At Home Group (HOME), which made its IPO debut in August 2016, reported Q4 (Jan) earnings this morning. In case you're not familiar, At Home is what is known as a home décor superstore where consumers can shop for a wide assortment of products for any room, in any style, for any budget. Its stores are similar to HomeGoods but much larger. Its stores are huge, typically in the 80,000 to 200,000 sq ft range. That's about 5x larger than a typical HomeGoods store. HomeGoods is owned by TJX Cos (TJX).
At Home currently operates 126 stores in 30 states. The chain is fairly spread out with just a few locations in each state with a focus on the South, Southeast and Midwest. As such, it's still quite small as HomeGoods has close to 600 locations. With that said, HOME sees potential for 600+ stores in the US. HOME is growing its store base by about 20% per year.
Over 70% of HOME's products are unbranded, private label or specifically designed for At Home. This helps keeps costs down and makes At Home attractive for value shoppers. At Home believes that decorating a home is a continuous, ever evolving process that can be as simple as replacing patio cushions with a new seasonal pattern or as involved as updating the look of a whole room or the entire house.
It keeps rent costs down by opening new stores in locations that have been vacated by department stores and discount chains. Each store is currently profitable with average annual revenue above $6 mln and with store-level adjusted EBITDA margins of 28%. Due in part to past investments, HOME's distribution center infrastructure should be able to support up to approximately 220 stores with limited incremental investment.
Turning to the JanQ results, non-GAAP EPS doubled to $0.28, which was better than market expectations. Revenue rose 26.4% year/year to $234.5 mln, which also was better than expected. Same store comps came in at a robust +7.1% for JanQ, this was much better than the full year FY17 comps of +3.7%.
HOME says it further elevated its holiday assortment in JanQ and capitalized on an inventory opportunity, both of which were well-received by customers. Looking ahead to the upcoming year, HOME has robust marketing and merchandising plans in place and a pipeline of store opportunities that the company is excited about. HOME reiterated that it has a substantial long-term growth runway with potential to increase its store count to nearly 5x its current footprint. It's a young brand with significant room to grow.
In addition to earnings, HOME also announced the launch of its first national TV campaign called "Unleash Your Inner Decorator" to include television and digital radio, showcasing the store's decorating possibilities. The campaign debuts on April 3, 2017, in more than 20 top markets and highlights At Home's décor assortment as well as everyday low prices. Four unique TV commercials are set to premiere that explore decorating aesthetics through the lens of a diverse group of individuals.
In sum, with the stock higher today (although it has come down off its early morning highs), it's clear investors are pleased with the JanQ results and especially the same store comps at +7.1%. As other retailers reported disappointing holiday sales, At Home seems to have done quite well. On a final note, as we said, HOME made its IPO debut in August 2016. The deal priced at $15, at the mid-point of its expected range of $14-16. It then opened at $16.25. The stock stumbled a bit in the Sep-Nov 2016 timeframe but it has been improving since then. It's still having trouble getting above the mid-teen area, we'll see if this strong report can get the stock moving higher on a sustained basis.