Consumer credit woes send Conn’s to $9.75 million Q1 loss
June 2, 2016,
THE WOODLANDS, Texas — Retailer Conn’s Inc. swung to a net loss of $9.75 million in the quarter ended April 30 as the company continued to rack up losses in its consumer credit business.
The company’s retail stores, which generate about one third of its sales from furniture and bedding, recorded a 6.8% sales increase and had an operating profit of $33.7 million. However, the consumer credit segment recorded an operating loss of $21 million. Interest expenses of $25.9 million increased the segment’s pre-tax loss to $46.9 million.
The most recent quarter’s net loss compares with net income of $15.7 million or 43 cents per share in last year’s first fiscal quarter.
“Our results this quarter reflect the transition we are undergoing this year to transform our credit business,” said Norm Miller, chairman, president and CEO. “Our work the past few years to revitalize our retail operation was highly successful, but changes in the underlying behavior of our customer base exposed the need for increased investment in credit risk management. We are temporarily slowing the pace of growth to allow us to implement strategies to turn around our credit segment’s financial performance. These strategies include investments in our credit risk management team, improvements to our underwriting strategies and reviewing opportunities to increase the yield on the portfolio.”
He said the changes include the appointment of a new chief financial officer, new chief credit officer and new general counsel. In addition, veteran Conn’s executive Michael Poppe has been promoted from executive vice president and chief operating officer to president and chief operating officer of credit and collections.
“It will take several quarters before the benefits of these efforts begin to meaningfully impact our reported results,” Miller said. “I am confident we are headed in the right direction and will end the year better positioned to achieve consistent and predictable earnings growth.”
Conn’s said furniture and mattress sales climbed 17.7% to $105.3 million in the quarter, making it the retailer’s largest product segment. Furniture unit volume jumped 23.5%, and mattress unit volume went up 13.2%, the company said.
Appliance sales rose 4.5% to $87.9 million, while consumer electronics sales fell 7.8% to $65.9 million.
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