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Why Is At Home Group (HOME) Down 0.6% Since Last Earnings Report?

·4 min read

It has been about a month since the last earnings report for At Home Group (HOME). Shares have lost about 0.6% 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 drivers.

At Home (HOME) Q1 Earnings & Revenues Top Estimates, Rise Y/Y

At Home Group Inc. reported first-quarter fiscal 2022 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Moreover, the top and the bottom line grew significantly on a year-over-year basis.

Inside the Headlines

The company reported adjusted earnings per share of 87 cents, which surpassed the consensus estimate of 61 cents by 42.6%. Moreover, earnings improved significantly from the year-ago loss of 61 cents.

During the fiscal first quarter, net sales of $537.1 million surpassed the consensus mark of $465.4 million by 15.4%. The figure also improved 182.9% from $189.8 million generated in the prior-year quarter. The upside was driven by a 187.3% improvement in comparable store sales or comps and 3.7% net increase in stores. Strong demand and strategic initiatives helped drive comps.

Operating Highlights

Gross margin of 37.3% expanded 2,870 basis points (bps) from the year-ago figure of 8.6%, 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 — contracted 1,480 bps year over year to 20.2%. This was mainly due to expense leverage as a result of higher sales.

Adjusted operating margin significantly increased to 16.8% from the prior-year level of negative 27.6% owing to the above-mentioned tailwinds. During the fiscal first quarter, adjusted EBITDA came in at $110.6 million against a loss of $14.6 million a year ago, reflecting substantial growth.

At the end of the fiscal first quarter, the company had 226 stores in 40 states. Out of these, eight net new stores were opened since the first quarter of fiscal 2021.

Financials

As of May 1, 2021, At Home reported cash and cash equivalents of $150.5 million compared with $125.8 million at fiscal 2021-end. Inventories were down 1.2% at the end of the reported quarter to $369 million from $364.5 million at fiscal 2021-end.

Long-term debt was $308.6 million at the end of first-quarter fiscal 2022 compared with $314.3 million at fiscal 2020-end.

Net cash provided by operating activities was $77.8 million for fiscal first-quarter 2022 against $55.2 million cash used operating activities at first-quarter 2021-end. As of May 1, 2021, it had total liquidity of $475.7 million (cash of $150.5 million plus $325.2 million in borrowings available under the ABL facility).


 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 12.27% due to these changes.

VGM Scores

At this time, At Home Group has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 these revisions looks promising. It comes with little surprise At Home Group has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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