Conn's sales decline 15.2%, but furniture, mattresses do well

Sales in category rise 7% in second quarter

Clint Engel -- Furniture Today, August 11, 2011

BEAUMONT, Texas — Furniture, electronics and appliance retailer Conn's posted a 15.2% drop in second quarter retail segment sales, citing store closings and "negative industry trends" in its electronics and appliance businesses.

But its furniture and bedding business was a shining star, recording a sales increase and helping to boost overall margins. Retail segment net sales for the period ended July 31 - including product sales, repair service agreement commissions and service revenues - declined to $152.2 million from $179.3 million for the same quarter a year ago.

Furniture and mattress sales in the quarter, however, rose about 7% to $22.7 million or 14.9% of total sales from $21.2 million or 11.8% of the total a year ago.

Same-store sales for the period decreased 12.8%, but the company said the performance improved as the quarter progressed with the best results following the July Fourth holiday weekend. Since that weekend, same-store sales have been down in the mid-single-digit range, the company said in a release.

Net sales for the first six months decreased 9.8% to $309.2 million and same-store sales were down 8.6%.

Conn's, with 71 stores in Texas, Louisiana and Oklahoma, said second-quarter results were hurt by negative trends in its consumer electronics and appliance business, particularly television sales, and also were affected by the closing of four stores during the quarter, two in Dallas and one each in San Antonio and Austin, Texas.

The company said that in stores where it is devoting more space to furniture and mattresses, there are initial signs that the move "will help drive continued growth" in the category.

Conn's Chairman Theodore Wright said while quarterly results didn't meet company expectations, "We did deliver gross margins above the range we targeted, and I am encouraged by recent sales trends. Early indications are that we can retain a meaningful portion of the customers that shopped at our now-closed locations. Also, the two stores with significantly expanded floor space allocated to furniture and mattresses have delivered good results so far."

The retail segment's gross margin, which includes gross profit from both product and repair service agreement sales, was approximately 29% for the quarter compared with 25.7% in the same period a year ago. The retailer said it saw expanded gross margins in most categories and "a shift in the product sales mix to higher-margin furniture and mattress sales."

Consumer electronics and appliances sales were down while enhanced displays and promotions in the furniture and mattress business led to a 6.5% increase in unit sales and a 1.3% increase in average selling price.

The company said the results are preliminary estimates subject to change upon completion of is quarterly financial statement closing process.