Kohl’s explores the acquisition of At Home
At Home Group (HOME) stock surged 8.2% on May 15 in reaction to reports of its possible acquisition by department store chain Kohl’s (KSS). According to a report by Reuters, Kohl’s is in talks with At Home to acquire the home decor chain. This proposed acquisition will help Kohl’s strengthen its presence in the home category.
Reuters reported last month that At Home was exploring strategic options, including a possible sale, amid a considerable drop in its stock price and intense competition from brick-and-mortar retailers as well as online players.
YTD movement and analysts’ ratings
At Home stock fell 20.4% on March 27, the day the company announced its earnings results for the fourth quarter of fiscal 2019, which ended on January 26, 2019. At Home’s net sales increased 20.6% to $354.1 million, while its adjusted EPS fell 6.0% to $0.47 in the quarter. The company exceeded analysts’ sales expectation of $351.8 million but lagged their EPS estimate of $0.48. At Home stock was also affected by the lower-than-expected guidances it issued for the first quarter of fiscal 2020 and fiscal 2020.
On April 4, At Home stock rose 8.0% on reports of its possible sale. On May 13, At Home stock fell 16.1% as US-China trade tensions escalated.
As of May 15, At Home stock had risen 19.5% year-to-date compared to the 13.7% rise in the S&P 500 Index. At Home stock has “buy” recommendations from 11 out of 13 analysts, while the remaining two have “hold” ratings. Its 12-month price target of $26.42 indicates a potential upside of 18.5% for its stock compared to its closing price of $22.30 on May 15.
The fourth quarter of fiscal 2019 was the 19th consecutive quarter during which At Home generated sales growth of over 20%. However, intense competition, rising expenses, and increased debt levels are expected to adversely affect the company’s performance in the upcoming quarters.