Ecommerce To Save Store Chain

Ecommerce To Save Store Chain – After At Home Group Inc. lost half its market value in one day this June, its CEO Lee Bird decided to reconsider everything at the home decor chain of 200 stores across 40 states.

“This past 90 days has been a revisit of our whole business,” Bird said in an interview. “We obviously lost the faith of our investors.”

In response, the home-goods retailer has slowed its ambitious addition of 400 more stores, which now will gradually open over the next decade. The chain will also revamp marketing to tout what it claims are the lowest prices in the industry.

And, crucially, after staying out of the e-commerce fray because the cost of implementation and shipping could hamper profit, the company now plans a full online offering by 2022.

The efforts come none too soon, as a shakeout in retail has left legacy chains struggling to survive the arrival of digital-first competitors like Amazon.com Inc., which has an AR interior decorating feature, and the home decor destination Wayfair Inc., the world’s 12th largest online retailer.

Consumers at all income levels are also more discount-oriented, using the internet to seek out deals. At Home appeared immune to these woes until June 6 when weak sales and increased costs from President Trump’s tariffs on Chinese goods led to a cut in its earnings forecast that hammered the stock.

“A long list of little things have gone against the company,” said Brad Thomas, an analyst at KeyBanc Capital Markets. “A few have been company specific, but it’s more about housing slowing down about a year ago.”

At Home also had little room for error, with its valuation soaring after revenue gained an average 23% annually over the past three years. But investors bolted after the company’s same-store sales fell the past two quarters—the first declines since going public three years ago. The company’s earnings have also missed analysts’ projections twice in the past three quarters.

For the second quarter ending July 27, 2019 when it added 13 stores, At Home posted a comparable store sales dip of 0.4%, as net sales gained 18.7% to $342.3 million, up from a year-ago’s $2.88.5 million, the company reported.

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The stock has declined 54% this year to $8.56 on Tuesday. Just a year ago, the retailer sold additional stock to the public for $33.20 a share.

“It’s hard, but I get paid a lot of money so no one is going to tear up for me,” said Bird, who bought $500,000 worth of shares on Monday.

Battling low-price competitors

An increase in value-driven U.S. shoppers should put At Home in a solid position. Much like Costco Wholesale Corp., the chain has a low-cost operating model—it opens stores cheaply in locations vacated by the likes of Sears and directly sources about 70% of its inventory.

That helps the retailer keep prices low, but not enough shoppers were getting the message because of “all the noise” on discounts and deals coming from competitors, Bird said.

Unlike At Home, most retailers employ a model of high-introductory prices and then discounts. At Home uses a pricing model of everyday low prices—a strategy popularized by Walmart Inc., which eschews promotions and instead tries to convince shoppers of constant value. In the low-price home goods space, Walmart is another direct At Home competitor, as is Target. Continue reading

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