• Clint Engel

Conn’s revenues decline 8.6% for 1Q

THE WOODLANDS, Texas — Conn’s posted an 8.6% drop in first quarter revenues but a smaller loss for the period, as the company’s credit business improved despite sales declines across all product categories.

Total revenues for the quarter ended April 30, declined to $355.8 million from $389.1 million for the same period a year ago. Retail revenues for the credit-oriented furniture, electronics and appliance retailer decreased 12.4% to $279.4 million primarily due to a 15.2% same-store sales decline, the company said.

The furniture and mattress business, often a shining star for the company, posted a 10.3% sales decline and a 14% drop in same-store sales. The category, which represents 33.8% of retail revenues, fared better than the retailer’s consumer electronics and home office categories; the home appliance category saw 8.9% sales declines and an 11.3% same-store sales drop.

Conn’s said its furniture unit volume decreased 24.1% during the quarter but saw an 11.8% increase in average selling price. Its mattress unit volume was off 21.6% with a 1.8% decrease in average selling price.

Conn’s credit business, meanwhile, improved, the “result of higher finance charges, strengthening portfolio trends, controlled expenses and lower borrowing costs,” said Norm Miller, president, CEO and chairman.

Interest income and fee yield were the highest since Conn’s fiscal 2015 fourth quarter, he said, thanks to company initiatives to increase yield. About 84% of the retailer’s current originations have a weighted average interest rate of 28.6%, compared with about 22% in September.

Retail profitability improved despite the sales decline, “reflecting the strength of our retail model,” Miller said, as “favorable mix within product categories” and lower logistics costs led to an increase in retail gross margin.

Miller also said the implementation of retailer’s new lease-to-own platform offered through Aaron’s Progressive Leasing division was ahead of schedule, and the company believes “lease-to-own sales can be a meaningful long-term driver of retail growth.”

“Our first quarter performance demonstrates the progress we are making improving our financial results, while creating a sustainable platform for long-term profitable growth,” Miller said in the earnings release.

“The foundation of our success is Conn’s differentiated business strategy, which offers our customers the ability to affordably finance top-of-the-line, brand name products for their homes. This compelling retail experience provides Conn’s with a significant opportunity to grow retail sales and become a national retailer.”

The company opened three Conn’s HomePlus stores during the quarter and said it doesn’t intend to open any more for the rest of the fiscal year.

In its guidance for the second quarter, the company said it expects same-store sales to be down 12% to 15%. Miller said the company expects to return to full-year profitability, this year.

Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
Quarter ended 4/30 2017 2016 % change
Revenues $355,826,000 $389,113,000 (8.6%)
Operating income $20,182,000 $12,656,000 59.5%
Net income ($2,580,000) ($9,749,000) 73.5%
Earnings per share ($0.08) ($0.32) 75.0%
Clint EngelClint Engel | Senior Retail Editor, Furniture Today

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