At Home Group Mulls Over Potential Sale, Stock Gains 8%

At Home Group Inc. HOME is exploring a range of strategic options that include the sale of the company, per Reuters. The company has appointed Bank of America Corp. to find a potential buyer. However, At Home Group has declined to comment on the matter.

Although the company has lost 39.2% against the industry’s 5% growth in a year’s time, it took a sharp U-turn following the news. Evidently, the stock gained nearly 8% yesterday.

Despite reporting robust sales growth of more than 20% year over year in each of the trailing 19 quarters, At Home Group has struggled to find a safe haven. Shares of the company have been declining as it is bearing the brunt of rising raw material, freight and transportation costs, higher marketing and advertising expenses, and stiff competition. The aforementioned factors have impacted the company’s earnings as well. In fourth-quarter fiscal 2019, adjusted earnings declined 6% year over year.

Furthermore, At Home Group issued tepid guidance for first-quarter and fiscal 2020. The company projects adjusted earnings to decline more than 90% in the first quarter from the year-ago period. Also, for fiscal 2020, its adjusted earnings are likely to decrease 21.5-16.9% on a year-over-year basis.

Further, the specialty retail home furnishings and decor businesses are highly competitive. At Home Group competes with other retailers that deal with similar kind of merchandises. The company also competes with national, regional and local businesses that follow a similar retail store strategy as well as with existing big box retail, department and specialty stores.

Substantial sales growth in the retail industry in the last decade has encouraged the entry of new competitors and business models. Increased competition can reduce sales and ultimately hurt operating results and businesses going forward.

Zacks Rank & Key Picks

At Home Group, which shares space with RH RH, carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Williams-Sonoma, Inc. WSM and Haverty Furniture Companies, Inc. HVT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Williams-Sonoma’s reported better-than-expected earnings in each of the trailing four quarters, the average being 9.6%.

Haverty’s earnings surpassed the consensus estimate in each of the trailing four quarters, with average positive surprise of 19.3%.

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At Home Group Inc. (HOME) : Free Stock Analysis Report
 
Haverty Furniture Companies, Inc. (HVT) : Free Stock Analysis Report
 
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Restoration Hardware Holdings Inc. (RH) : Free Stock Analysis Report
 
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