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At Home Group (HOME) Down 8.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for At Home Group (HOME). Shares have lost about 8.7% 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) Q4 Earnings & Revenues Beat, Stock Rises

At Home Group Inc. reported fourth-quarter fiscal 2021 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. Moreover, the top and the bottom lines grew significantly on a year-over-year basis.

At Home is optimistic about its growth opportunities, and 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, “As we look forward, we have never been more confident in our ability to capture the large opportunity ahead. We are in the early innings of many exciting initiatives, and we remain focused on delivering strong and consistent results.”

Inside the Headlines

The company reported adjusted earnings per share of $1.08, which surpassed the consensus estimate of 69 cents by 56.5%. Moreover, earnings increased significantly from the year-ago level of 37 cents.

During the fiscal fourth quarter, net sales of $562 million surpassed the consensus mark of $514.7 million by 9.2%. The figure also improved 41.3% from $397.7 million generated in the prior-year quarter. The upside driven by a 30.8% improvement in comparable store sales or comps and 3.3% net increase in stores. Strong demand and persistent rollout of its strategic initiatives helped it drive comps. Also, one additional week (53rd week) had a favorable impact on sales.

Operating Highlights

Gross margin of 38.9% expanded 1,020 basis points (bps) from the year-ago figure of 28.7% backed by product margin expansion, lower occupancy costs, depreciation expenses and distribution center costs. Adjusted selling, general and administrative expenses — as a percentage of net sales — increased 200 bps year over year to 20.6%. This was mainly due to increased incentive compensation and a year-over-year rise in advertising expenses.

Adjusted operating margin increased a significant 830 bps to 17.9% from the prior-year level, owing to the above-mentioned tailwinds. Adjusted EBITDA was $119.6 million compared with $61.5 million a year ago, reflecting growth of 94.4%.
At the end of the fiscal fourth quarter, the company had 219 stores in 40 states. Out of these, seven net new stores were opened since the fourth quarter of fiscal 2020.

Financials

As of Jan 30, 2021, At Home reported cash and cash equivalents of $125.8 million compared with $12.1 million at fiscal 2020-end. Inventories were down 12.8% at the end of the reported quarter primarily due to strong demand for its products post the easing of the coronavirus-led restrictions.

Long-term debt was $314.3 million at the fiscal fourth-quarter end compared with $334.3 million at fiscal 2020 end.

Net cash provided by operating activities was $422.7 million for fiscal 2021 compared with $105.6 million as of fiscal 2020 end. As of Jan 30, 2021, it had total liquidity of $438.4 million (cash of $125.8 million plus $312.6 million in borrowings available under the ABL facility).

2021 Highlights

Net revenues for fiscal 2021 were $1,737.1 million compared with $1,365.0 million in fiscal 2020, up 27.3%.

In fiscal 2021, gross margin moved up 620 bps to 34.6% from 28.4% in fiscal 2020.

Adjusted EBITDA increased 104.4% to $358.4 million from $175.3 million in fiscal 2020.

Adjusted earnings per share for fiscal 2021 were $2.68 compared with 57 cents per share reported in fiscal 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 156.25% due to these changes.

VGM Scores

Currently, At Home Group has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 trending upward for the stock, and the magnitude of this revision 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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