On Wednesday, BofA Securities updated its view on Arhaus Inc shares (NASDAQ:ARHS), increasing the price target to $17.00 from $14.50. The firm has reiterated its Buy rating.
This revision follows Arhaus's fourth-quarter earnings report, which posted an earnings per share (EPS) of $0.22, surpassing the expected $0.17. Despite a comparable sales decline of 6.8%, this result was better than the anticipated 10.7% drop.
Arhaus, a home furnishings retailer, demonstrated resilience amid challenging market conditions. The company chose not to repeat the promotions it had offered in November 2022, which contributed to a 1.6% increase in demand comp during the fourth quarter. This approach appears to have paid off, as it helped the company exceed analysts' expectations.
However, Arhaus faced margin pressures, with gross margin falling by 330 basis points to 41.0% compared to the previous year. The decline was attributed to a mix of factors, including product mix adjustments and increased costs related to showroom operations and transportation. Despite these challenges, BofA Securities has recognized the company's strategic decisions as it maintains a positive outlook on the stock.
The beginning of the year showed a mixed performance for Arhaus, with demand comps experiencing a high single-digit percentage drop in January, which was largely due to weather conditions affecting customer traffic. Nevertheless, there was a notable improvement in February, with demand comps rising to a mid-single-digit percentage, signaling a potential rebound in consumer interest and spending.
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