and support profitability.

Simply put these Investments are foundational to supporting our next phase of growth.

Speaker #3: This reflects some benefits from vendor negotiations, sourcing shifts, and operational efficiencies. We will continue to assess pricing, over the coming months and quarters, and plan to respond quickly and thoughtfully as conditions evolve.

Michael Lee: This is an important foundational step in modernizing our distribution network and strengthening our transportation capabilities across the business. We are now live with the new TMS system and are nearing the end of our hypercare phase, at which point we will be fully operational. As with any large-scale implementation, there is continued work underway, and our teams remain focused on execution and long-term success. Our TMS is expected to deliver several meaningful benefits over time. First, improved cost efficiencies through better load optimization, route planning, and carrier selection, helping us to reduce transportation expense and improve network productivity. Second, greater operational visibility through real-time tracking and system-driven planning, replacing manual processes and giving us stronger control across the delivery journey. Third, stronger integration and scalability across our broader distribution network, creating efficiencies through connectivity with our warehouse management systems and other platforms.

Speaker #3: Turning to our outlook. While we continue to operate in a challenging environment, we remain confident in our full-year 2026 outlook. In the first quarter, we achieved results within our expected range, and we continue to believe our long-term strategy and operating model position us well to navigate near-term volatility.

A recent Milestone was a go live of phase. 1 of our transportation management system. In April, this is an important foundational step in modernizing, our distribution Network, and strengthening our transportation capabilities across the business. We are now live with the new TMS system and are nearing the end of our hypercare phase, at which point we will be fully operational.

And as with any large-scale implementation, there is continued work underway and our teams remain focused on execution and long-term success.

Our TMS is expected to deliver several meaningful benefits over time.

Speaker #3: We recognize that the consumer has been pressured by broader economic uncertainty, geopolitical tensions, and shifting consumer sentiment, and that being said, we also see several meaningful factors supporting the balance of the year.

Speaker #3: First, we entered the second quarter with healthy client deposits, which we expect to convert to delivered revenue, as inventory availability and in-stock positions improve across key categories.

Michael Lee: First, we entered the Q2 with healthy client deposits, which we expect to convert to delivered revenue as inventory availability and in-stock positions improve across key categories. Second, we have increased promotional activity and marketing efforts to drive volume and client engagement, strengthen brand awareness, and stimulate demand. Third, we have seen continued strength in our interior design and trade channels. As a result, these factors continue to support our confidence in the H2. Importantly, because of prior pricing actions, we have flexibility to increase our promotional activity while continuing to protect our margins. This allows us to support volume and demand generation without creating meaningful pressure on profitability. As we have said before, for our client base, we believe demand is often deferred rather than lost.

Second greater operational, visibility through real-time tracking and system driven planning, replacing manual processes and giving us stronger control across the delivery Journey.

Speaker #3: Second, we have increased promotional activity and marketing efforts to drive volume and client engagement, strengthen brand awareness, and stimulate demand. And third, we have seen continued strength in our interior design and trade channels, as a result, these factors continue to support our confidence in the back half of the year.

Michael Lee: We are encouraged by the progress and excited about the long-term value this platform can create as we continue to expand capabilities across the network. Additionally, we continue to make meaningful progress on our order management system and enterprise resource planning initiatives. Our OMS investment is critical to enhancing the client experience and improving the purchase journey across our omni-channel model. While our ERP investment is designed to modernize our core financial and operational systems. Execution across our distribution network and technology infrastructure investment remains our top priority. Success is delivering these initiatives on time, on budget, and within scope. Equally important is the cultural shift underway. As we implement these systems, we are increasing accountability and standardization across Arhaus, building a more scalable and disciplined operating model. Overall, we view these strategic investments as essential to strengthening our foundation and positioning Arhaus for long-term profitable growth.

And third stronger, integration and scalability. Across our broader distribution Network creating efficiencies through connectivity with our warehouse management systems and other platforms,

We are encouraged by the progress and excited about the long-term value of this platform can create as we continue to expand capabilities of the network.

Speaker #3: Importantly, because of prior pricing actions, we have flexibility to increase our promotional activity while continuing to protect our margins. This allows us to support volume and demand generation without creating meaningful pressure on profitability.

Additionally, we continue to make meaningful progress on our order management system and enterprise resource planning initiatives. Our OMS investment is critical to enhancing the client experience and improving the purchase journey across our Omni Channel model. While our Erp investment is designed to modernize our core financial and operational systems.

Speaker #3: As we have said before, for our client base, we believe demand is often deferred rather than lost. Our clients may consider purchases, and we believe deferred demand improved product availability and demand generation efforts support our confidence in maintaining our full-year guidance.

Michael Lee: Our clients may consider purchases, and we believe deferred demand, improved product availability, and demand generation efforts support our confidence in maintaining our full year guidance. It is also important to note that our current outlook does not include any benefits from potential IEEPA tariff refunds. As we gain full clarity and confirmation around those refunds, we will evaluate any impact and update our guidance if necessary. For the full year, we continue to expect net revenue between $1.43 billion and $1.47 billion for year-over-year growth of between 3.7% and 6.6%. Comparable delivered sales of flat to +3%. Net income of $66 million to $75 million. Adjusted EBITDA of $150 million to $161 million.

Execution across our distribution Network and Technology. Infrastructure investment remains our top priority, and success is delivering these initiatives on time on budget. And within scope.

Speaker #3: It's also important to note that our current outlook does not include any benefits from potential IEPA tariff refunds. As we gain full clarity and confirmation around those refunds, we will evaluate any impact and update our guidance if necessary.

Equally important is the cultural shift underway as we implement these systems. We are increasing accountability and standardization across our house, building a more scalable and disciplined operating model overall. We view these strategic investments as essential to strengthening our foundation and positioning our house for long-term profitable growth.

Michael Lee: Turning to tariffs and sourcing. Trade policy remains fluid, particularly following the recent Supreme Court ruling on certain IEPA-related tariffs and the rollout of the CBP refund process. We are actively evaluating the potential implications, including the administrative process required to pursue refunds. Separately, the 10% global tariff implemented under Section 122 is currently scheduled to expire in July, though the path forward remains uncertain. Given this evolving backdrop, we continue to take a disciplined and measured approach. Importantly, our diversified sourcing strategy and meaningful domestic manufacturing footprint position us well across the range of potential policy scenarios. Based on current policy, we continue to estimate 2026 tariff impacts to be in the range of $30 to 40 million. This reflects some benefits from vendor negotiations, sourcing shifts, and operational efficiencies.

Speaker #3: For the full year, we continue to expect net revenue between $1.43 billion and $1.47 billion for year-over-year growth of between 3.7% and 6.6%. Comparable delivered sales of flat to plus 3%, net income of $66 million to $75 million, and adjusted EBITDA of $150 million to $161 million.

Turning to tariffs and sourcing, trade policy remains fluid, particularly following the recent Supreme Court ruling on certain IIPA-related tariffs and the rollout of the CBP refund process. We are actively evaluating the potential implications, including the administrative process required to pursue refunds.

Speaker #3: For the second quarter of 2026, we expect continued near-term pressure on demand as consumer remains cautious amid ongoing macroeconomic and geopolitical uncertainty. Our second quarter outlook reflects a range of outcomes, with the low-end assuming continued pressure on demand trends and the high-end incorporating benefits from improved inventory availability, strong in-stock positions, client deposit conversion, and the positive impact of our increased marketing and promotional activity.

Michael Lee: For Q2 2026, we expect continued near-term pressure on demand as consumers remain cautious amid ongoing macroeconomic and geopolitical uncertainty. Our Q2 outlook reflects a range of outcomes with the low end assuming continued pressure on demand trends and the high end incorporating benefits from improved inventory availability, strong in-stock positions, client deposit conversion, and the positive impact of our increased marketing and promotional activity. As a reminder, we are also lapping a particularly strong Q2 in the prior year, which benefited from elevated delivered sales following insourcing of operations of our Dallas distribution center. Therefore, Q2 performance should be viewed in the context of this year-over-year comparison.

Separately, the 10% Global tariff implemented under Section. 122 is currently scheduled to expire in July though. The path forward remains uncertain.

Given this evolving backdrop, we continue to take a disciplined and measured approach.

Importantly, our Diversified sourcing strategy and meaningful domestic. Manufacturing footprint position us well across the range of potential policy scenarios.

Based on current policy, we continue to estimate 2026 tariff impacts to be in the range of 30 to 40 million.

Speaker #3: As a reminder, we are also lapping a particularly strong second quarter in the prior year, which benefited from elevated delivered sales following in-sourcing of operations of our Dallas distribution center.

Michael Lee: We will continue to assess pricing over the coming months and quarters and plan to respond quickly and thoughtfully as conditions evolve. Turning to our outlook. While we continue to operate in a challenging environment, we remain confident in our full year 2026 outlook. In Q1, we achieved results within our expected range. We continue to believe our long-term strategy and operating model position us well to navigate near-term volatility. We recognize that the consumer has been pressured by broader economic uncertainty, geopolitical tensions, and shifting consumer sentiment. That being said, we also see several meaningful factors supporting the balance of the year. First, we entered Q2 with healthy client deposits, which we expect to convert to delivered revenue as inventory availability and in-stock positions improve across key categories.

This reflects some benefits from vendor negotiations, sourcing, shifts and operational efficiencies.

Speaker #3: And therefore, second quarter performance should be viewed in the context of this year-over-year comparison. For the second quarter of 2026, we expect net revenue between $350 million to $370 million for a year-over-year growth rate of down 2.4% to up 3.2%.

We will continue to assess pricing over the coming months and quarters, and plan to respond quickly and thoughtfully as conditions evolve.

Michael Lee: For Q2 2026, we expect net revenue between $350 million to $370 million for a year-over-year growth rate of -2.4% to +3.2%, with comparable delivered sales of -5% to flat and net income of $19 million to $24 million and adjusted EBITDA of $40 million to $49 million. In closing, we are controlling what we can control and investing where it matters most and in positioning Arhaus to emerge stronger. We have the brand, the product, the balance sheet, and the strategy to navigate this period and capture opportunity as demand improves. Thank you to our teams across Arhaus for their focus and execution. To our shareholders, thank you for your continued support. With that, I'll turn it over to the operator.

Turning to our Outlook while we continue to operate in a challenging environment. We remain confident in our full year 2026 Outlook,

Speaker #3: With comparable delivered sales of minus 5% to flat, and net income of $19 million to $24 million, and adjusted EBITDA of $40 million to $49 million.

Speaker #3: In closing, we are controlling what we can control, and investing where it matters most, and positioning our house to emerge stronger. We have the brand, the product, the balance sheet, and the strategy to navigate this period and capture opportunity as demand improves.

And the first quarter, we achieved results within our expected range. And we continue to believe our long-term strategy and operating model position as well to navigate near-term volatility. We recognize that the consumer has been pressured by broader economic uncertainty, geopolitical tensions, and shifting consumer sentiment. And that being said, we also see several meaningful factors supporting the balance of the year.

Michael Lee: Second, we have increased promotional activity and marketing efforts to drive volume and client engagement, strengthen brand awareness, and stimulate demand. Third, we have seen continued strength in our interior design and trade channels. As a result, these factors continue to support our confidence in the back half of the year. Importantly, because of prior pricing actions, we have flexibility to increase our promotional activity while continuing to protect our margins. This allows us to support volume and demand generation without creating meaningful pressure on profitability. As we have said before, for our client base, we believe demand is often deferred rather than lost. Our clients may consider purchases, and we believe deferred demand, improved product availability, and demand generation efforts support our confidence in maintaining our full-year guidance. It's also important to note that our current outlook does not include any benefits from potential IEPA tariff refunds.

First, we entered the second quarter with healthy client deposits, which we expect to convert to delivered Revenue, as inventory availability, and in stock positions improve across key categories.

Speaker #3: Thank you to our teams across our house for their focus and execution. And to our shareholders, thank you for your continued support. And with that, I'll turn it over to the operator.

Second, we have increased promotional activity, and marketing efforts to drive, volume and client engagement strength and brand awareness and stimulate demand.

Speaker #3: We are happy to answer your questions.

Michael Lee: We are happy to answer your questions.

And third, we have seen continued strength in our interior design and trade channels.

Speaker #1: Thank you. We will now be conducting the question-and-answer session. We ask that you limit yourself to one question and one question only. If you would like to ask a question, please press star one on your telephone keypad.

Operator 1: Thank you. We will now be conducting the question and answer session. We ask that you limit yourself to one question and one question only. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using a speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. The first question comes from the line of Andrew Carter with Stifel.

Operator: Thank you. We will now be conducting the question and answer session. We ask that you limit yourself to one question and one question only. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using a speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. The first question comes from the line of Andrew Carter with Stifel.

As a result, these factors continue to support our confidence, in the back, half of the year.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #1: For participants using a speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions.

Importantly, because of Prior pricing actions, we have flexibility to increase our promotional activity, while continuing to protect our margins, this allows us to support volume and demand, generation without creating meaningful pressure on profitability as we have said before, for our client base, We Believe demand is often deferred rather than loss.

Speaker #1: The first question comes from the line of Andrew Carter with Steeple.

Our clients may consider purchases and we believe deferred demand improved product, availability and demand generation efforts support our confidence in maintaining our full-year guidance.

Speaker #2: Thank you. Good morning. I wanted to ask in terms of your reiteration of guidance, the guidance implies, I think, 3% to kind of 6.5% comparable growth in the second half of the year.

W. Andrew Carter: Thank you. Good morning. I wanted to ask, in terms of your reiteration of guidance, the guidance implies, I think, 3% to kind of 6.5% comparable growth in the H2 of the year. In terms of where your written trends are today comparable, are they supportive of that kind of outlook, or do they need to accelerate from here to get to the low end, high end, et cetera? Thanks.

Andrew Carter: Thank you. Good morning. I wanted to ask, in terms of your reiteration of guidance, the guidance implies, I think, 3% to kind of 6.5% comparable growth in the H2 of the year. In terms of where your written trends are today comparable, are they supportive of that kind of outlook, or do they need to accelerate from here to get to the low end, high end, et cetera? Thanks.

Michael Lee: As we gain full clarity and confirmation around those refunds, we will evaluate any impact and update our guidance if necessary. For the full year, we continue to expect net revenue between $1.43 billion and $1.47 billion for year-over-year growth of between 3.7% and 6.6%. Co-comparable delivered sales of flat to +3%. Net income of $66 million to $75 million, and adjusted EBITDA of $150 million to $161 million. For Q2 2026, we expect continued near-term pressure on demand as consumers remain cautious amid ongoing macroeconomic and geopolitical uncertainty.

Speaker #2: In terms of where your written trends are today comparable, are they supportive of that kind of outlook, or do they need to accelerate from here to get to the low-end, high-end, etc.?

It's also important to note that our current Outlook does not include any benefits from potential iepa tariff refunds. As we gain full clarity and Confirmation around those refunds, we will evaluate any impact and update our guidance. Uh, if necessary.

Speaker #2: Thanks.

Speaker #3: Yeah. Good morning. Thanks, Andrew. Look, let me first take a step back and remind everyone of the approach we took to setting our full-year guidance back in February: really starting with the top line, our guidance assumed a continuation of a weak housing market.

Michael Lee: Yeah. Good morning. Thanks, Andrew. Look, let me first take a step back and remind everyone of the approach we took to setting our full year guidance back in February. Really starting with the top line, our guidance assumed a continuation of a weak housing market. It assumed continued investments in home remodeling and renovations. And then we also assumed growth from our new trade model as a platform for growth into FY 26. And with this, we arrived at a range of around 0% to 3% comp delivered growth, and that was further supported by 350 basis points of growth tied to new showrooms in the development pipeline. That was really what underpinned our top line guide.

For the full year. We continue to expect net revenue between 1.43 billion and 1.47 billion for year-over-year. Growth of between 3.7% and 6.6%.

Of 66 million to 75 million and adjusted. EBA of 150 million to 161 million.

Speaker #3: It assumed continued investments in home remodeling and renovations. And then we also assumed growth from our new trade model, as a platform for growth into FY26.

Michael Lee: Our Q2 outlook reflects a range of outcomes, with the low end assuming continued pressure on demand trends and the high end incorporating benefits from improved inventory availability, strong in-stock positions, client deposit conversion, and the positive impact of our increased marketing and promotional activity. As a reminder, we are also lapping a particularly strong Q2 in the prior year, which benefited from elevated delivered sales following insourcing of operations of our Dallas distribution center. Therefore, Q2 performance should be viewed in the context of this year-over-year comparison.

For the second quarter of 2026, we expect continued near-term pressure on demand. As consumer as consumers. Remain cautious amid ongoing, macroeconomic and geopolitical uncertainty.

Speaker #3: And with this, we arrived at a range of around 0 to 3 percent comp delivered growth. And that was further supported by $350 basis points of growth tied to new showrooms in the development pipeline.

Speaker #3: So that was really what underpinned our top line guide. Our EBITDA margin guide was based on flattish gross margins for the year, reflecting modest inflationary headwinds.

Michael Lee: Our EBITDA margin guide was based on flattish gross margins for the year, reflecting, you know, modest inflationary headwinds, you know, a full year of tariff impacts, as well as, you know, pricing actions and improved mix, as well as, you know, various productivity initiatives to help offset some of those headwinds. From a operating expense perspective, we assumed, you know, continued funding of our digital transformation, which started last November and will continue through this year, as well as increases for sales and marketing investments to help drive the top line. That's what led to our EBITDA guidance of $151 to $160 million for the year. Look, as we mentioned in our prepared remarks, Q1 was challenging. We faced very difficult weather conditions.

Speaker #3: A full year of tariff impacts as well as pricing actions and improved mix as well as various productivity initiatives to help offset some of those headwinds.

Michael Lee: For Q2 2026, we expect net revenue between $350 to $370 million for a year-over-year growth rate of -2.4% to +3.2%, with comparable delivered sales of -5% to flat and net income of $19 to $24 million and adjusted EBITDA of $40 to $49 million. In closing, we are controlling what we can control and investing where it matters most and in positioning Arhaus to emerge stronger. We have the brand, the product, the balance sheet, and the strategy to navigate this period and capture opportunity as demand improves. Thank you to our teams across Arhaus for their focus and execution. To our shareholders, thank you for your continued support. With that, I'll turn it over to the operator.

Our second quarter Outlook reflects a range of outcomes with the low-end assuming continued pressure on demand Trends and the high-end incorporating benefits from improved inventory, availability, strong. In stock positions, client deposit, conversion, and the positive impact of our increased marketing and promotional activity. As a reminder, we are also lapping a particularly strong second quarter in the prior year, which benefited from elevated. Delivered sales following insourcing of operations of our Dallas distribution center and therefore second quarter performance should be viewed in the context of this year-over-year comparison.

Speaker #3: From an operating expense perspective, we assumed continued funding of our digital transformation, which started last November and will continue through this year, as well as increases for sales and marketing investments to help drive the top line.

For the second quarter of 2026, we expect net revenue between $350 million to $370 million, for a year-over-year growth rate of down 2.4% to up 3.2%.

Speaker #3: So that's what led to our EBITDA guidance of $151 to $160 million for the year. And look, as we mentioned in our prepared marks, Q1 was challenging.

With comparable delivered sales of minus 5% to flat and net income of 19 million to 24 million, and adjusted IBA of 40 million, to 49 million.

Speaker #3: We faced very difficult weather conditions. And just to give you a little more color, we had 60 showrooms closed for five days in January, which included a weekend.

Michael Lee: Just to give you a little more color, we had 60 showrooms close for 5 days in January, which included a weekend. We had 20 showrooms close later in January for 2 days, and then another 20 showroom closures in February for 3 days. If you just run the math on selling days against the quarter, it is about a 4% reduction in selling days as a result of those weather-related closures. We also, you know, had delays on the catalog, which coincided with our January store-wide sale. The catalogs, a majority of the catalogs did not show up in people's homes until the end of January.

Speaker #3: We had 20 showrooms closed later in January for two days. And then another 20 showroom closures in February for three days. So if you just run the math on selling days, against the quarter, it's about a 4% reduction in selling days as a result of those weather-related closures.

In closing, we are controlling what we can control and investing where it matters. Most, and in positioning, our house to emerge stronger, we have the brand, the product, the balance sheet, and the strategy to navigate this period and capture opportunity as demand approved.

Thank you to our teams across our house for their focus and execution.

Michael Lee: We are happy to answer your questions.

And to our shareholders, thank you for your continued support. And with that, I'll turn it over to the operator. We are happy to answer your questions.

Operator 1: Thank you. We will now be conducting the question-and-answer session. We ask that you limit yourself to one question and one question only. One moment while we pull for questions. The first question comes from the line of Andrew Carter with Stifel.

Thank you.

Speaker #3: We also had delays on the catalog, which coincided with our January store-wide sale. And the catalogs, a majority of the catalogs did not show up in people's homes until the end of January.

Speaker #3: And when you take that and then add the impact of the war and the commensurate impacts of the capital markets and what it meant to consumer sentiment, along with the associated inflation concerns that are emerging, we kind of had a perfect storm in Q1.

Michael Lee: When you take that and then add the impact of the war and the commensurate impacts of the capital markets and what it meant to consumer sentiment, along with the associated inflation concerns that are emerging, you know, we kinda had a perfect storm in Q1. Putting all that into context, we did see a meaningful improvement in, you know, showroom traffic and client engagement as we exited Q1 and proceeded into Q2, and that engagement really has continued through April and into May. And that's, you know, it's consistent with what we've highlighted in the past, which is our clients tend to be, you know, very resilient. They often are, you know, the fastest to return following a period of uncertainty.

We will now be conducting the question and answer session. We ask that you limit yourself to one question, and one question only. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants,

Confusing a speaker equipment. It may be necessary to pick up your handset before pressing the star key 1 moment, while we pull for questions.

Speaker #3: So putting all that into context, we did see a meaningful improvement in showroom traffic and client engagement as we exited Q1 and proceeded into Q2.

W. Andrew Carter: Thank you. Good morning. I wanted to ask in terms of your reiteration of guidance, the guidance implies, I think, 3% to kind of 6.5% comparable growth in H2. In terms of where your written trends are today comparable, are they supportive of that kind of outlook, or do they need to accelerate from here to get to the low end, high end, et cetera? Thanks.

The first question comes from the line of Andrew Carter with steeple.

Speaker #3: And that engagement really has continued through April and into May. And that's consistent with what we've highlighted in the past, which is our clients tend to be very resilient; they often are the fastest to uncertainty.

Michael Lee: Good morning. Thanks, Andrew. Look, let me first take a step back and remind everyone of the approach we took to setting our full year guidance back in February. Really starting with the top line, our guidance assumed a continuation of a weak housing market. It assumed continued investments in home remodeling and renovations. We also assumed growth from our new trade model as a platform for growth into FY26. With this, we arrived at a range of around 0% to 3% comp delivered growth, and that was further supported by 350 basis points of growth tied to new showrooms in the development pipeline. That was really what underpinned our top-line guide.

Thank you. Good morning. I wanted to ask in terms of your reiteration of guidance, your the guidance implies, I think 3% to kind of 6 and a half percent comparable growth in the second half of the year. In terms of where your written uh Trends are today comparable. Are they supportive of that kind of Outlook, or do they need to accelerate from here to get to the low end? High-end Etc. Thanks.

Yeah, good morning. Thanks Andrew. Uh,

Speaker #3: And though we're all cautious about the macro backdrop, we believe we're out of the woods when it comes to some of those unique challenges we faced in Q1.

Michael Lee: Though we're all, you know, cautious about the macro backdrop, we believe we're out of the woods when it comes to some of those unique challenges we faced in Q1. We've elected to hold our guide based on, you know, somewhat of an elevated risk profile. If you just look at our distance to go, taking our full year guide and bouncing that against what that means for Q2 to Q4, you know, we've got to deliver 1% to 4% delivered comp growth versus the full year guide of 0% to 3%. It's about another point from a distance to go perspective. You know, again, very elevated but achievable given we know how Q2 is shaping up, and we know everything that's in store, you know, for H2. You know, that's a little bit of a backdrop.

Speaker #3: So we've elected to hold our guide based on somewhat of an elevated risk profile. And if you just look at our distance to go, taking our full-year guide and bouncing that against what that means for Q2 to Q4, we've got to deliver 1 to 4 percent delivered comp growth versus the full-year guide of 0 to 3.

Look, let me, let me first, take a step back and remind everyone of the approach. We took to setting our full year guidance. Back in February, really starting with the Top Line, our guidance assumed a continuation of a weak housing market. It assumed continued investments in Home Remodeling and Renovations, uh,

Speaker #3: So it's about another point from a distance-to-go perspective. So again, very elevated, but achievable given we know how Q2 is shaping up and we know everything that's in store for H2.

Michael Lee: Our EBITDA margin guide was based on flattish gross margins for the year, reflecting, you know, modest inflationary headwinds, you know, a full year of tariff impacts, as well as, you know, pricing actions and improved mix, as well as, you know, various productivity initiatives to help offset some of those headwinds. From a operating expense perspective, we assumed, you know, continued funding of our digital transformation, which started last November and will continue through this year, as well as increases for sales and marketing investments to help drive the top line. That's what led to our EBITDA guidance of $151 million to $160 million for the year. Look, as we mentioned in our prepared marks, Q1 was challenging. We faced very difficult weather conditions.

Speaker #3: So that's a little bit of a backdrop. And then I also want to highlight that we're entering a period where our inventory availability and our in-stock now status is reaching recent highs.

Michael Lee: I also wanna highlight that, you know, we're entering a period where our inventory availability and our in-stock now status is reaching recent highs. You know, we haven't talked a lot about it, but as we've navigated through tariffs, you know, over the last 6 to 8 months, we've had portions of inventory where, you know, we were oversold, and we had elongated, you know, lead times. We're in a much stronger position now than we were, you know, even 2, 3 months ago. Really optimistic that we're well-positioned, you know, from that perspective. You know, as far as our Q2 guide goes, Andrew, recall that we are overlapping, you know, a pretty big Q2 of last year.

And then we also assumed growth from our new trade model. Um, as a platform for growth in the FY 26. And with this, we arrived at a range of around zero to 3% cop delivered growth. And that was further supported by 350 basis points of growth tied to new showrooms in the development pipeline. So that was really what underpinned our our Top Line guide our Eva do margin. Guide was based on

Flattish gross margins for the year reflecting, you know, modest inflationary headwinds.

You know, a full year of tariff impacts.

Speaker #3: We haven't talked a lot about it, but as we've navigated through tariffs, over the last six to eight months, we've had portions of inventory where we were oversold and we had elongated lead times.

uh, as well as you know, pricing actions and improved mix as well as you know various productivity initiatives to help offset some of those headwinds

Speaker #3: And we're in a much stronger position now than we were even two, three months ago. So really optimistic that we're well positioned from that perspective.

Speaker #3: As far as our Q2 guide goes, Andrew, recall that we are overlapping a pretty big Q2 of last year. Our delivered comp was up 10.5% last year in Q2.

Michael Lee: Our delivered comp was up 10.5% last year in Q2, that was, you know, driven by the early ramp of Dallas. As we sit here today, 5 weeks into the quarter, you know, we're trending toward the high end of our Q2 guide. We kept our range wide because of the ongoing uncertainty that we're facing, and we think that's prudent. Once again, because of that Q2 overlap, I would encourage everyone to look at our Q2 guide relative to 2 years ago. In doing that, you'll see that our Q2 revenue guide is +13% to +19% versus 2024. If you look at adjusted EBITDA, it's essentially flat to +22% versus 2024.

Michael Lee: Just to give you a little more color, we had 60 showrooms closed for 5 days in January, which included a weekend. We had 20 showrooms closed later in January for 2 days, and then another 20 showroom closures in February for 3 days. If you just run the math on selling days against the quarter, it's about a 4% reduction in selling days as a result of those weather-related closures. We also, you know, had delays on the catalog, which coincided with our January storewide sale. The catalogs, a majority of the catalogs did not show up in people's homes until the end of January.

Speaker #3: And that was driven by the early ramp of Dallas. And as we sit here today, five weeks into the quarter, we're trending toward the high end of our Q2 guide.

Speaker #3: But we kept our range wide because of the ongoing uncertainty that we're facing. And we think that's prudent. So once again, because of that Q2 overlap, I would encourage everyone to look at our Q2 guide relative to two years ago.

Speaker #3: And in doing that, you'll see that our Q2 revenue guide is plus 13 to plus 19 percent versus 2024. And if you look at adjusted EBITDA, it's essentially flat to up 2020 top.

Peter in January for 2 days and then another 20 showroom closures in February for 3 days. So if you just run the map on selling days against the quarter, it's about a 4% reduction in selling days as a result of those weather related closures. Uh, we also um, you know, had delays um on the on the catalog uh which coincided with our January storewide sale.

Michael Lee: When you take that and then add the impact of the war in Iran and the commensurate impacts of the capital markets and what it meant to consumer sentiment, along with the associated inflation concerns that are emerging, you know, we kind of had a perfect storm in Q1. You know, putting all that into context, we did see a meaningful improvement in, you know, showroom traffic and client engagement as we exited Q1 and proceeded into Q2. That engagement really has continued through April and into May. That's, you know, it's consistent with what we've highlighted in the past, which is our clients tend to be, you know, very resilient. They often are the, you know, the fastest to return following a period of uncertainty.

Speaker #3: I'm sorry, it's flat to plus 22% versus 2024. So just looking at it, taking the overlap out of play and looking at it versus two years ago.

uh and the catalogs a majority of the catalogs did not show up in people's homes until the end of of January and

Michael Lee: Just looking at it, taking the overlap out of play, looking at it versus 2 years ago. That's how significant that Q2 overlap was for us. Again, just one final comment when we get back to our full year guide looking at EBITDA. We do have an elevated risk profile, really driven by a variety of inflationary headwinds. I mentioned, you know, fuel costs that are having both a direct and indirect impact on our business, and we are taking actions to mitigate these costs. While we, you know, have a number of productivity initiatives underway, we expect that to start to flow through in H2 as well, and we'll share more details on these as they materialize.

Speaker #3: So that's how significant that Q2 overlap was for us. And again, just one final comment, when we get back to our full-year guide, looking at EBITDA, we do have an elevated risk profile.

Speaker #3: Really driven by a variety of inflationary headwinds. I mentioned fuel costs, they're having both a direct and indirect impact on our business. And we are taking actions to mitigate these costs.

Speaker #3: And while we have a number of productivity initiatives underway, we expect that to start to flow through in the second half as well. And we'll share more details on these as they materialize.

Michael Lee: Just one, you know, final reminder, our current guidance does not include anything on tariff refunds. We just don't know enough at this stage to guide on it. I can assure you by the end of Q2, we'll have more information to share. Hopefully that gives you a little color on, you know, the building blocks behind our full year guide as we sit here, you know, 5 weeks into Q2.

Speaker #3: And just one final reminder, our current guidance does not include anything on tariff refunds. We just don't know enough at this stage to guide on it.

Michael Lee: Though we're all, you know, cautious about the macro backdrop, we believe we're out of the woods when it comes to some of those unique challenges we faced in Q1. We've elected to hold our guide based on, you know, somewhat of an elevated risk profile. If you just look at our distance to go, taking our full year guide and bouncing that against what that means for Q2 to Q4, you know, we've got to deliver 1% to 4% delivered comp growth versus the full year guide of 0% to 3%. It's about another 1 point from a distance to go perspective. You know, again, very elevated but achievable given we know how Q2 is shaping up, and we know everything that's in store, you know, for H2. You know, that's a little bit of a backdrop.

Speaker #3: But I can assure you by the end of Q2, we'll have more information to share. So hopefully, that gives you a little color on the building blocks behind our full-year guide as we sit here five weeks into Q2.

When you, you take that and then add the impact of the war and the commensurate impacts of the capital markets. And and what it meant to Consumer sentiment, along with the associated inflation, concerns that are emerging you you, you know, we kind of had a perfect storm in q1. So, you know, putting putting all that into context. Uh, we did see a meaningful Improvement in, you know, showroom traffic and client engagement, as we exited q1 and proceeded in into Q2 and that engagement really has continued through April and into May. Uh, and that's, you know, it's consistent with what we've highlighted in the past, which is our clients, tend to be, you know, very resilient. They often are the, you know, the fastest to return following a period of uncertainty and though, we're all, you know, cautious about the macro backdrop, we believe we're out of the woods. Uh, when it comes to some of those unique challenges, we faced in q1

Speaker #2: And I just want to add one little piece just to our full-year 2026 adjusted EBITDA guide is 150 million to 161 million for the full year.

Tara Atwood-Saja: I just wanna add one little piece just to our full year 2026 adjusted EBITDA guide is $150 to 161 million for the full year.

Speaker #3: Thank you, Tara.

Michael Lee: Thank you, Tara.

Speaker #4: And our next question, we'll hear from Marilyn Tech with Bank of America.

Operator 2: Our next question, we'll hear from Marilyn Chen with Bank of America.

Operator: Our next question, we'll hear from Marilyn Chen with Bank of America.

Michael Lee: I also want to highlight that, you know, we're entering a period where our inventory availability and our in-stock now status is reaching recent highs. You know, we haven't talked a lot about it, but as we've navigated through tariffs, you know, over the last 6 to 8 months, we've had portions of inventory where, you know, we were oversold, and we had elongated, you know, lead times. We're in a much stronger position now than we were, you know, even 2, 3 months ago. Really optimistic that we're well-positioned, you know, from that perspective. You know, as far as our Q2 guide goes, Andrew, recall that we are overlapping, you know, a pretty big Q2 of last year.

Speaker #5: Okay. Thank you for taking my question. I was wondering if you could remind us the timeline of your order management system and ERP rollout.

Marilyn Chen: Thank you for taking my question. I was wondering if you could remind us the timeline of your Order Management System and ERP rollout. Are you still targeting Q1 2027 for deployment? Can you remind us the P&L impact from that investment in 2026? I think maybe you expected to see some gross margin efficiencies from the transportation management part of that in H2, but just wondering what kind of SG&A cost you will see in 2026.

Speaker #5: Are you still targeting 1Q2027 for deployment? And can you remind us the P&L impact from that investment in '26? I think maybe you expected to see some gross margin efficiencies from the transportation management part of that in the second half.

So we've elected to hold our guide based on, you know, somewhat of an elevated risk profile. And if you just look at our distance to go taking our full year guide and bouncing that against what that means for, Q2 to Q4, you know, we've got to deliver 1 to 4% delivered comp growth versus the full year guide of 0 to 3. So it's it's about another Point uh from a distance to go perspective. So you know, again very elevated but achievable given we know how Q2 is shaping up and we know everything that's in store, you know, for H2. Um so you know that that's a little bit of a backdrop and then I also want to highlight that, you know, we're entering a period where our inventory availability and our, our in-stock now status.

Speaker #5: But just wondering what kind of SG&A cost you will see in 2026.

Speaker #3: Yeah. Thanks for the question. Look, we're really excited about the progress we're making on our digital transformation. The TMS system is going to provide meaningful benefits to our supply chain.

Michael Lee: Yeah. Thanks for the question. Look, we're really excited about the progress we're making on our digital transformation. The TMS system is going to provide meaningful benefits to our supply chain. In fact, even though we're still in the hypercare phase, which we do expect to end in the next few days, by the way. We are already looking at the underlying KPIs that measure load rates and all the associated efficiencies that we expected to get from this transportation management system. Early indicators are that, yes, we are already seeing some of those benefits.

Is reaching recent highs, you know, we haven't talked a lot about it, but as we've navigated through tariffs, you know, over the last 6 to 8 months, we've had, you know, uh, portions of inventory where, you know, we were oversold and we had elongated, you know, lead times and we're in a much stronger position now than we were, you know, even 2, 3 months ago. So really really optimistic that we're well positioned, you know, from from that perspective um,

Speaker #3: In fact, even though we're still in the hypercare phase, which we do expect to end in the next few days, by the way, underlying KPIs that measure load rates and all the associated efficiencies that we expected to get from this transportation management system.

Michael Lee: Our delivered comp was up 10.5% last year in Q2, and that was, you know, driven by the early ramp of Dallas. As we sit here today, 5 weeks into the quarter, you know, we're trending toward the high end of our Q2 guide. We kept our range wide because of the ongoing uncertainty that we're facing, and we think that's prudent. Once again, because of that Q2 overlap, I would encourage everyone to look at our Q2 guide relative to 2 years ago. In doing that, you'll see that our Q2 revenue guide is +13% to +19% versus 2024. If you look at adjusted EBITDA, it's essentially flat to +22% versus 2024.

Speaker #3: So early indicators are that, yes, we are already seeing some of those benefits. When you go fully operational on the TMS, which would include the phase two portion of that project, which kicks off here in the next few weeks, and it helps us with inbound transportation, we expect to see four to five million dollars a year in annualized benefits on just that transportation line item.

Michael Lee: When you go fully operational on the TMS, which would include the phase 2 portion of that project, which kicks off here in the next few weeks, and it helps us with inbound transportation, we expect to see $4 to $5 million a year in annualized benefits on just that transportation line item. For FY '26, you know, we're forecasting $1 to $2 million of benefits. Maybe we'll do a little bit better than that, but that's what we're modeling. When you look at the other components of the digital transformation, which include the ERP and the OMS, as we sit here today, we're on schedule. With these projects, you always have week-to-week volatility on are we on track on certain tasks.

Speaker #3: For FY26, we're forecasting 1 to 2 million dollars of benefits. Maybe we'll do a little bit better than that, but that's what we're modeling.

Michael Lee: Just looking at it, taking the overlap out of play and looking at it versus 2 years ago. That's how significant that Q2 overlap was for us. Again, just one final comment when we get back to our full-year guide looking at EBITDA. We do have an elevated risk profile, really driven by a variety of inflationary headwinds. I mentioned, you know, fuel costs. They're having both a direct and indirect impact on our business, and we are taking actions to mitigate these costs. While we, you know, have a number of productivity initiatives underway, we expect that to start to flow through in H2 as well, and we'll share more details on these as they materialize.

You know, as far as our Q2 guy goes, Andrew recall that we are overlapping, you know, a pretty big Q2 of last year. Our delivered comp was up 10 and a half percent last year in Q2 and that was, you know, driven by the, the early ramp of Dallas. And, uh, you know, as we sit here today, 5 weeks into the quarter, you know, we're trending toward the high end of our Q2 guide, but we kept our our range wide because of the ongoing uncertainty that we're facing and we we we think that's prudent. Uh, so once again, because of that, Q2 overlap, I would encourage everyone to look at our Q2 guide relative to 2 years ago. And in doing that, you'll see that our Q2 Revenue guide is plus 13 to plus 19% versus 2024. And if you look at adjusted IB, but uh, it's essentially flat to up 2020. Uh, top, I'm sorry. It's flat to plus 22% versus 2024. So just looking at it,

Speaker #3: When you look at the other components of the digital transformation, which include the ERP and the OMS, as we sit here today, we're on schedule.

Speaker #3: With these projects, you always have week-to-week volatility on, are we on track on certain tasks? Some we're ahead on, some we're behind on. But on its entirety, we are still tracking for a Q1 launch on both of those systems.

Michael Lee: Some we're ahead on, some we're behind on its entirety, we are still tracking for a Q1 launch on both of those systems. You know, so far, we're on budget and generally no massive, like, scope changes at this point. We feel pretty good about the scope. There's a few things here and there that, you know, that we're looking at, Generally, in terms of the overall deliverables, you know, we're tracking quite well. Going back to our business case on this, you know, there's a tremendous number of benefits that emerge over the next few years. Some of it is tied to software savings as we consolidate our ecosystem and have fewer systems that we're paying licensing fees on.

Taking the overlap out of play and looking at it versus 2 years ago. So that's how significant that Q2 overlap was for us. And and again just 1 final comment when we get back to our full year guide, looking at ibid, do we do have a an elevated risk profile. Uh really driven by a variety of inflationary headwinds I mentioned you know, fuel costs.

Uh, that are having both a direct and indirect impact on our business and we are taking actions to mitigate these costs.

Speaker #3: And so far, we're on budget. And generally, no massive scope changes at this point. We feel pretty good about the scope. There's a few things here and there that we're looking at.

Speaker #3: But generally, in terms of the overall deliverables, we're tracking quite well. Going back to our business case on this, there's a tremendous number of benefits that emerge over the next few years.

Uh, and, and, and while we, uh, you know, have a number of productivity initiatives underway, we expect that to start to flow through in the second half as well, and we'll share more details on these as they materialize.

Speaker #3: Some of it is tied to software savings as we consolidate our ecosystem and have fewer systems that we're paying licensing fees on. Some of it is in the form of IT efficiencies where we can streamline our support costs.

Tara Atwood-Saja: I just wanna add one little piece just to our full year 2026 adjusted EBITDA guide is $150 to $161 million for the full year.

Michael Lee: Some of it is in the form of IT efficiencies, where we can streamline our support costs. Then some of it just comes down to SG&A efficiency across the organization. Just from an SG&A perspective, we're modeling 50 basis points of SG&A load that will materialize over the next, you know, two years. That's still what we're targeting. That's, you know, again, it will come across different pockets of the organization, a lot of that being back office costs, whether it's, you know, things like, you know, payroll, accounts payable, and other, you know, transactional areas of the business.

Speaker #3: And then some of it just comes down to SG&A efficiency across the organization. And just from an SG&A perspective, we're modeling 50 basis points of SG&A load that will materialize over the next two years.

Michael Lee: Thank you, Tara.

And I just want to um add 1 1. Little piece just to uh our full year. 2026 adjusted EPA guide is 150 million to 161 million for the full year. Thank you. Tara,

Operator 2: Our next question, we'll hear from Marilyn Clark with Bank of America.

Speaker #3: So that's still what we're targeting. And that's again, it will come across different pockets of the organization. A lot of that being back-office costs, whether it's things like payroll, accounts payable, and other transactional areas of the business.

and our next question, we'll hear from Marilyn check with Bank of America.

Marilyn Clark: Thank you for taking my question. I was wondering if you could remind us the timeline of your order management system and ERP rollout. Are you still targeting Q1 2027 for deployment? Can you remind us the P&L impact from that investment in 2026? I think maybe you expected to see some gross margin efficiencies from the transportation management part of that in H2. Just wondering what kind of SG&A cost you will see in 2026.

Speaker #3: But getting back to your point on that order management system, we see this as a significant unlock to how we fill orders, how we deploy inventory, and we think that's going to be a big unlock just from a productivity perspective, but also from a customer experience perspective.

Michael Lee: Getting back to your point on that order management system, we see this as a significant unlock to how we fill orders, how we deploy inventory, and we think that's gonna be a big unlock just from a productivity perspective, but also from a customer experience perspective. Lots more to come. We'll keep you updated quarterly on this, but tracking extremely well at this juncture.

Thank you for taking my question. Um, I I was wondering if you could remind us the timeline of your order management system and Erp rollout. Are you still targeting 1 Cube 2027 for deployment? And can you remind us the p&l impact from that investment in 26? I think maybe you expected to see some growth margin efficiencies from the transportation management, part of that, and the second half, but, just wondering what kind of sgna cost. Um, you will see in 2026.

Michael Lee: Yeah. Thanks for the question. Look, we're really excited about the progress we're making on our digital transformation. The TMS system is going to provide meaningful benefits to our supply chain. In fact, even though we're still in the hypercare phase, which we do expect to end in the next few days, by the way, we are already looking at the underlying KPIs that measure load rates and all the associated efficiencies that we expected to get from this transportation management system. Early indicators are that, yes, we are already seeing some of those benefits.

Speaker #3: So lots more to come. We'll keep you updated quarterly on this, but tracking extremely well at this juncture.

Speaker #4: And next, we'll hear from Christina Fernandez with Telsi Advisory Group.

Operator 2: Next, we'll hear from Cristina Fernandez with Telsey Advisory Group.

Operator: Next, we'll hear from Cristina Fernandez with Telsey Advisory Group.

Yeah, thanks for the question. Look, we're really excited about the progress. We're making on our digital transformation. Uh, the the TMS system is going to provide meaningful benefits to our supply chain. In fact, even though we're still in the hyper care phase.

Speaker #5: Hi. Good morning. I had a question for John. Can you talk about how consumers are responding to the newness, whether it was the spring collection or the expanded outdoor in the bath introductions you did in the fall in also a clarification on the current trend when you talk about significant improvement?

Cristina Fernandez: Hi, good morning. I had a question for John. Can you talk about how consumers are responding to the newness, whether it was the spring collection or the expanded outdoor and the bath introductions you did in the fall? Also a clarification on the current trend. When you talk about significant improvement, has demand turned positive, or is it still negative but vastly improved from earlier in the quarter? Thanks.

Cristina Fernández: Hi, good morning. I had a question for John. Can you talk about how consumers are responding to the newness, whether it was the spring collection or the expanded outdoor and the bath introductions you did in the fall? Also a clarification on the current trend. When you talk about significant improvement, has demand turned positive, or is it still negative but vastly improved from earlier in the quarter? Thanks.

Michael Lee: When you go fully operational on the TMS, which would include the phase 2 portion of that project, which kicks off here in the next few weeks, and it helps us with inbound transportation, we expect to see $4 to 5 million a year in annualized benefits on just that transportation line item. For FY '26, you know, we're forecasting $1 to 2 million of benefits. Maybe we'll do a little bit better than that, but that's what we're modeling. When you look at the other components of the digital transformation, which include the ERP and the OMS, as we sit here today, we're on schedule. With these projects, you always have week-to-week volatility on are we on track on certain tasks. Some we're ahead on, some we're behind on.

Speaker #5: Has the demand turned positive, or is it still negative but vastly improved from earlier in the quarter? Thanks.

Speaker #3: Hi, Christina. Yeah. Thanks for the question. Yeah. Product-wise, I think, as I said in the recorded talk, that this is our biggest launch of new product most exciting time I think in our history.

John Reed: Hi, Cristina. Yeah, thanks for the question. Yeah, product-wise, you know, I think as I said in the recorded talk that, you know, this is our biggest launch of new product, most exciting time, you know, I think in our history. As I'm sure you may or may not know, but, you know, trends have changed very quickly in the last year or so. They've changed really into our favor, product that is just right down our sweet spot. You know, it had been very stark white or even before that, just gray, neutral fabrics, you know, very flat. We've always been much more eclectic, much warmer, and so forth. It's a great time right now.

Which which we do expect to end in the next few days, by the way. Um, we we are we are already looking at the underlying kpis that measure load rates, and all the associated efficiencies that we expected to get from this transportation management system. So early, indicators are that? Yes, we are. We are already seeing some of those benefits When when you, uh, go fully operational on the TMS, which would include the the, the phase 2, portion of that project, which kicks off here in the next few weeks. And it and it, uh, helps us with inbound Transportation. Uh, we expect to see 4 to 5 million dollars a year in annualized benefits on just that Transportation line item. Uh, for FY 26. You know, we're forecasting 1 to 2 million dollars of benefits. Maybe we'll do a little bit better than that but that's what we're we're we're modeling.

Speaker #3: As I'm sure you may or may not know, but trends have changed very quickly in the last year or so. And they've changed really into our favor product that is just right down our sweet spot.

Michael Lee: On its entirety, we are still tracking for a Q1 launch on both of those systems. You know, so far, we're on budget and generally no massive, like, scope changes at this point. We feel pretty good about the scope. There's a few things here and there that, you know, that we're looking at, but generally, in terms of the overall deliverables, you know, we're tracking quite well. Going back to our business case on this, you know, there's a tremendous number of benefits that emerge over the next few years. Some of it is tied to software savings as we consolidate our ecosystem and have fewer systems that we're paying licensing fees on. Some of it is in the form of IT efficiencies, where we can streamline our support costs.

Speaker #3: It had been very stark white or even before that, just gray. Neutral fabrics, very flat. And we've always been much more eclectic much warmer and so forth.

Uh, when you look at the other components of the digital transformation, which include the ERP and the MS, as we sit here today, we're on schedule. Uh, with these projects, you always have week-to-week volatility on are we on track on certain tasks. Some we're ahead on, some we're behind on, but in its entirety, uh, we are still tracking for a Q1 launch on both of those systems.

Speaker #3: So it's been a it's a great time right now. We accelerated the launch of some of our products. And I'm thrilled to report that in the big picture, the results have been phenomenal.

Michael Lee: We accelerated the launch of some of our products. I'm thrilled to report that, in the big picture, the results have been phenomenal. We're playing catch up to get them to all stores. You know, a lot of these groups that we say we would've tested in 20 stores, put on the web, and so forth, we monitor closely, and if it's outperforming, you know, product that's currently on floors, then we switch floor samples and send it out to all the stores. We're in that process right now. Everything's looking fantastic. I'm loving, you know, the wood pieces, the designs, and the shapes.

John Reed: We accelerated the launch of some of our products. I'm thrilled to report that, in the big picture, the results have been phenomenal. We're playing catch up to get them to all stores. You know, a lot of these groups that we say we would've tested in 20 stores, put on the web, and so forth, we monitor closely, and if it's outperforming, you know, product that's currently on floors, then we switch floor samples and send it out to all the stores. We're in that process right now. Everything's looking fantastic. I'm loving, you know, the wood pieces, the designs, and the shapes.

Speaker #3: Now we're playing catch-up to get them to all stores a lot of these groups that we would say would have tested in 20 stores, put on the web, and so forth.

Speaker #3: We monitor closely and if it's outperforming a product that's currently on floors and then we switch floor samples and send it out to all the stores.

Speaker #3: So we're in that process right now. But everything's looking fantastic. I'm loving the wood pieces. The designs, the shapes, I just got back from the Milan furniture show last week, week before.

Michael Lee: Some of it just comes down to SG&A efficiency across the organization. Just from an SG&A perspective, we're modeling 50 basis points of SG&A load that will materialize over the next, you know, 2 years. That's still what we're targeting. That's, you know, again, it will come across different pockets of the organization, a lot of that being back office costs, whether it's, you know, things like, you know, payroll, accounts payable, and other, you know, transactional areas of the business. Getting back to your point on that order management system, we see this as a significant unlock to how we fill orders, how we deploy inventory, and we think that's gonna be a big unlock just from a productivity perspective, but also from a customer experience perspective.

Um, and you know, so far, um, we're on budget. And and, and, and generally no, no massive like scope changes at this point. We feel pretty good about the scope. There's a few things here and there that, you know, that we're looking at. But generally, in terms of the overall deliverables, you know, we're tracking quite well, uh, going back to our our business case on this. Um, you know, there's a tremendous number of B benefits that emerge over the next few years. Uh, some of it is tied to software savings, as we consolidate our ecosystem and have fewer systems, that we're paying licensing fees on. Um, some of it is in the form of it, efficiencies, where we can, uh, streamline our support costs.

Michael Lee: I just got back from the Milan Furniture Show last week before. I've gotta say, we should have had a booth there because I think our product looks better than anybody else's I saw in Milan. I've never said that before. I think it's the truth. We are dead on, right with the trends. We're way ahead of the competition in it. Yeah, it's gonna be a fun year for that.

John Reed: I just got back from the Milan Furniture Show last week before. I've gotta say, we should have had a booth there because I think our product looks better than anybody else's I saw in Milan. I've never said that before. I think it's the truth. We are dead on, right with the trends. We're way ahead of the competition in it. Yeah, it's gonna be a fun year for that.

Speaker #3: And I've got to say, we should have had a booth there because I think our product looks better than anybody else's I saw in Milan.

Speaker #3: I've never said that before, but I think it's the truth. We are dead on right with the trends. And we're way ahead of the competition in it.

Speaker #3: And yeah, it's going to be a fun year for that.

Jennifer Porter: Yeah. Christina, just to add a little bit of color there, too, you know, Mike and John both referred to our catalog being delayed earlier. You know, specifically, as I think you all know, we have various catalogs and direct mailings that we send out. Big book at 228 pages, a 12-pager, postcards. The catalog that was affected with those delays was that 228-page book, and that is really the supporting system for us introducing all of that incredible new product and getting it out to our customers and into their homes. You know, just looking at that, customers are really responding well to that product. Now getting that marketing into homes, launching digital campaigns throughout the quarter.

Speaker #4: Yeah. And Christina, just to add a little bit of color there too, Mike and John, both referred to our catalog being delayed earlier. And specifically, as I think you all know, we have various catalogs and direct mailings that we send out, big bucket, 228 pages, a 12-page or postcards.

Uh and then some of it just comes down to sgna efficiency across the organization and just from an sgna perspective uh we're modeling 50 basis points of sgna load. That will materialize over the next you know 2 years. Um so that that's still what we're targeting and that's you know again it will come across different pockets of the organization, a lot of that being back office costs. Whether it's you know, things like you know, payroll accounts payable um and other you know, transactional areas of the business. But getting back to your point on that order management system. We we see this as a significant unlock to how we fill orders, how we deploy inventory and

Michael Lee: Lots more to come. We'll keep you updated quarterly on this, but tracking extremely well at this juncture.

We we think that's going to be a, a, a big unlock just from a productivity perspective, but also from a customer experience perspective.

Speaker #4: The catalog that was affected with those delays was that 228-page book. And that is really the supporting system for us introducing all of that incredible new product and getting it out to our customers and into their homes.

So lots more to come, we'll keep you updated quarterly on this but tracking extremely well at this juncture.

Operator 2: Next, we'll hear from Cristina Fernandez with Telsey Advisory Group.

Speaker #4: So just looking at that, customers are really responding well to that product. And now getting that marketing into homes, launching digital campaigns throughout the quarter.

And next, we'll hear from Cristina Fernandez with telsey Advisory Group.

Speaker #4: And then we actually have gotten our early summer catalog out into homes at the end of March here. We're just really excited to continue to see that initial engagement and excitement to that product.

Jennifer Porter: We actually have gotten our early summer catalog out into homes at the end of March here. We're just really excited to continue to see that initial engagement and excitement to that product. It continuing to grow going into Q2 now that more people know that it's out there and are being driven into stores to go and see it.

Speaker #4: It continuing to grow going into Q2 now, that more people know that it's out there. And are being driven into stores to go and see it.

Speaker #3: And it's obviously the beginning of the outdoor season. So far, it's been phenomenal. We're very happy with the results. And learning a lot for next year to even get better.

John Reed: It's obviously the beginning of the outdoor season. So far it's been phenomenal. We're very, very happy with the results and learning a lot for next year to even get better.

But vastly improved from earlier in the quarter. Thanks.

John Reed: Hi, Cristina. Yeah, thanks for the question. Yeah, product-wise, you know, I think as I said in the recorded talk that, you know, this is our biggest launch of new product, most exciting time, you know, I think in our history. As I'm sure, well, you may or may not know, you know, trends have changed very quickly in the last year or so. They've changed really into our favor, product that is just right down our sweet spot. You know, it had been very stark white or even before that, just gray, neutral fabrics, you know, very flat. We've always been much more eclectic, much warmer, and so forth. It's a great time right now.

Hi Christina. Um yeah, thanks for the question. Um,

Michael Lee: I would just add on the newness front, in Q1, I think our newness was at around 12% of sales, up from 8% of sales last year. continuing to lean more into that, and that trend continued into April. Look, I know, you know, we talked about not getting into month-to-month, you know, disclosures, but I think the question was has demand turned positive in April? It absolutely has turned positive. I can tell you April and May are performing even ahead of some of our internal forecasts. We are very, very encouraged by the momentum in the business. You know, we talked about U-shaped recoveries and V-shaped recoveries. I would say April was more like a V-shaped recovery in that regard.

Speaker #2: I would just add on the newness front in Q1. I think our newness was at around 12% of sales up from 8% of sales last year.

yeah, product wise, you know, I think as I said in the recorded um,

talk that, um, you know, this is a

Speaker #2: So continuing to lean more into that. And that trend continued into April. And look, I know we talked about not getting into month-to-month disclosures, but I think the question was, has demand turned positive in April?

biggest launch of new product, most exciting time, you know, I think in in our history,

Speaker #2: It absolutely has turned positive. And I can tell you April and May are performing even ahead of some of our internal forecasts. So we are very, very encouraged by the momentum in the business.

Um as I'm sure when you may or may not know but you know Trends have changed very quickly in the last year or so um and they've changed really into our favor uh product that is just write down our sweet spot. Um you know it had been very stark white or even before that just Gray.

Speaker #2: And we've talked about U-shaped recoveries and V-shaped recoveries. I would say April was more like a V-shaped recovery in that regard.

John Reed: We accelerated the launch of some of our products, I'm thrilled to report that, in the big picture, the results have been phenomenal. Now we're playing catch up to get them to all stores. You know, a lot of these groups that we say would've tested in 20 stores, put on the web, and so forth. We monitor it closely and if it's outperforming, you know, product that's currently on floors, then we switch floor samples and send it out to all the stores. We're in that process right now. Everything's looking fantastic. I'm loving, you know, the wood pieces, the designs, the shapes. I just got back from the Salone del Mobile last week before.

Neutral Fabrics, you know, very flat. Um and we've always been much more eclectic much warmer and so forth. So it's been um, it's been a, it's a great time right now. We, we accelerated the launch of some of our products. Um,

Operator 2: Next, we'll move on to Steven Forbes with Guggenheim Securities.

Speaker #4: And next, we'll move on to Stephen Forbes with Guggenheim Security.

Operator: Next, we'll move on to Steven Forbes with Guggenheim Securities.

and I'm thrilled that report that that, um,

and the big picture, the results have been phenomenal.

Speaker #3: Good morning, John. Mike Jen. John or Mike, maybe a two-part question. First, can you expand on the promotional change that you're investing behind versus the traditional buy more save more just so we sort of understand sort of what you guys are leaning into?

Steven Forbes: Good morning, John, Mike, Jen. John or Mike, maybe a two-part question. First, can you expand on the promotional change that you're investing behind versus the traditional buy more, save more, just so we sort of understand what you guys are leaning into. Secondarily, the new trade model that you've launched here, would love to just hear you talk about, you know, sort of what are the key attributes of it and what's really resonating with the trade professionals.

Now, we're playing, catch up to get, get them to all stores. You know, all of these groups that we say we would have tested in 20 stores, put on the web and so forth. Um,

Speaker #3: And then secondarily, the new trade model that you've launched here, we'd love to just hear you talk about sort of what are the key attributes of it and what's really resonating with the trade professionals.

We monitor closely and and if it's outperforming, you know project that's currently on Flores. And we then we switch floor samples and send it out to all the stores.

So we're in that process right now, um, but everything's looking. Fantastic.

John Reed: Sure, Steven. I can start, and Jen can help with the promotion side. The trade model is pretty simple. You know, we have these outside folks that have their own businesses, and they have their own clients. They bring various people and hopefully more and more to us. All we did was we offered a second way for them to make an income. It was, we were giving them basically a commission, so to speak, type of format, and now we've offered them a discount instead. One or the other. They get to choose. Which is more the traditional way that many of them work. We just offered a second way of them to make income using our product.

Um I'm loving, you know, the wood pieces um that designs the shapes.

Speaker #5: Sure, Stephen. I can start. And Jen can help with the promotion side. But the trade model, it's pretty simple. We have these outside folks that have their own businesses.

John Reed: I've gotta say, we should have had a booth there because I think our product looks better than anybody else's I saw in Milan. I've never said that before, I think it's the truth. We are dead on, right with the trends, and we're way ahead of the competition in it. Yeah, it's gonna be a fun year for that.

I just got back from the, uh, the Milan Furniture show. Um, last week week before, and I've got to say, we should have had a booth there, because I think our product looks better than anybody else as I saw in in Milan.

Speaker #5: And they have their own clients that they bring to various people. And hopefully, more and more to us. So all we did was we offered a second way to for them to make an income.

I've never said that before, but um,

Jennifer Porter: Yeah. Cristina, just to add a little bit of color there, too. You know, Mike and John both referred to our catalog being delayed earlier. You know, specifically as I think you all know, we have various catalogs and direct mailings that we send out. Big book at 228 pages, a 12-pager, postcards. The catalog that was affected with those delays was that 228 page book, and that is really the supporting system for us introducing all of that incredible new product and getting it out to our customers and into their homes. You know, just looking at that, customers are really responding well to that product.

I I think it's the truth. We are dead on right with the with the um Trends and we're way ahead of the competition in it and um yeah it's going to be a fun year for that.

Speaker #5: It was we were giving them basically commission, so to speak, type of format. And now we've offered them a discount instead. One or the other.

And Christina just to add a little bit of color.

Speaker #5: They get to choose. Which is more the traditional way that most of them many of them work. So we just offered a second way of them to make income using our product.

Speaker #5: And so far, the response has been phenomenal. Very, very early to say it. I think it's only 30 days we launched it or something.

John Reed: So far the response has been phenomenal. Very, very early to say. I think it's only 30 days we launched it or something.

John Reed: So far the response has been phenomenal. Very, very early to say. I think it's only 30 days we launched it or something. So far so good. Jen, maybe you can fill him in on the promotional thing.

You know, Mike and John both referred to our catalog being delayed earlier and you know specifically as as I think you all know we have um various catalogs and direct mailings that we send out big book at 228 Pages, a 12-page or postcards the catalog that was affected with those delays was that 228 page book. And that is really the supporting system for us. Introducing all of that incredible new product, and getting it out to our customers and into their homes. Um, so um, you know, just looking at that,

Speaker #5: But so far, so good. And then Jen, maybe you can fill them in on the promotional thing because yeah. I've been that different. I don't think.

John Reed: So far so good. Jen, maybe you can fill him in on the promotional thing.

Jennifer Porter: Now getting that marketing into homes, launching digital campaigns throughout the quarter, and then we actually have gotten our early summer catalog out into homes at the end of March here. We're just really excited to continue to see that initial engagement and excitement to that product, it continuing to grow going into Q2 now that more people know that it's out there and are being driven into stores to go and see it.

Jennifer Porter: Yeah. Of course

John Reed: hasn't been that different, I don't think.

Jennifer Porter: Yeah, Steven, good question on the promotions. Looking at our Q1 approach to promotions, really strategy was very similar and in line with what we've talked about previously in 2025 with a lot of the buy more, save mores, and those types of promotions that we've talked about on prior calls. Going into April, we purposely elevated our promotional activity, and that was in reaction both to what's going on in the macro and also the challenging Q1 environment that was spoken to prior on this call. You know, as Mike just said, we're really pleased with what's happening in April. We started to see that pick up at H2 of May. Really pleased with April. Really pleased with what we're seeing going into May as well.

Speaker #4: Yeah. Stephen, good question on the promotions. So looking at our Q1 approach to promotions, really strategy was very similar and in line with what we've talked about previously in 2025.

Speaker #4: With a lot of the buy more save more and those types of promotions that we've talked about on prior calls, going into April, we purposely elevated our promotional activity.

Are really responding well to that product. And now, getting that marketing into homes launching digital campaigns throughout the, um, quarter and then we actually have gotten our early summer catalog out into homes. Um, at the end of March here, uh, we're really excited to continue to see that initial engagement and excitement of that product um, it continuing to grow going into Q2 now that more people know, but it's out there.

John Reed: It's obviously the beginning of the outdoor season. So far it's been phenomenal.

John Reed: We're very happy with the results.

And our customers are being driven into stores to go and see it, and it's obviously the beginning of the outdoor season. Um, so far it's been phenomenal.

Speaker #4: And that was in reaction both to what's going on in the macro and then also the challenging Q1 environment that was spoken to prior on this call.

Michael Lee: Learning a lot for next year to even get better. I would just add on the newness front, in Q1, I think our newness was at around 12% of sales, up from 8% of sales last year. Continuing to lean more into that, and that trend continued into April. Look, I know, you know, we talked about not getting into month-to-month, you know, disclosures, I think the question was has demand turned positive in April? It absolutely has turned positive. I can tell you April and May are performing even ahead of some of our internal forecasts. We are very encouraged by the momentum in the business. You know, we talk about U-shaped recoveries and V-shaped recoveries.

we're very, very happy with the, with the results and, um,

learning a lot for next year to see if we can get better.

Speaker #4: And as Mike just said, we're really pleased with what's happening in April. We started to see that pick up at second half of May.

Speaker #4: Really pleased with April. Really pleased with what we're seeing going into May as well. I think when you look at our approach, what we're looking at is the underlying health and quality of our business.

Jennifer Porter: I think when you look at our approach, you know, what we're looking at is the underlying health and quality of our business. Even with the challenging environment in Q1, our customers are remaining highly engaged. We have, you know, an affluent customer. They're still looking for the furniture. They're still doing those big projects. We're seeing that underlying quality of our demand remaining really strong. If you look at orders over 10,000, over 100,000, those bigger projects, they're really good. We're really pleased with that engagement with clients coming in and working with our interior designers, as John just mentioned, with trade designers as well. That structure is looking good. What we are seeing is that customers are being more deliberate. They're more considered.

Speaker #4: So even with the challenging environment in Q1, our customers are remaining highly engaged. We have an affluent customer. They're still looking for the furniture.

Speaker #4: They're still doing those big projects. And we're seeing that underlying quality of our demand remaining really strong. If you look at orders over 10,000, over 100,000, those bigger projects, they're really good.

Speaker #4: We're really pleased with that engagement with clients coming in and working with our interior designers. And as John just mentioned, with trade designers as well.

Michael Lee: I would say April was more like a V-shaped recovery in that regard.

I I would just add on on the newness front, uh, in in q1, I think our newness was at around 12% of sales up from 8% of sales last year. So continuing to to lean more into that and that trans continued into to April. And, and, and look, I know, um, you know, we, we, we talked about not getting into month-to-month, uh, you know, uh, disclosures. But I think the question was has demand turned positive in April? It absolutely has turned positive. And I can tell you, April in May are performing, even ahead of some of our internal, uh, forecasts. So we are very, very encouraged by the momentum in, in, in the business. And, uh, you know, we we, we talk about u-shaped, recoveries and v-shaped, recoveries. I would say, April was more like a v-shaped recovery in that regard.

Speaker #4: So that structure is looking good. What we are seeing is that customers are being more deliberate. They're more considered. We started talking about that last year.

Operator 2: Next, we'll move on to Steven Forbes with Guggenheim Securities.

Next, we'll move on to Stephen Forbes with Guggenheim security.

Steven Forbes: Good morning, John, Mike, Jen. John or Mike, maybe a two-part question. First, can you expand on the promotional change that you're investing behind versus the traditional buy more, save more, just so we sort of understand what you guys are leaning into? Secondarily, the new trade model that you've launched here, would love to just hear you talk about, you know, sort of what are the key attributes of it and what's really resonating with the trade professionals.

Jennifer Porter: We started talking about that last year. We saw that in Q1. Our approach to promotions, our approach to marketing, our approach to really just outreach to the customers is really focused on that. Focusing on what we are doing really well, which as John has referenced, clients are responding really well to the products. They're responding really well to our quality, our unique assortment, the craft that only we can offer. That is really what we're positioning out in the market. We're looking to engage them with marketing, really trying to be creative with the content and the ways that we're getting that messaging out to customers.

Speaker #4: We saw that in Q1. And so our approach to promotions, our approach to marketing, our approach to really just outreach to the customers is really focused on that.

Speaker #4: Focusing on what we are doing really well, which as John has referenced, clients are responding really well to the product. They're responding really well to our quality.

Good morning, John Mike, Jen uh, John or, or Mike? Maybe a 2-part question, uh, first, can you expand on the promotional change that you're investing behind versus the traditional? Buy more save more just so we sort of understand

Speaker #4: Our unique assortment, the craft that we can only that only we can offer. And so that is really what we're positioning out in the market.

You sort of what you guys are leaning into. And then secondarily the new trade model that you've launched here. Would love to just hear you talk about, you know, sort of what what are the key attributes of it. And and what's really resonating with the the trade professionals

John Reed: Sure, Steven. I can start, and Jen can help with the promotion side. The trade model is pretty simple. It is, you know, we have these outside folks that have their own businesses, and they have their own clients. They bring the various people and hopefully more and more to us. All we did was we offered a second way to, for them to make an income. It was, we were giving them basically a commission, so to speak, type of format, and now we've offered them a discount instead. One or the other. They get to choose. Which is more the traditional way that most of them, many of them work. We just offered a second way of them to make income, using our product.

Speaker #4: We're looking to engage them with marketing. Really trying to be creative with the content and the ways that we're getting that messaging out to customers.

Help with the promotion side. Um,

Speaker #4: And then similarly with promotions, really looking at what are those drivers where we can mind, continue to introduce our house to new potential clients who maybe don't know about us yet, but then also really looking at those levers to drive the consideration to conversion window.

Jennifer Porter: Similarly with promotions, really looking at what are those drivers where we can first off, keep Arhaus top of mind, continue to introduce Arhaus to new potential clients who maybe don't know about us yet, also really looking at those levers to drive the consideration to conversion window. Pleased with what we've seen in April. Pleased with our plans for the next coming months here, we'll continue to monitor our business, the macro, adapt and evolve throughout the year as needing.

But the trade model um is is pretty simple. It, you know, we have these outside folks that have their own businesses. Um,

And they have their own clients, they bring the various people, and hopefully more and more to us. So, all we did was we, we we, uh,

Speaker #4: And please, with what we've seen in April, please with our plans for the next coming months here. And we'll continue to monitor our business, the macro, and adapt and evolve throughout the year as need be.

Offered a second way to for them to make an income. Um it was we were we were giving them basically a

Commission, so to speak, type of format. And now we've offered them a discount instead—one or the other—they get to choose. Um.

Operator 2: Thank you.

Steven Forbes: Thank you.

Speaker #3: Thank you.

Speaker #5: Thank you, Stephen.

Michael Lee: Thank you, Steven.

Operator 2: Next, we'll hear from Peter Benedict with Baird.

Speaker #4: And next, we'll hear from Peter Benedict with Baird.

Operator: Next, we'll hear from Peter Benedict with Baird.

John Reed: So far the response has been phenomenal. Very, very early to say. I think it's only 30 days we launched it or something.

Which is more the traditional way that most of them many of them work. So we're just off. We just offered a second second way of them to make income, um, using our products. And um, so far the response has been phenomenal.

Speaker #6: Hey, good morning, guys. This is Zach Batcon for Peter. Thanks for taking our question. Mike, you mentioned a flattish gross margin view for the year.

[Analyst] (Baird): Hey, good morning, guys. This is Zach back on for Peter. Thanks for taking our question. Mike, you mentioned a flattish gross margin view for the year. I think you had previously discussed 60 to 70 basis points of expansion. Can you help us understand the change there and your assumptions for oil and fuel costs over the balance of 2026? Then maybe on the Q2 EBITDA range as well. Realize you have some tough compares in the quarter, if you could unpack the drivers of compression there and help us understand how that moderates in the H2, that would be helpful. Thank you.

John Reed: So far so good. Jen, maybe you can fill him in on the promotional thing.

Um, very, very early to say it—I think it's only 30 days. We launched it or something. But so far, so good.

Speaker #6: I think you had previously discussed 60 to 70 basis points of expansion. Could you help us understand the change there and your assumptions for oil and fuel costs over the balance of 2026?

Jennifer Porter: Yeah, of course.

John Reed: Hasn't been that different, I don't think.

Jennifer Porter: Steven, good question on the promotions. Looking at our Q1 approach to promotions, really strategy was very similar and in line with what we've talked about previously in 2025, with a lot of the buy more, save mores, and those types of promotions that we've talked about on prior calls. Going into April, we purposely elevated our promotional activity, that was in reaction both to what's going on in the macro and also the challenging Q1 environment that was spoken to prior on this call. You know, as Mike just said, we're really pleased with what's happening in April. We started to see that pick up the second half of May. Really pleased with April. Really pleased with what we're seeing going into May as well.

Speaker #6: And then maybe on the Q2 EBITDA range as well. Realize you have some tough compares in the quarter, but if you could unpack the drivers of compression there and help us understand how that moderates.

Speaker #6: In the second half, that would be helpful. Thank you.

And then Jen, maybe you can fill them in on the pro promotional thing because yeah, of course, been that different. I don't think. Um, yeah, Stephen a good question on the promotions. Um, so looking at our uh, q1 approach promotions, really strategy was very similar and in line with what we've talked about previously, uh, in 2025, um, uh, with a lot of the buy more space, more and those types of promotions that we've talked about on prior calls.

Speaker #5: Yeah, Zach. Look, fuel costs are highly uncertain at this point, but that's really the driving force behind gross margin. And there's about a 40 basis point impact in Q1.

Michael Lee: Zach, look, fuel costs are highly uncertain at this point, that's really the driving force behind gross margin. You know, there's about a 40 basis point impact in Q1, that impact really, you know, is about half a quarter's worth of impact. When you know, take into account that, you know, we've got a full quarter impact coming up, we also have a lag effect between any mitigations taking place and when they actually flow through the P&L. A little bit more cautious as it relates to fuel. Look, everything we're hearing is that even if the war ends, the lag effect on fuel prices coming down is going to really, you know, be in months and quarters, not weeks.

Speaker #5: And that impact really is about half a quarter's worth of impact. So when you take into account that we've got a full quarter impact coming up, and we also have a lag effect between any mitigations taking place and when they actually flow through the P&L.

Jennifer Porter: I think when you look at our approach, you know, what we're looking at is the underlying health and quality of our business. Even with the challenging environment in Q1, our customers are remaining highly engaged. We have, you know, an affluent customer. They're still looking for the furniture. They're still doing those big projects. We're seeing that underlying quality of our demand remaining really strong. If you look at orders over $10,000, over $100,000, those bigger projects, they're really good. We're really pleased with that engagement, with clients coming in and working with our interior designers, as John just mentioned, with trade designers as well. That structure is looking good. What we are seeing is that customers are being more deliberate. They're more considered.

Speaker #5: So a little bit more cautious as it relates to fuel. And look, everything we're hearing is that even if the war ends, the lag effect on fuel prices coming down is going to really be in months and quarters, not weeks.

Speaker #5: So if anything, we're just being a little bit cautious there. But again, I want to emphasize that we've got mitigation steps that are underway.

Michael Lee: If anything, we're just being a little bit cautious there. Again, I wanna emphasize that, you know, we've got mitigation steps that are underway. And we think we can fully offset that in terms of ongoing structural costs. It just, you know, takes a little bit of time to get it going in the P&L and for it to flow through to delivery. That's something just to be mindful of, is just that lag effect. In terms of the overall EBITDA for the balance of the year, you know, look, inflation is persistent and it's real. You know, sort of setting aside the fuel costs, there are indirect impacts from fuel costs and even little things like fuel costs impacting foam in our manufacturing business, right?

Going into April, we purposely elevated, our promotional activity, um, and that was in reaction, both to what's going on in the macro and then also, the challenging q1 environment. Um, that was spoken to you prior, um, on this call. Uh and you know, as Mike just said we're, we're really pleased. Uh, with what's happening. Uh in April, um, we started to see that pick up at second half of May, really pleased with with April. Really pleased is what we're seeing going into may as well. Um, I think when you look at our approach, um you know what we're looking at is the underlying um, health and quality of our business. So even with the challenging environment in q1, our customers are remaining highly engaged. Um, we have, you know, an affluent customer, um, they're still looking for the furniture, they're still doing those big projects, um, and we're seeing that underlying quality of of our demand remaining really strong. Um, if you look at orders over 10,000 over 100,000 those bigger projects. Um, they're they're really good. We're really pleased with that engagement, uh, with clients coming.

Speaker #5: And we think we can fully offset that in terms of ongoing structural costs. It just takes a little bit of time to get it going in the P&L and for it to flow through to delivery.

Speaker #5: So that's something just to be mindful of is just that lag effect. In terms of the overall EBITDA, for the balance of the year, look, inflation is persistent, and it's real.

In and working with our interior designers, as John just mentioned, um, with trade designers as well. So, that structure is looking good. Um, what we are seeing is that customers are being more deliberate. They're more considered. Um, we started talking about that last year. Um, we we saw that in q1. Um, and so our approach to Promotions our approach to marketing, our approach to really just Outreach to the customers is really focused on that, um, focusing on what we are doing really well, which is John, um,

Speaker #5: Sort of setting aside the fuel costs, there are indirect impacts from fuel costs. And even little things like fuel costs impacting foam. In our manufacturing business, right?

Speaker #5: And these aren't huge. Maybe there are a lot of I'll call it ankle biters in terms of these impacts that are happening across the business.

Michael Lee: These aren't huge. Maybe there are a lot of, you know, I'll call it ankle biters in terms of these, you know, impacts that are happening across the business, we're increasingly, you know, leaning on productivity initiatives to help offset that. The inflation impacts are real. That's something that we're, you know, continuing to manage, you know, day in, day out. You know, some of it's, you know, more business as usual, you know, with our suppliers around the world. You know, different suppliers are facing different cost pressures. Some aren't facing any, and some are facing more than others. We continue to work through that. I don't see as much from a product cost perspective as I do from a, you know, supply chain logistics perspective, even container costs, right?

Jennifer Porter: Similarly with promotions, really looking at, you know, what are those drivers where we can help, first off, keep Arhaus top of mind, continue to introduce Arhaus to new potential clients who maybe don't know about us yet, but then also really looking at those levers to drive the consideration to conversion window. Pleased with what we've seen in April. Pleased with our plans for the next coming months here, and we'll continue to monitor our business, the macro, and adapt and evolve throughout the year as needing.

Speaker #5: But we're increasingly leaning on productivity initiatives to help offset that. But the inflation impacts are real. So that's something that we're continuing to manage day in, day out.

Has reference clients are responding really well to the product, they're responding really well to our quality, our unique assortment the craft that we can only but only we can offer. And so that is really what we're positioning out in the market. Um, we're looking to engage them with marketing. Um, really trying to be creative with the, um, content and the ways that we're getting that messaging um out to customers. And then similarly with emotions, um, really looking at you know, what are those drivers where we can help

Speaker #5: Some of it's more business as usual. With our suppliers, around the world, different suppliers are facing different cost pressures. Some aren't facing any, and some are facing more than others.

Speaker #5: But we continue to work through that. I don't see as much from a product cost perspective as I do from a supply chain logistics perspective.

First off, keep our house top of Mind. Continue to introduce our house to new potential clients, who maybe don't know about us yet. But then also really looking at those levers to drive the consideration to conversion window. Um, and pleased with what we've seen in April, um, uh, pleased with our our plans for the next coming months here. And we'll continue to monitor our business, the macro um and adapt and evolve throughout the year this evening.

Steven Forbes: Thank you.

Thank you.

Michael Lee: Thank you, Steven.

Thank you, Stephen.

Operator 2: Next, we'll hear from Peter Benedict with Baird.

Speaker #5: Even container costs, right? Getting containers now are more expensive than they were even three months ago. So really managing through that. But nothing that I would say is a structural change to our business.

Michael Lee: Getting containers, now are more expensive than they were even, you know, 3 months ago. Really managing through that. Nothing that I would say is a structural change to our business. It's really just leaning on productivity initiatives to help offset those. More to come as we get through Q2 on some of those mitigation steps, but we're really excited about some of the opportunities that we're discussing internally to help absorb some of those headwinds.

And next, we'll hear from Peter benedict, with bear.

[Analyst] (Baird): Hey, good morning, guys. This is Zach back on for Peter. Thanks for taking our question. Mike, you mentioned a flattish gross margin view for the year. I think you had previously discussed 60 to 70 basis points of expansion. Can you help us understand the change there and your assumptions for oil and fuel costs over the balance of 2026, and then maybe on the Q2 EBITDA range as well. Realize you have some tough compares in the quarter, but if you could unpack the drivers of compression there and help us understand how that moderates in the H2, that would be helpful. Thank you.

Speaker #5: It's really just leaning on productivity initiatives to help offset those. So more to come. As we get through Q2 on some of those mitigation steps, but we're really excited about some of the opportunities that we're discussing internally to help absorb some of those headwinds.

Hey, good morning guys. This is Zack back on for Peter. Thanks for taking our question. Um, Mike you mentioned the flattish, gurus margin View for the year. I think, you had previously discussed 60 to 70 basis points of expansion. Could you help us understand the change there in your assumptions for oil and fuel costs over the balance of 2026 and then maybe

Speaker #6: Great.

[Analyst] (Baird): Great.

Operator 2: Our next question, we'll hear from Jonathan Matuszewski with Jefferies.

Speaker #4: And our next question we'll hear from Jonathan. Matuszki with Jefferies.

Operator: Our next question, we'll hear from Jonathan Matuszewski with Jefferies.

Maybe on the Q2 EBA range as well. I realize you have some tough compares in the quarter, but if you could unpack the drivers of compression there and help us understand how that moderates in the second half, that would be helpful. Thank you.

Michael Lee: Yeah, Zach. Look, fuel costs are highly uncertain at this point, but that's really the driving force behind gross margin. You know, there's about a 40 basis point impact in Q1, and that impact really, you know, is about half a quarter's worth of impact. When you know, take into account that, you know, we've got a full quarter impact coming up, and we also have a lag effect between any mitigations taking place and when they actually flow through the P&L. A little bit more cautious as it relates to fuel. Look, everything we're hearing is that even if the war ends, the lag effect on fuel prices coming down is going to really, you know, be in months and quarters, not weeks.

Speaker #6: Hi, this is Andres. I'm on for Jonathan. Thanks so much for taking the question. With S&P at all-time highs and the wealth effect historically being a key driver of your consumer, what's the broader macro and housing environment you're embedding in the back half?

[Analyst] (Jefferies): Hi, this is Andreas. I'm on for Jonathan. Thanks so much for taking the question. With S&P at all-time highs and the wealth effect historically being a key driver of your consumer, what's the broader macro and housing environment you're embedding in H2? Thank you.

And that impact really, you know, is about half a quarters worth of impact.

Speaker #6: Thank you.

so when you, you know, uh, take into account that um

Speaker #5: Yeah, it's a great question. The stock market volatility and its impact on our business, it is real. Even going back to last April when a lot of the tariffs were announced for the first time and the stock market reaction, there's a pretty good correlation between what we see and the capital market outlook.

Michael Lee: Yeah. It's a great question. The stock market volatility and its impact on our business, it is real. Even going back to last April when a lot of the tariffs were announced for the first time and the stock market reaction, there's a pretty good correlation between what we see and the capital market outlook. Our guide is really based on, you know, a continuation, a lot of the fundamentals that we're seeing today. I wouldn't say that we build our plans based on the S&P being at an all-time high, but we're certainly not building into our full year guide a recession. Look, we know that job growth is a bit anemic right now. We know that inflation's real.

Michael Lee: If anything, we're just being a little bit cautious there. Again, I wanna emphasize that, you know, we've got mitigation steps that are underway. We think we can fully offset that in terms of ongoing structural costs. It just, you know, takes a little bit of time to get it going in the P&L and for it to flow through to delivery. That's something just to be mindful of, is just that lag effect. In terms of the overall EBITDA for the balance of the year. You know, look, inflation is persistent and it's real. You know, sort of setting aside the fuel costs, there are indirect impacts from fuel costs and even little things like fuel costs impacting foam in our manufacturing business, right?

Speaker #5: Our guide is really based on a continuation of a lot of the fundamentals that we're seeing today. I wouldn't say that we build our plans based on the S&P being at an all-time high, but we're certainly not building in into our full-year guide a recession.

Speaker #5: So look, we know that job growth is a bit anemic right now. We know that inflation's real. We know that the housing market's weak.

Michael Lee: We know that the housing market's weak. We know that the 10-year continues to move up. Consumer credit is being impacted. you know, again, a lot of our business comes from the high-end consumer, and when we look at high-end housing, high-end housing continues to perform well. As recent as the last 30, 60 days, measures on luxury home sales continuing to perform well. High-end consumers are still investing in projects, home remodels, so that continues to do well. That's really what's underscoring our full year outlook from a, call it an infrastructure perspective. you know, most of our outlook is weighted on the promotion plans, the product that's coming, the marketing, you know, new showroom expansion, things like that, which fit into the category of controllable.

Speaker #5: We know that the 10-year continues to move up. So consumer credit is being impacted. But again, a lot of our business comes from the high-end consumer and when we look at high-end housing, high-end housing continues to perform well.

You know, we've got a full quarter impact coming up and we also have a lag effect between um any mitigations taking place and when they actually flow through the p&l. So a little bit more cautious as it relates to fuel and look, everything we're hearing is that even if the, the, the war in the, the lag effect on fuel prices coming down is going to really, you know, be in months and quarters not not weeks. So, if anything, we're just being a little bit cautious there. But again, I want to emphasize that, you know, we've got mitigation steps that are that are underway. Um, and and, and we think we can fully offset that in terms of ongoing structural costs. Um, it just, you know, it takes a little bit of time to get it going in the p&l and for the flow through, uh, to delivery. So that's something just to be mindful of is just that lag effect in terms of the overall ebita.

Speaker #5: As recent as the last 30, 60 days measures on luxury home sales continuing to perform well. High-end consumers are still investing in projects. Home remodels.

Michael Lee: These aren't huge. Maybe there are a lot of, you know, I'll call it ankle biters in terms of these, you know, impacts that are happening across the business. We're increasingly, you know, leaning on productivity initiatives to help offset that. The inflation impacts are real. That's something that we're, you know, continuing to manage, you know, day in, day out. You know, some of it's, you know, more business as usual, you know, with our suppliers around the world. You know, different suppliers are facing different cost pressures. Some aren't facing any, and some are facing more than others. We continue to work through that. I don't see as much from a product cost perspective as I do from a, you know, supply chain logistics perspective. Even container costs, right?

Uh, for the balance of the year, uh, you know, look in inflation is is, is, is persistent and it's, and it's real. Um, you know, the step sort of setting aside, the fuel costs. There are indirect impacts from fuel costs and even little things like uh fuel costs, impacting, the phone uh, in our manufacturing business.

Speaker #5: So that continues to do well. So that's really what's underscoring our full-year outlook from a call it an infrastructure perspective. But most of our outlook is weighted on the promotion plans, the product that's coming, the marketing, new showroom expansion, things like that, which fit into the category of controllable.

Michael Lee: I can tell you that, you know, one of the reasons why we've held our guide is that we feel really good about the balance of this year from a product perspective, from an inventory perspective. I know there's some questions about why inventory is up, but we are coming out of a cycle where, you know, we had out of stocks on a number of items. We're in a pretty good spot overall. Yes, we recognize the volatility of the backdrop is still there. I would say that's what's driving maybe a wider range than we would normally have on our guide, is just protecting against that uncertainty. Hopefully that helps give some context.

Speaker #5: And I can tell you that one of the reasons why we've held our guide is that we feel really good about the balance of this year from a product perspective, from an inventory perspective.

Speaker #5: I know there's some questions about why inventory is up, but we are coming out of a cycle where we had out-of-stocks on a number of items.

Speaker #5: So we're in a pretty good spot overall. And yes, we recognize the volatility of the backdrop is still there. And I would say that's what's driving maybe a wider range than we would normally have on our guide is just protecting against that uncertainty.

Michael Lee: Getting containers are more expensive than they were even 3 months ago. Really managing through that. Nothing that I would say is a structural change to our business. It's really just leaning on productivity initiatives to help offset those. More to come as we get through Q2 on some of those mitigation steps. We're really excited about some of the opportunities that we're discussing internally to help absorb some of those headwinds.

Right? And these these aren't huge. Uh, maybe they're a lot of, you know, I'll call it ankle biters in terms of these, you know, impacts that are happening across the business but we're increasingly you know, leaning on productivity initiatives to help offset that but the, the inflation impacts are real. So that's something that we're, you know, continuing to manage, you know, day in day out, you know, some of its, you know, more businesses usual, you know, with our suppliers around the world, you know, different suppliers are facing, different cost pressures, some aren't facing any and some are facing, uh, more than others. But, uh, we continue to work through that. I don't see as much from a product cost perspective as I do from. Uh, you know, supply chain Logistics perspective, even container costs right. Getting containers. Uh, now are are, are more expensive than they were even, you know, uh, 3 months ago, so really managing through that. But, uh, nothing that I would say, is a structural change to our business. It's really just leaning on

Speaker #5: So hopefully that helps give some context.

on productivity initiatives to help offset them.

Speaker #6: Thanks so much.

Jennifer Porter: Thanks so much.

[Analyst] (Jefferies): Thanks so much.

Speaker #4: And our next question we'll hear from Peter Keith with Piper Stanley.

Operator 2: Our next question we'll hear from Peter Keith with Piper Sandler.

Operator: Our next question we'll hear from Peter Keith with Piper Sandler.

So more to come as we as we get through Q2 on some of those mitigation steps but we're we're really excited about some of the opportunities that we're discussing internally to help absorb some of those headwinds.

[Analyst] (Baird): Great.

Speaker #7: Hi, this is Alexia Morgan on for Peter Keith. Thanks for taking our question. We've been monitoring supply chain disruptions stemming from the Texas Chemical Plant incident in March.

Alexia Morgan: Hi, this is Alexia Morgan on for Peter Keith. Thanks for taking our question. We've been monitoring supply chain disruptions stemming from the Texas chemical plant incident in March. Could you frame up your exposure there to the resulting foam and polyol shortages? Are you anticipating any material delays in upholstery or other categories? How do we model the potential impact there?

Great.

Operator 2: Our next question, we'll hear from Jonathan Matuszewski with Jefferies.

And our next question will hear from Jonathan matusky with Jeffrey.

Speaker #7: Could you frame up your exposure there to the resulting foam and polyol shortages? Are you anticipating any material delays in upholstery or other categories?

Hi, this is Andreas. I'm on for Jonathan. Thanks so much for taking the question.

Speaker #7: And how do we model the potential impact there?

Speaker #5: No, it's a good question. Yes, we're fully aware of that incident. And we are very comfortable confident with our foam supply. So not expecting any disruption in terms of the supply chain.

Michael Lee: No, it's a good question. Yes, we're fully aware of that incident, and we are very comfortable, confident with our foam supply. Not expecting any disruption in terms of the supply chain. We are experiencing some cost pressures on foam, but that's a relatively small percentage of the overall product cost. It's not a meaningful factor. It's just another example of those ankle-biter headwinds that we're fighting through, candidly. Since you mentioned it, I do wanna just acknowledge the great work that our manufacturing team is doing. We continue to set new records on upholstery sales each and every month. We're sort of battling through a surge in special order upholstery. We're producing at higher levels than we've been in a long time. We've even added a second shift in manufacturing to keep up with that demand.

Um, with SMP at all-time highs and the wealth effect. Historically being a key driver of your consumer. What's the broader macro? And housing environment? You're embedding in the back half. Thank you.

Michael Lee: Yeah. It's a great question. It, the stock market volatility, and its impact on our business, it is real. Even going back to last April when a lot of the tariffs were announced for the first time and the stock market reaction. There's a pretty good correlation between what we see and the capital market outlook. Our guide is really based on, you know, a continuation of a lot of the fundamentals that we're seeing today. I wouldn't say that we build our plans based on the S&P being at an all-time high, but we're certainly not building into our full year guide a, you know, a recession. Look, we know that job growth is a bit anemic right now. We know that inflation's real.

Speaker #5: We are experiencing some cost pressures on foam, but that's a relatively small percentage of the overall product cost. So it's not a meaningful factor.

Speaker #5: It's just another example of those ankle biter headwinds that we're fighting through candidly. But since you mentioned it, I do want to just acknowledge the great work that our manufacturing team is doing.

Speaker #5: We continue to set new records on upholstery sales each and every month. And we're sort of battling through a surge in special order upholstery we're producing at higher levels than we've been in a long time.

Speaker #5: We've even added a second shift in manufacturing to keep up with that demand. So that continues to be an area of our business that is a strategic advantage for us and feel really well positioned to deliver on those 700 fabrics and leathers that we offer through our special order program.

Michael Lee: We know that the housing market's weak. We know that the 10-year continues to move up. Consumer credit is being impacted. You know, again, a lot of our business comes from the high-end consumer. When we look at high-end housing, high-end housing continues to perform well. As recent as the last 30, 60 days, measures on luxury home sales continuing to perform well. High-end consumers are still investing in projects, home remodels, that continues to do well. That's really what's underscoring our full year outlook from an infrastructure perspective. You know, most of our outlook is weighted on the promotion plans, the product that's coming, the marketing, you know, new showroom expansion, things like that which fit into the category of controllable.

Michael Lee: That continues to be an area of our business that is a strategic advantage for us and feel really well-positioned to deliver on those 700 fabrics and leathers that we offer through our special order program.

Yeah, it's it's it's a great question. It, uh, the stock market volatility, uh, and its impact on our business, but it, it is real. Um, even going back to, uh, last April, when a lot of the tariffs were announced for the first time and the stock market reaction there, there's a pretty good correlation between what we see and the, the Capital Market Outlook. Um, our guide is really based on, you know, a, uh, continuation, a lot of the fundamentals that we're seeing today. I wouldn't say that we build our plans based on the S&P, being at an all-time high. But we're certainly not building in our into our full year guide, a, uh, you know, a, a, a recession. Um, so, but we know that job growth is a bit anemic. Right now, we know that inflation's real, we know that the housing Market's re, uh, weak, uh,

we know that the 10-year continues to to move up, uh,

Speaker #7: Great. Thank you.

Alexia Morgan: Great. Thank you.

Operator 2: We'll hear from Simeon Gutman with Morgan Stanley.

Speaker #4: And we'll hear from Simon Gutman with Morgan Stanley.

Operator: We'll hear from Simeon Gutman with Morgan Stanley.

Speaker #8: Hey, good morning. It's Simeon Gutman. How are you? I wanted to ask, I guess, two parts. First, the desale and written orders quarter to date.

Simeon Gutman: Hey, good morning. It's Simeon Gutman. How are you? I wanted to ask, I guess, two parts. First, the de-sell in written orders, quarter to date, can you talk about how that shapes the visibility for the rest of the year? I know you mentioned a lot of other factors and variables at play. Can you talk about new gallery productivity? How they're performing, and then, you know, what that implies, I guess, for, I guess, older or existing galleries. I assume they're doing less good, but can you talk about the dispersion between them? Thanks.

Speaker #8: Can you talk about how that shapes the visibility for the rest of the year? And I know you mentioned a lot of other factors and variables at play.

Speaker #8: And then can you talk about new gallery productivity? What how they're performing? And then what that implies, I guess, for, I guess, older or existing galleries?

Michael Lee: I can tell you that, you know, one of the reasons why we've held our guide is that we feel really good about the balance of this year from a product perspective, from an inventory perspective. I know there's some questions about why inventory is up, but we are coming out of a cycle where, you know, we had out of stocks on a number of items. We're in a pretty good spot overall. Yes, we recognize the volatility of the backdrop is still there, and I would say that's what's driving maybe a wider range than we would normally have on our guide, is just protecting against that uncertainty. Hopefully that helps give some context.

Speaker #8: I assume they're doing less good, but can you talk about the dispersion between them? Thanks.

Speaker #5: Sure. Simeon, I could start with the galleries. Yeah, I mean, we track obviously new ones, old ones, and so forth every single month. And yeah, over the big picture on new galleries have been open a year or so.

John Reed: Sure, Simeon. I can start with the galleries. Yeah, I mean, we track obviously new ones, old ones, and so forth every single month. Yeah, over a big picture on new galleries have been open a year or so, we've been very happy with their performance. They've been hitting our plans or exceeding them in quite a few cases. That's not only new galleries, but galleries we came back and renovated or moved. You know, example, we had a great gallery in Pittsburgh for, gosh, 20 years. We moved it down the street, a little larger, better looking, far better looking, and sales have been through the roof.

Speaker #5: We've been very, very happy with their performance. They've been hitting our plans and exceeding them. And quite a few cases. And that's not only new galleries, but galleries we've came back and renovated or moved.

[Analyst] (Jefferies): Thanks so much.

The promotion plans, the product that's coming the marketing. You know, new showroom expansion, things like that, which fit into the category of controllable. And I can tell you that you know, 1 of the reasons why we've held our guide is that we feel really good about the balance of this year, from a product perspective, from an inventory perspective. I know there's some questions about why inventory is up, but we are coming out of a cycle where, you know, we had out of stocks on a number of items. So, um, we're, we're, we're in a pretty good spot overall, and yes, uh, we recognize the volatility of the backdrop is still there and I would say, that's what's driving, maybe a wider range than we would normally have on our guide is just protecting against that uncertainty. So hopefully that helps give some context.

Thanks so much.

Operator 2: Our next question, we'll hear from Peter Keith with Piper Sandler.

And our next question, we'll hear from Peter Keith with Piper Stan Sandler.

Speaker #5: An example, we've been had a great gallery in Pittsburgh for, gosh, 20 years. We moved it down the street and a little larger, better looking, far better looking.

Speaker #5: And sales have been through the roof. So things like that have been working in both new, brand new ones and moving or renovating existing ones.

John Reed: Things like that have been working, in both new brand new ones and moving or renovating, existing ones. Yeah, I think they're outperforming, as a whole. You know, the fleet as a total, but both of both are doing well. Pockets are, you know, pockets in the country are doing better than others just because of the weather and so forth. Yeah. And then the second question-

Speaker #5: So yeah, I think they're outperforming as a whole. The fleet as a total but both are doing well. Pockets are pockets in the country are doing better than others.

Hi, this is Alexia Morgan on for Peter. Keith, thanks for taking your question. Um, we've been monitoring supply chain disruptions stemming from, uh, the Texas chemical plant incident in March. Could you frame up your exposure there to the the resulting foam and, and poly? Y'all shortages. Um, are you anticipating any material delays in upholstery or other categories? Um, and how do we model the the potential impact their

Michael Lee: No, it's a good question. Yes, we're fully aware of that incident, and we are very comfortable, confident with our foam supply. Not expecting any disruption in terms of the supply chain. We are experiencing some cost pressures on foam, but that's a relatively small percentage of the overall product cost, so it's not a meaningful factor. It's just another example of those ankle-biter headwinds that we're fighting through, candidly. Since you mentioned it, I do want to just acknowledge the great work that our manufacturing team is doing. We continue to set new records on upholstery sales each and every month, and we're sort of battling through a surge in special order upholstery. We're producing at higher levels than we've been in a long time. We've even added a second shift in manufacturing to keep up with that demand.

Speaker #5: Just because of the weather and so forth. So yeah. And then the second question. And then just to follow up on your question, Simeon, about just how the written orders are performing and the momentum there.

Michael Lee: Just to follow up on your question, Simeon, about just, you know, how the written orders are performing and the momentum there. Again, I would just underscore our earlier remarks that, you know, we really started to see improvement in the second half of March and even what I would call an acceleration into April and May. It certainly has felt like a V-shaped recovery from that moment onward. We are, you know, shooting for the high end of our Q2 guide as a result. You know, just a reminder that that guide's really just informed by, you know, the uncertainty that's out there. As we sit here today, really confident in how the Q2 orders are shaping up. With that, we'll leave it at that.

Speaker #5: Again, I would just underscore our earlier remarks that we really started to see improvement in the second half of March and even what I would call an acceleration into April and May.

Speaker #5: And it certainly has felt like a V-shaped recovery from that moment onward. And we are shooting for the high end of our Q2 guide as a result.

Speaker #5: And just a reminder that that guide is really just informed by the uncertainty that's out there. But as we sit here today, really confident in how the Q2 orders are shaping up.

No, it's a good question. Yes, we're fully aware of that incident and we are very comfortable, confident with our phone Supply. Um, so so not expecting any disruption in terms of the supply chain. We are experiencing some cost pressures on foam, but that's a relatively small percentage of the overall product cost. So it's not a meaningful factor. It's just another example of those ankle biter headwinds that were fighting through candidly. But uh, since you mentioned it, I I do want to just acknowledge the great work that our manufacturing team is doing. We continue to set new records on upholstery sales each and every month. And we're, we're sort of battling through a surge in special order upholstery. We're producing at higher levels, than than we've been in a long time. We've even had a added, a second shift in manufacturing to keep up with that demand. So that continues to be uh, an area of our business that

Speaker #5: So with that, we'll leave it at that.

Is a strategic Advantage for us and feel really uh well positioned to uh to deliver on those 700 fabrics and leather Leathers that we offer through our special uh order program.

Alexia Morgan: Great. Thank you.

Great. Thank you.

Operator 2: We'll hear from Simeon Gutman with Morgan Stanley.

Speaker #4: Thank you, ladies and gentlemen. We have reached the end of the question and answer session. I would now like to turn the floor over to Tara Atwood Sage for closing remarks.

Operator 1: Thank you, ladies and gentlemen. We have reached the end of the question and answer session. I would now like to turn the floor over to Tara Atwood-Saja for closing remarks and comments.

Operator: Thank you, ladies and gentlemen. We have reached the end of the question and answer session. I would now like to turn the floor over to Tara Atwood-Saja for closing remarks and comments.

And we'll hear from Simon Gutman with Morgan Stanley.

Simeon Gutman: Hey, good morning. It's Simeon Gutman. How are you? I wanted to ask, I guess, two parts. First, the de-sell in written orders, quarter to date, can you talk about how that shapes the visibility for the rest of the year? I know you mentioned a lot of other factors and variables at play. Can you talk about new gallery productivity, how they're performing, and then, you know, what that implies, I guess, for, I guess, older or existing galleries? I assume they're doing less good, but can you talk about the dispersion between them? Thanks.

Speaker #4: And comments.

Speaker #9: Thanks, everyone, for joining us today.

Tara Atwood-Saja: Thanks everyone for joining us today.

Speaker #5: Thanks, everybody. Thank you. Appreciate your questions. Bye.

John Reed: Thanks, everybody.

Operator 2: Thank you.

Michael Lee: Thank you.

John Reed: Appreciate your questions. Bye.

John Reed: Appreciate your questions.

Speaker #4: Bye.

Tara Atwood-Saja: Bye.

Operator 2: Bye.

Michael Lee: Bye.

Hey, good morning. It's Simeon. Gutman. How are you? I wanted to ask, I guess, 2 parts first the the dell and written orders uh, quarter to date. Can you talk about how that shapes the visibility for the rest of the year? And I know you mentioned a lot of other factors and variables at play. And then can you talk about new Gallery productivity? What how they're performing and then, you know what, what that implies I guess for I guess older or existing galleries. I assume they're

Um, doing less good. But can you talk about the dispersion between them? Thanks

John Reed: Sure, Simeon. I can start with the galleries. Yeah, I mean, we track obviously new ones, old ones, and so forth every single month. Yeah, over the big picture on new galleries that have been open a year or so, we've been very, very happy with their performance. They've been hitting our plans and exceeding them in quite a few cases. That's not only new galleries, but galleries we came back and renovated or moved. You know, example, we had a great gallery in Pittsburgh for, gosh, 20 years. We moved it down the street.

Sure, send me and I can start with the, uh, the galleries. Um,

Yeah, so I mean we we we track obviously new ones old ones and so forth every single month and um, yeah. Over

If you look at the big picture on new galleries, they've been open a year or so. We've been very, very happy with their performance. They've been hitting our plans and exceeding them.

And and quite a few cases.

And that's not only new, new new galleries, but galleries, we we came back and renovated or moved.

um,

you know, an example we've been had a great

Gallery in Pittsburgh, for gosh 20 years, we moved it down the street and, um,