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Why Is At Home Group (HOME) Down 13.9% Since Last Earnings Report?

A month has gone by since the last earnings report for At Home Group (HOME). Shares have lost about 13.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.

At Home Q2 Earnings Beat Estimates, Inventory Low

At Home Group Inc. reported impressive results for second-quarter fiscal 2021. The top and bottom lines topped the Zacks Consensus Estimate and grew significantly from the year-ago period.

It expects moderating business prospects for the remainder of fiscal 2021 due to meaningful increase in the seasonal mix and inventory constraints. Also, the ongoing competitor liquidations, and uncertainty related to the COVID-19 pandemic and elections may weigh on its future results. At Home projects seasonal inventory to decline 20% and 10% in the fiscal third and fourth quarters, respectively.

Inside the Headlines

The company reported adjusted earnings per share of $1.41, which topped the consensus estimate of $1.33 by 6% and increased a notable 683% from 18 cents reported a year ago.

Net sales of $515.2 million also beat the consensus mark of $515 million by 0.5% and grew 50.5% from $342.3 million generated last year. The upside was driven by a 42.3% improvement in comparable store sales or comps and 7.4% net increase in stores. Strong demand and persistent rollout of its omni-channel initiatives helped it achieve improved comps.

Operating Highlights

Gross margin of 38.1% expanded 880 basis points (bps) from the year-ago figure of 29.3% backed by lower occupancy costs, depreciation expense and distribution center costs. Adjusted selling, general and administrative expenses — as a percentage of net sales — improved 900 bps year over year to 13%.

Consequently, adjusted operating margin increased a significant 1,780 bps to 24.6% from the prior-year level owing to the above-mentioned tailwinds. Adjusted EBITDA was $159.7 million compared with $47.1 million a year ago, reflecting growth of 239.1%.

At fiscal second quarter-end, the company had 219 stores in 40 states. Out of these, 15 net new stores were opened in the last year.

Financials

As of Jul 25, 2020, At Home reported cash and cash equivalents of $32.4 million compared with $12.1 million at fiscal 2020-end and $13.1 million at the end of fiscal second-quarter 2020. Inventories were down 30% 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 $359.5 million at fiscal second quarter-end compared with $334.3 million at fiscal 2020-end.

Net cash provided by operating activities was $234.5 million in the first six months of fiscal 2021 compared with $11.4 million in the corresponding period of fiscal 2020. As of Jul 25, 2020, it had total liquidity of $305.8 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 33.83% due to these changes.

VGM Scores

At this time, At Home Group has a strong 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 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 broadly trending upward 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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