Stock in the Spotlight: Conns Inc. (NASDAQ:CONN)

Conns Inc. (NASDAQ:CONN) reported earnings for the three months ended April 2016 on June 02, 2016. The company earned $-0.31 per share on revenue of $389.11M. Analysts had been modeling earning per share of $0.06 with $392.64M in revenue.

Conns Inc. (NASDAQ:CONN) announced its financial results for the first quarter ended April 30, 2016.

Norm Miller, Conn’s Chairman, Chief Executive Officer and President, commented, “Our results this quarter reflect the transition we are undergoing this year to transform our credit business. We have a strong, differentiated retail model that delivers an excellent value to our customers. 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. It will take several quarters before the benefits of these efforts begin to meaningfully impact our reported results. I am confident we are headed in the right direction, and will end the year better positioned to achieve consistent and predictable earnings growth.

Retail Segment First Quarter Results (on a year-over-year basis unless otherwise noted)

Total retail revenues were $319.0 million for the first quarter of fiscal 2017, an increase of $20.4 million, or 6.8%, primarily a result of new store openings partially offset by a decline in same store sales. Excluding the impact of our April 2015 decision to exit video game products, digital cameras, and certain tablets, same store sales for the quarter decreased 1.3%. Sales growth was also impacted by underwriting changes made in the fourth quarter of fiscal 2016 and in the first quarter of fiscal 2017. Retail segment operating income for the first quarter was $33.7 million, and $34.2 million adjusted to exclude net charges of $0.5 million primarily from legal and professional fees related to securities-related litigation.

The following provides a summary of items impacting the performance of our product categories during the first quarter of fiscal 2017 compared to the prior-year period:

  • Furniture unit volume increased 23.5%, partially offset by a 3.8% decrease in average selling price;
  • Mattress unit volume increased 13.2% and average selling price increased 3.3%;
  • Home appliance unit volume increased 5.4% with average selling price flat. Total sales for refrigeration increased 6.8%, laundry increased 2.6%, and cooking increased 8.5%;
  • Consumer electronic unit volume decreased 10.4%, partially offset by a 4.0% increase in average selling price. Television sales decreased 1.5% as unit volume decreased 8.1%, partially offset by a 7.2% increase in average selling price. Excluding the impact from exiting video game products and digital cameras, consumer electronics same store sales decreased 8.6%;
  • Home office average selling price increased 11.0%, partially offset by a 7.4% decrease in unit volume. Excluding the impact from exiting certain tablets, home office same store sales increased 2.8%; and
  • The increase in repair service agreement commissions was driven by improved program performance resulting in higher retrospective commissions and increased retail sales.

Conns Inc. earnings per share showed a decreasing trend of -45.3% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 52%.Analysts project EPS growth over the next 5 years at 23%. It has EPS annual growth over the past 5 fiscal years of 87.4% when sales grew 14.8. It reported 6.6% sales growth, and -174.8% EPS decline in the last quarter.

The stock is trading at $8.07, up 6.18% from 52-week low of $7.6. The stock trades down -81.64% from its peak of $43.95 and 63.2% above the consensus price target of $13.17. Its volume clocked up at 0.8 million shares which is lower than the average volume of 0.88 million shares. Its market capitalization currently stands at $248.65M.

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