Furniture retailer Arhaus gears up for $355-mln IPO. Here’s all you need to know

Home furnishing companies experienced a spike in demand during the pandemic due to the shift in spending patterns, even as homebound consumers took up renovation and remodeling activities. The good news is that the premium home furnishing market in the US is estimated to grow at a compound annual rate of 10% through 2024, which indicates that the companies are headed for a boom time.

After registering strong growth during the crisis period, home furnishing company Arhaus Inc. is all set to go public, at a time when retailers across the country are preparing for the holiday season.  

12.9 Million Shares

The Ohio-based store chain is planning to offer around 12.9 million shares, and its selling shareholders will offer 10 million shares. At an estimated price of $14-$17 per share, the offer is expected to generate around $355 million, which would value the company at about $2.3 billion. The proceeds will mainly be used for settlings fees related to certain term loans and for general corporate purposes.

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Pursuant to the offering, Arhaus’ stock will list on the Nasdaq Global Select Market under the symbol ARHS. The group of book-runners will be led by Bank of America Securities, Jefferies Group, Morgan Stanley, and Piper Sandler.

Arhaus was founded in 1986 and operates around 75 outlets across the country, employing more than 1,400 workers. The showrooms are designed in the theater model, which the management calls ‘centers of imagination’. Led by founder and CEO John Reed, the company is specialized in premium furniture and home décor products that are mostly handcrafted.

Future Perfect

The fancy home décor market is highly fragmented, and Arhaus expects to leverage its unique store model and omnichannel capabilities to enhance market share and profitability, going forward. It is estimated that there is potential to expand the store base by 100% in new and existing markets, and the company plans to open 5-7 new stores per year in the near future.

Besides the concept showrooms, Arhaus is banking on the aggressive expansion of its digital platform and e-commerce penetration to drive future growth. However, a lot will depend on how the pandemic situation emerges in the coming months, as far as meeting the goals is concerned.

Reorganization

Meanwhile, the company has embarked on a reorganization and expects to complete it prior to the IPO. Under the plan, the recently formed Arhaus, Inc. will acquire the units of Arhus, LLC and its subsidiaries, which are currently held by Arhaus Holding.

In the fiscal year ended December 2020, revenues increased about 3% from last year to $507.4 million. Net income was $12.14 million or $0.43 per share, up from $11.6 million or $0.41 per share recorded in fiscal 2019. On an adjusted basis, profit before interest, taxes, depreciation, and amortization rose 40% to $69.7 million. Comparable sales grew for ten consecutive quarters.

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Recently, rival furniture retailer RH (NYSE: RH) reported double-digit earnings and revenue growth for the most recent quarter, after staying on the growth path since the early months of the pandemic that resulted in a multi-fold increase in its market value.