Arhaus's second quarter had two completely different stories stacked on top of one another, and management's own announcement led with the wrong one. The headline read as a clean beat: net revenue up 7.4% to $384.9 million, gross margin up 330 basis points to 44.7%, adjusted EBITDA up 16.8% to $70.5 million, GAAP diluted EPS of $0.28 versus $0.25 a year ago. Read the way it was written, the quarter looks like a vindication of the brand. Read the way it actually happened, it is something more specific. The entire $23.8 million gross-margin beat - 620 basis points of the reported 330-basis-point Q2 expansion - came from a non-recurring court-ordered refund of IEEPA tariffs the company had previously expensed. Strip the refund out and the quarter tells a different story: ex-IEEPA gross margin fell roughly 290 basis points year over year, ex-IEEPA operating income fell about 35%, and ex-IEEPA net income fell roughly 55%. Management knows this and said so plainly - "we delivered results above the high end of our guidance range across our key financial metrics" - but the metric doing the lifting was the refund, not the merchandise business.
The other quarter, the one buried under the refund, is the more interesting one. Comparable Written Sales, the company's own forward-looking order metric, swung from negative 5.7% in Q1 to positive 12.5% in Q2 - a roughly 18-point swing inside one quarter. Comparable Delivered Sales, the closer-to-revenue metric, swung from negative 1.7% to positive 4.0%. Client deposits - cash collected against future orders - grew 11.8% since year-end to $263.8 million, the largest year-over-year reading on the balance sheet. The merchandise business has clearly reaccelerated; what the quarter prints in dollars and cents lags the demand signal by a quarter or two, and the P&L is being held aloft this period by a one-time tariff windfall the company has already received in cash. The market had mostly priced through the noise: shares at $9.74 trade roughly 25% off the August-2025 high of $12.93 and 75% off the May 2026 low of $5.57. The next two prints - Q3 and Q4 - will land against a clean (mostly ex-IEEPA) base, and they will reveal whether the demand signal in the written-sales line converts to the delivered-sales line the way the company needs it to.