On August 6, Arhaus (NASDAQ:ARHS) reported second quarter results that beat its own guidance on nearly every line, and the premium furniture retailer had a tailwind most companies would love to have: a tariff refund check. Net revenue for the quarter ended June 30 climbed 7.4% to $385 million, above the top of management’s forecast, while Comparable Written Sales jumped 12.5% after a rough start to the year. But a large piece of the quarter’s profit growth came from a one-time tariff recovery rather than the business simply running better, and that distinction matters for anyone reading only the headline numbers.
Orders Are Piling Up
The most encouraging figure in the release is not revenue; it is Comparable Written Sales, which track new orders rather than completed deliveries. That number rose 12.5% in the second quarter, a sharp reversal from a 5.7% decline in the first quarter of 2026, pushing the year-to-date figure positive at 2.8%. Because written sales eventually convert into delivered revenue, that swing points to demand building in the pipeline rather than fading. Client deposits, cash collected on orders not yet delivered, grew 11.8% from the end of 2025 to $264 million as of June 30, reinforcing that read.
Arhaus also carries no long-term debt, leaving room to keep investing in its showroom network without borrowing. The company completed four showroom projects in the quarter, including new locations in Ashburn, Virginia, and Ontario, California, and still expects 10 to 14 total showroom projects in 2026, enough to lift its unit count by a mid-single-digit percentage. On top of that organic momentum, Arhaus has now collected the full $37.8 million it sought in tariff refunds, plus $1.3 million in interest, as of August 6, cash that is fully in hand rather than merely promised.
The Profit Boost Won’t Repeat
Not every number holds up under a closer look. Of the $23.8 million tariff benefit that flowed through cost of goods sold in the quarter, $15.5 million was tied to inventory the company had already sold before April 2026, meaning it landed in these results because of timing rather than any change in how Arhaus operates. Strip that out, and the 16.8% jump in Adjusted EBITDA looks far less impressive. Selling, general and administrative expenses grew 16.1% to $118 million, more than double the pace of revenue growth, which is not the direction those two lines should be moving.
Free cash flow for the first six months of 2026 fell to $22.9 million from $39.8 million a year earlier, even as reported net income rose. Cash and equivalents dropped 10.6% from the end of 2025 to $226 million, largely because Arhaus paid out a $49 million special dividend in March, while merchandise inventory grew 4.3% to $354 million. And despite the strong written sales figure, Comparable Delivered Sales, the number tied to revenue actually recognized, is up just 1.4% for the year, with third-quarter guidance ranging as wide as negative 1% to positive 5%, a reminder that orders still have to convert into deliveries before they count.
Wall Street Is Split On This
Hedge fund interest in Arhaus cooled heading into this report, with the number of funds holding a position falling from 32 to 27. Short sellers, meanwhile, have built a sizable position, with 12.05% of the float sold short, a level that signals real skepticism rather than routine hedging. That combination suggests that the market was cautious about Arhaus even before weighing whether this quarter’s profit boost can repeat. A stock shorted this heavily can also move sharply once sentiment shifts, in either direction.
What Happens Next Matters
Arhaus heads into the back half of 2026 with a stronger order book and a tariff refund now fully banked, but the quarter’s headline profit growth leaned heavily on a benefit that will not recur. Whether the bull case holds depends on Comparable Written Sales continuing to convert into delivered revenue instead of stalling the way it did earlier in the year. The bear case rests on SG&A growth continuing to outpace revenue and on free cash flow failing to recover once the tariff cash works through the balance sheet.
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