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At Home Group (HOME) Down 17.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for At Home Group (HOME - Free Report) . Shares have lost about 17.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is At Home Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

At Home (HOME - Free Report) Q3 Earnings Beat Estimates

At Home Group Inc. 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.

Although the company did not 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.

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.

Fiscal Q4 Views

Based on quarter-to-date trends, the company expects total comps to be in the mid to high-teens for the fiscal fourth quarter. It is on track to deliver one of the best fourth quarters in At Home's history.

From a gross margin standpoint, it expects year-over-year expansion from the same factors that generated margin improvement in the fiscal third quarter, i.e., fixed cost leverage, product margin expansion and lower freight expenses.

It anticipates a low 20s SG&A rate for the quarter.

It now expects to open 12 to 15 new stores next year, higher than its prior plan at seven to 10 stores.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, At Home Group has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, At Home Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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