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Why Shares of At Home Plunged on Thursday

By Lou Whiteman – Jun 6, 2019 at 11:37AM

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Earnings were bad. Guidance was worse.

What happened

Shares of At Home Group (HOME) lost nearly half of their value on Thursday, trading down more than 45% after the home decor retailer missed on earnings and provided guidance that fell short of expectations.

So what

After markets closed Wednesday, At Home reported net income of $0.21 per share for the quarter, down from $0.28 per share a year prior. Adjusted for one-time items, earnings came in at $0.03 per share, shy of the $0.08 consensus, on revenue of $306.3 million that lagged expectations for $360 million.

Comparable-store sales decreased 0.8% in the quarter. At Home opened 11 new stores during the period, ending the quarter with 191 locations in 38 states.

A home decor display.

Image source: Getty Images.

Company chairman and CEO Lee Bird in a statement called it "a challenging first quarter as we faced unusually adverse weather across a majority of our markets, resulting in comparable store sales below our expectations."

However, At Home also tempered expectations for the quarters to come. The company said it expects adjusted second-quarter earnings of $0.14 to $0.17 per share, short of the $0.26 consensus, on revenue of between $340 million and $345 million compared to expectations for $350 million in sales.

For the full fiscal year, At Home is expecting adjusted earnings of $0.67 to $0.74 per share on revenue of $1.39 billion. Analysts had been expecting $1.03 per share of earnings on sales of $1.4 billion.

Now what

Bird said that the company, in response to its weather problems, took "swift markdown actions," sacrificing near-term margins so it could head into the fall selling season in a clean inventory position. At Home could use a fresh start, with its shares now down 74% over the past year amid macro concerns about the health of the retail economy and specific questions about its debt burden.

At Home did get a boost in April when the company was mentioned as a potential takeover candidate. But absent some external catalyst, it appears the stock could be mired in the doldrums for the next few quarters at least.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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