Will New Store Openings Aid At Home's (HOME) Q2 Earnings?

At Home Group Inc. HOME is set to report second-quarter fiscal 2019 results on Aug 29, after the market closes. The company delivered a positive earnings surprise of 14.81% in the last reported quarter. In fact, its earnings surpassed estimates in all the trailing four quarters, with the average being 20.06%.

Let’s discuss some of the key factors that might influence the company’s second-quarter fiscal 2019 results.

Factors at Play

At Home has been delivering solid top and bottom-line performance, courtesy of strong comparable store sales (comps) growth and new store openings. The company has achieved net sales growth of 21% in the last reported quarter, representing 16th consecutive quarter of more than 20% net sales growth. Despite weather-related woes, At Home marked the 17th consecutive quarter of positive comps growth in the last reported quarter.

Importantly, the company expects new store openings to be the biggest driver of sales growth. The company had earlier projected to open 10 new stores in the second quarter of fiscal 2019.

Apart from new store openings, the company remains focused on its loyalty and credit card programs in order to attract more customers. As of Apr 28, 2018, enrollment in both Insider Perks and the credit card program has exceeded the company’s expectations since their launch in fiscal 2018.

At Home expects sales in the range of $284-$287 million for the to-be-reported quarter. Comps are anticipated to grow 2.5-3%. Meanwhile, the Zacks Consensus Estimate for total sales is pegged at $286.7 million, suggesting an increase of 23.6% year over year.

Now, its direct sourcing initiatives and favorable year-over-year comparison will likely prove conducive to the company’s gross margin expansion.

Overall, the Zacks Consensus Estimate for earnings is pegged at 33 cents per share, reflecting an increase of 83.3% year over year. Higher sales along with a lower tax rate are expected to aid At Home’s bottom-line performance.

At Home Group Inc. Price and EPS Surprise

 

At Home Group Inc. Price and EPS Surprise | At Home Group Inc. Quote

Here is What Our Quantitative Model Predicts:

Our proven model does not show that At Home is likely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: At Home currently has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.

Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Worth a Look

Here are some stocks in the Retail-Wholesale sector, which have the right combination of elements to beat estimates in their respective quarters to be reported.

RH RH has an Earnings ESP of +0.76% and a Zacks Rank #2.

Best Buy Co., Inc. BBY has an Earnings ESP of +1.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has an Earnings ESP of +0.90% and a Zacks Rank #3.

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