Dive Brief:
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The first retail-based initial public offering of the year, from big-box furniture and home goods retailer At Home, had a flat reaction from Wall Street on Thursday.
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At Home began trading at $16.25 per share, 8% above its $15-per-share IPO price but returned to $15.15, close to its opening price tag, at market’s close, according to Fortune.
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At Home runs 115 stores in 29 states in the South and Midwest, plus Washington, D.C. and Phoenix, taking advantage of vacated department stores and other empty retail locations. The company posted annual sales of $653 million, with eight straight quarters of 20% sales increases and nine straight quarters of same-store sales increases, according to the Dallas Morning News. But At Home remains unprofitable, Fortune reports.
Dive Insight:
At a time of booming e-commerce sales and a general consensus that the U.S. has too many stores (especially when it comes to suburban big-box retail), At Home has bucked the trend.
CEO Lee Bird has said that the retailer’s growth has proved that there’s a place for the approach. Online retail sales of furniture can be particularly expensive for retailers and their customers because of tough logistics and high shipping fees, and touch and feel is particularly important for many furniture shoppers. The retailer has no plans right now to sell online.
"So we need big boxes," Bird told the Dallas Morning News, telling Fortune “Customers tell us they want to see our goods in person."
At Home keeps prices low to avoid forced discounts, an approach akin to the burgeoning online mattress market. The U.S. home furnishings market is among the healthiest in retail, with $200 billion in sales and steady annual growth of about 3% over the past decade, Bird told Fortune. He sees further expansion for the company on the coasts, specifically in California and the New York City area.
As it grows, At Home could pose a challenge to another private furniture retailer, Ikea, which recently said it would boost the quality of its furniture. At Home aims to furnish everything from a shopper's college dorm to their first home; Ikea’s well designed but low-quality goods, by contrast, aren’t often a choice for consumers beyond college or the early post-collegiate days.
“Customers expect us to do more,” Ikea CEO Peter Agnefjäll told Reuters last month. “And nowadays you can't really make products that are throwaway: When you buy a sofa table it needs to be built to last.”