Arhaus Restates Financials Due to Inventory Control Weakness

TL;DR

Arhaus is restating its 2023 financials because of inventory accounting errors; expect amended reports soon.

AI Summary

Arhaus, Inc. announced on February 29, 2024, that it will restate its previously issued financial statements for the fiscal year ended December 31, 2023, and interim periods within that year. This restatement is due to a material weakness in internal control over financial reporting related to the accounting for inventory, specifically the valuation of certain inventory items. The company expects to file amended financial statements once the restatement is complete.

Why It Matters

This restatement indicates potential issues with Arhaus's inventory management and financial reporting accuracy, which could impact investor confidence and future financial performance.

Risk Assessment

Risk Level: medium — A restatement due to a material weakness in internal controls suggests potential inaccuracies in past financial reporting and may require significant effort to correct.

Key Players & Entities

• Arhaus, Inc. (company) — Registrant
• February 29, 2024 (date) — Date of earliest event reported
• December 31, 2023 (date) — Fiscal year end affected by restatement
• 51 E. Hines Hill Road, Boston Heights, Ohio 44236 (address) — Principal Executive Offices

FAQ

Key Financial Figures

• $0.001 — hich registered Class A common stock, $0.001 par value per share ARHS The Nasdaq G

Filing Documents

• arhs-20240229.htm (8-K) — 79KB
• 0001875444-24-000013.txt ( ) — 219KB
• arhs-20240229.xsd (EX-101.SCH) — 2KB
• arhs-20240229_def.xml (EX-101.DEF) — 3KB
• arhs-20240229_lab.xml (EX-101.LAB) — 24KB
• arhs-20240229_pre.xml (EX-101.PRE) — 15KB
• arhs-20240229_htm.xml (XML) — 3KB

02 - Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

Item 4.02 - Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review On February 29, 2024, the Audit Committee (the "Audit Committee") of the Board of Directors of Arhaus, Inc. (the "Company"), after discussion with management, concluded that the Company's previously issued unaudited condensed consolidated financial statements included in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2023 (the "Q3 Form 10-Q" and such period, the "Affected Period"), filed with the U.S. Securities and Exchange Commission (the "SEC") on November 2, 2023, should no longer be relied upon due to the errors described below and should be restated. In preparation of the December 31, 2023 consolidated financial statements, the Company identified an error within the unaudited condensed consolidated balance sheet as of September 30, 2023 related to certain leasehold and landlord improvements prior to showroom completion being incorrectly included in prepaid and other current assets rather than property, furniture and equipment, net. The error resulted in inaccurate cash flows ascribed to operating and investing activities in the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2023. As such, the Company will restate its financial statements for the Affected Period and revise the December 31, 2022 comparative balance sheet included therein in an amendment to the Q3 Form 10-Q (the "Q3 Form 10-Q/A") to be filed as soon as practicable. Additionally the Company will make the corresponding revisions for impacted annual and applicable interim periods in the years ended December 31, 2023, 2022 and 2021 in the Company's 2023 Form 10-K. In connection with the restatement of the Company's unaudited condensed consolidated financial statements for the Affected Period, the Company determined it is appropriate to correct for certain other previously identified immaterial err

Forward-Looking Statements

Forward-Looking Statements Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements can generally be identified by the use of forward-looking terminology, including, but not limited to, "may," "could," "seek," "guidance," "predict," "potential," "likely," "believe," "will," "expect," "anticipate," "estimate," "plan," "intend," "forecast," or variations of these terms and similar expressions, or the negative of these terms or similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: our ability to manage and maintain the growth rate of our business; our ability to obtain quality merchandise in sufficient quantities; disruption in our receiving and distribution system, including delays in the integration of our distribution centers and the possibility that we may not realize the anticipated benefits of multiple distribution centers; the possibility of cyberattacks and our ability to maintain adequate cybersecurity systems and procedures; loss, corruption and misappropriation of data and information relating to clients and employees; changes in and compliance with applicable data privacy rules and regulations; risks as a result of constraints in our supply chain; a failure of our vendors to meet our quality standards; declines in general economic conditions that affect consumer confidence and consumer spending that could adversely affect our revenue; our abilit

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View this 8-K filing on SEC EDGAR