Why has At Home Group (HOME) fallen 16% since its last earnings report?

It’s been a month since At Home Group’s (HOME) last earnings report, with shares down about 16% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is At Home Group poised for a breakout? Before we dive into how investors and analysts have reacted recently, let’s take a quick look at the most recent earnings report to better understand the important catalysts.

At Home posts bigger-than-expected Q1 loss

At Home Group Inc. reported weak results for the first quarter of fiscal 2021, where both revenues and earnings missed the Zacks Consensus Estimate and were lower than the same period last year.

Lee Bird, its president and CEO, said: “Early results are strong across all markets, with initial sales in reopened stores growing solidly by double digits during the reopening period since the start of the quarter. As a low-price leader in our category, focused on expanding our omni-channel presence, I am confident that At Home is well-positioned to capture additional share in the large and fragmented home furnishings market in both the short and long term.”

Given the unprecedented and ongoing uncertainty caused by the COVID-19 pandemic, At Home did not provide guidance for the second quarter or full year fiscal 2021.

Inside the headlines

The company’s adjusted loss per share of 61 cents was wider than the consensus estimate of a loss of 39 cents. In the same quarter a year earlier, the company reported adjusted earnings of 3 cents per share.

Net sales of $189.8 million were 2.5% below the consensus of $194.7 million. Additionally, the reported number was down 38% from $306.3 million in the prior-year quarter due to temporary store closures due to the COVID-19 pandemic, partially offset by net store growth.

Sales in comparable stores fell by 46.5%. In the same period last year, the indicator fell by 0.8%.

Operational Highlights

Gross margin of 8.6% declined by basis points (bps) in 2020 compared to 28.8% a year earlier. The decline was primarily due to a reduction in borrowing in rental and depreciation costs due to lower sales.

Adjusted selling, general and administrative expenses — as a percentage of net sales — increased 1,020 basis points year over year to 35%.

Adjusted operating margin contracted by a significant 3,100 bps to minus 27.6% compared to the prior-year level due to the aforementioned headwinds. Adjusted EBITDA was negative at $14.6 million compared to $33.8 million a year earlier.

Store update

At the end of the fiscal first quarter, the company had 218 stores in 39 states. Of those, 27 new stores opened last year, up 14.1% year over year.

Financial

As of April 25, 2020, At Home reported cash and cash equivalents of $43.6 million, compared to $12.1 million at the end of fiscal year 2020 and $15.3 million at the end of the first quarter of fiscal year 2020. Long-term debt was $334.2 million at the end of the first quarter of fiscal year, compared to $336.3 million at the end of fiscal year 2020.

In the first three months of fiscal 2021, net cash used in operating activities was $55.2 million, compared to $1.2 million in the same period of fiscal 2020.

As of June 16, 2020, the company’s total liquidity was over USD 200 million.

How have estimates changed since then?

It turns out that the new estimates have been on an upward trend over the past month. The consensus estimate has moved up 134.02% due to these changes.

VGM Results

At Home Group currently has a weak Growth Score of F, but its Momentum Score is slightly better at D. Following the same pattern, the stock has been given a D rating on the Value side, which puts it in the bottom 40% for this investment strategy.

Overall, the stock has a Composite VGM Score of F. If you’re not focused on a single strategy, this rating should interest you.

Perspectives

The stock’s estimates are trending upwards, and the magnitude of these revisions looks promising. It is worth noting that At Home Group has a Zacks Rank #3 (Hold). We expect the stock to deliver consistent returns over the next few months.

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