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At Home (HOME) Stock Down Even as Q3 Earnings Beat Estimates

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At Home Group Inc. (HOME - Free Report) reported third-quarter fiscal 2021 results, wherein earnings beat the Zacks Consensus Estimate, while revenues matched the same. Moreover, the top and the bottom line grew significantly on a year-over-year basis.

However, following the earnings release, the company’s shares slipped 1.9% during after-hour trading session on Dec 1. Investors’ sentiments might have been impacted by the company’s inability to provide any guidance for fiscal 2021 due to uncertainty related to the COVID-19 pandemic. Nonetheless, the company is optimistic about expanding its market share in the fragmented and growing industry of home decor.

In this regard, Lee Bird, chairman and chief executive officer of At Home, stated, “We have the potential to grow our store base nearly three times larger, and our real estate opportunities are only getting stronger. We also believe we can drive revenue per store significantly higher through both our in-store and omnichannel strategies.”

Inside the Headlines

The company reported adjusted earnings per share of 74 cents, which topped the consensus estimate of 63 cents by 17.5%. Moreover, earnings also increased 740% year over year.

At Home Group Inc. Price, Consensus and EPS Surprise

 

At Home Group Inc. Price, Consensus and EPS Surprise

At Home Group Inc. price-consensus-eps-surprise-chart | At Home Group Inc. Quote

During the fiscal third quarter, net sales matched the consensus mark of $470 million. The figure also improved 47.5% from $318.7 million generated in the prior-year quarter. The upside was driven by a 44.1% improvement in comparable store sales or comps and 2.8% net increase in stores. Strong demand and persistent rollout of its omni-channel initiatives helped it drive comps.

Operating Highlights

Gross margin of 36.3% expanded 950 basis points (bps) from the year-ago figure of 26.8% backed by lower occupancy costs, depreciation expense and distribution center costs. Adjusted selling, general and administrative expenses — as a percentage of net sales — improved 280 bps year over year to 20.7%.

Consequently, adjusted operating margin increased a significant 1,250 bps to 15.2% from the prior-year level owing to the above-mentioned tailwinds. Adjusted EBITDA was $93.8 million compared with $32.9 million a year ago, reflecting growth of 184.9%.

At the end of the fiscal third quarter, the company had 219 stores in 40 states. Out of these, six net new stores were opened since the third quarter of fiscal 2020.

Financials

As of Oct 24, 2020, At Home reported cash and cash equivalents of $33.9 million compared with $12.1 million at fiscal 2020-end and $14.1 million at the end of fiscal third-quarter 2020. Inventories were down 19.5% at the end of the reported quarter, primarily due to strong demand for its products post the easing of coronavirus-led restrictions.

Long-term debt came in at $314.5 million at fiscal third quarter-end compared with $334.3 million at fiscal 2020-end.

Net cash provided by operating activities was $309.4 million in the first nine months of fiscal 2021 compared with $7.8 million in the corresponding period of fiscal 2020. As of Oct 24, 2020, it had total liquidity of $360.4 million.

Zacks Rank

At Home — which shares space with RH (RH - Free Report) , Tempur Sealy International, Inc. (TPX - Free Report) and Williams-Sonoma, Inc. (WSM - Free Report) in the Zacks Retail - Home Furnishings industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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