Dive Brief:
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Home decor retailer At Home on Tuesday reported a Q4 net sales rise of 26.4% to $234.5 million from $185.5 million in the year-ago quarter, driven by the net addition of 23 stores since that quarter of fiscal 2016 and a same-store sales increase of 7.1%.
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Full fiscal year 2016 net sales rose 23.1% to $765.6 million from $622.2 million in the previous fiscal year, driven by the net addition of 23 stores in fiscal 2017 and a same-store sales increase of 3.7%, according to a press release. For this year, At Home expects net sales to be in a range of $903 million to $910 million, based on its forecast for a same-store sales increase of 2.5% to 3.0%.
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At Home, which has banked its strategy on brick and mortar, reported that it opened one new store in the fourth quarter and ended the year with 123 locations in 30 states, a 23% year-over-year increase in total stores. This year the company plans 25 net new store openings as well as its first nationwide television advertising campaign, dubbed "Unleash Your Inner Decorator."
Dive Insight:
Sure, e-commerce growth is outpacing brick-and-mortar sales growth, and there’s a general consensus that the U.S. has too many stores (especially when it comes to suburban big-box retail). But At Home has bucked the trend, opening more and more stores and largely shunning digital sales.
That approach helped make At Home a winner over the holidays, thanks to appealing merchandise that resonated with customers during that period, according to GlobalData Retail managing director Neil Saunders, who added that the retailer’s growth prospects remain sound and that in fact it is "fast becoming a major player" in the home decor segment.
“Although At Home has been expanding more aggressively, it remains a young chain and brand with a somewhat limited exposure,” Saunders said in a note emailed to Retail Dive. “There is plenty of headroom to expand via new stores as well as online. Indeed, next year will see the opening of a net 25 stores, slightly above this year's level of new openings. New stores and continued underlying growth from existing stores should push up total year sales to around $905 million — just shy of the annual billion-dollar mark, which we think At Home will hit in the fiscal year 2019.”
At Home holds a lot of potential in part because consumers are still becoming aware of it, and will continue to as it expands to more stores. To move that along, "Unleash Your Inner Decorator" will debut April 3 in more than 20 markets, complete with four commercials exploring decorating aesthetics from the perspective of a diverse set of consumers.
But At Home's success is due mostly to the expansion of its physical footprint, which Saunders said has helped push the retailer to profit. Even its biggest financial hits — lingering costs from its initial public offering last year and an almost 20% increase in selling, general and administrative expenses from establishing new stores that helped send net income down 74% — are transitory. The new stores in particular can be viewed as can investment in future growth, Saunders said.
In his statement Tuesday, At Home CEO Lee Bird said that the company has “robust” marketing and merchandising plans in place for this year, along with its plans for new and existing stores. Bird also emphasized the company’s focus on operational efficiencies that it achieves as it grows.
At Home will need that, Saunders said, along with some more attention to the store experience, something that can hardly be overlooked when physical retail is the essential proposition. “There is one particular area where we believe At Home could execute better: inspiration in stores," he said. "Even new shops are very functional, and there is limited engagement with shoppers,” he said. “Although this is partly a symptom of the big box nature of the format, this is a lost opportunity in a category like home. From our data, it also deters those occasional shoppers who are not undertaking a big decoration project from visiting At Home – something that diminishes same-store sales growth.”