Conn’s, Inc. (NASDAQ/NM: CONN), a specialty retailer of consumer
electronics, home appliances, furniture, mattresses, computers and
lawn and garden products, today announced its retail segment net
sales results for the quarter ended October 31, 2011.
Retail segment net sales for the quarter ended October 31, 2011,
of $155.0 million, increased $17.1 million, or 12.4%, as compared
to the quarter ended October 31, 2010. Retail segment net sales
represent total product sales, repair service agreement commissions
(excluding the impact of repair service agreement cancellations due
to credit charge-offs) and service revenues. Same store sales
(sales recorded in stores operated for the entirety of both
periods, excluding four stores that have been closed, one store in
the process of being closed and two stores with leases that expired
during the current fiscal year) increased 18.9% for the quarter
ended October 31, 2011, as compared to the same quarter in the
prior year period. Some of the factors impacting the Company’s
sales performance during the quarter were as follows:
- Increases in advertising and sales
staffing to accelerate sales volume growth;
- Continued increases in average selling
prices in all major categories;
- Improved and expanded product selection
in the Furniture and Mattresses category; and
- Same store sales benefitted from the
store closures completed during the current fiscal year, as the
Company has been able to retain a portion of the sales from the
closed locations.
“We showed this quarter that we are beginning to gain market
share, and did so while maintaining retail gross margins within our
forecasted range,” commented Theodore Wright, Conn’s Chairman.
The Company previously provided earnings guidance for the fiscal
year ending January 31, 2012, of adjusted diluted earnings per
share of $0.65 to $0.75, which excludes charges related to the
refinancing it completed during the second quarter, costs related
to completed and future store closings and the impact of the
adoption of accounting guidance related to troubled debt
restructuring, which is required to be implemented in the current
fiscal year. The troubled debt restructuring guidance, FASB
Accounting Standards Update 2011-02, requires that an impairment
loss be recorded based on an estimate of the present value of a
loan’s expected future cash flows, for loans that qualify as
restructured under the guidance. The Company intends to update its
earnings guidance for the current fiscal year, as appropriate, and
provide initial guidance for fiscal year 2013 when it issues its
earnings release for the quarter ended October 31, 2011.
The retail segment’s retail gross margin, which includes gross
profit from both product and repair service agreement sales, was
approximately 28.5% for the quarter ended October 31, 2011. This is
an increase from the 25.8% experienced in the quarter ended October
31, 2010, as the Company achieved expanded gross margins in the
furniture and mattresses and home office categories and saw a shift
in the product sales mix to higher-margin furniture and mattress
sales. The following table presents net sales by category and
changes in net sales for the quarter:
Quarter
ended October 31, Same store 2011 % of
Total 2010 % of Total Change %
Change % Change (dollars in thousands) Consumer
electronics $ 49,060 31.7 % $ 47,680 34.6 % $ 1,380 2.9 % 8.6 %
Home appliances 47,023 30.3 % 42,282 30.7 % 4,741 11.2 % 16.5 %
Furniture and mattresses 26,007 16.8 % 16,351 11.9 % 9,656 59.1 %
68.9 % Home office 12,864 8.3 % 13,448 9.7 % (584 ) -4.3 % -1.9 %
Other 5,450 3.5 % 6,055 4.4 % (605 ) -10.0 %
-2.5 % Total product sales 140,404 90.6 % 125,816 91.3 % 14,588
11.6 % 17.3 %
Repair service agreement commissions
10,601 6.8 % 8,275 6.0 % 2,326 28.1 % 32.0 % Service revenues
3,950 2.6 % 3,769 2.7 % 181 4.8 % Total
net sales $ 154,955 100.0 % $ 137,860 100.0 % $ 17,095 12.4
% 18.9 %
Note: The amounts in the table reflect the
results of the Company’s retail segment.
The following is a summary of some of the items impacting the
Company’s key categories during the quarter, as compared to the
same quarter in the prior fiscal year:
- Consumer electronics category sales
increased primarily as a result of a 1.9% increase in the unit
sales of televisions, as the average selling price increased 3.0%.
Also, contributing to the increase was an increase in home theater
sales, partially offset by declines in camcorder, GPS devices and
gaming hardware sales;
- Home appliance category sales increased
during the quarter on a 3.1% increase in unit sales and an average
selling price increase of 9.0%. Laundry sales were up 14.4%,
refrigeration sales were up 20.1%, room air conditioning sales were
up 7.0% and cooking sales were down 2.7%;
- The growth in furniture and mattress
sales was driven by enhanced displays and product selection, and
increased promotional activity, resulting in a 40.9% increase in
unit sales of furniture and mattresses, combined with a 14.0%
increase in the average selling price;
- Home office sales declined primarily as
a result of a 20.1% drop in the unit sales of laptop and desktop
computers and netbooks, as the average selling prices of those
products increased by 6.0%. This decline was partially offset by
sales from the introduction of tablets. Additionally, though home
office sales were down for the quarter, the Company saw growth in
the category during the month of October. While home office sales
declined, the Company drove an increase in the amount of gross
profit generated by this category; and
- Repair service agreement commissions
increased more than product sales on higher sales penetration as a
percent of product sales, as compared to the prior year
period.
All of the above amounts are preliminary estimates and are
subject to change upon completion of the Company’s quarterly
financial statement closing process. Actual results may differ
significantly from the preliminary estimates.
The Company will host a conference call and audio webcast on
Thursday, December 8, 2011, at 10:00AM, CT, to fully discuss its
earnings and operating performance for the quarter. The webcast
will be available live at www.conns.com and will be archived for
one year. Participants can join the call by dialing 877-754-5302 or
678-894-3020.
About Conn’s, Inc.
The Company is a specialty retailer currently operating 70
retail locations in Texas, Louisiana and Oklahoma: with 23 stores
in the Houston area, 17 in the Dallas/Fort Worth Metroplex, eight
in San Antonio, three in Austin, five in Southeast Texas, one in
Corpus Christi, four in South Texas, six in Louisiana and three in
Oklahoma. The Company’s primary product categories include:
- Home appliances, including
refrigerators, freezers, washers, dryers, dishwashers and
ranges;
- Consumer electronics, including LCD,
LED, 3-D, plasma and DLP televisions, camcorders, digital cameras,
Blu-ray and DVD players, video game equipment, portable audio, MP3
players, and home theater products;
- Furniture and mattresses, including
furniture for the living room, dining room, bedroom and related
accessories, and mattresses; and
- Home office, including desktop,
notebook, netbook and tablet computers, printers and computer
accessories.
Additionally, the Company offers a variety of products on a
seasonal basis, including lawn and garden equipment, and continues
to introduce additional product categories for the home to help
respond to its customers' product needs and to increase same store
sales. Unlike many of its competitors, the Company provides
flexible in-house credit options for its customers, in addition to
third-party financing programs and third-party rent-to-own payment
plans. In the last three years, the Company financed, on average,
approximately 60% of its retail sales under its in-house financing
plan.
This press release contains forward-looking statements that
involve risks and uncertainties. Such forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "intend," "could,"
"estimate," "should," "anticipate," or "believe," or the negative
thereof or variations thereon or similar terminology. Although the
Company believes that the expectations reflected in such
forward-looking statements will prove to be correct, the Company
can give no assurance that such expectations will prove to be
correct. The actual future performance of the Company could differ
materially from such statements. Factors that could cause or
contribute to such differences include, but are not limited to:
- the Company's growth strategy and plans
regarding opening new stores and entering new markets;
- the Company's intention to update,
relocate or expand existing stores;
- the effect of closing or reducing the
hours of operation of existing stores;
- the Company's estimated capital
expenditures and costs related to the opening of new stores or the
update, relocation or expansion of existing stores;
- the Company's ability to introduce
additional product categories;
- sales trends in the home appliances,
consumer electronics and furniture and mattresses industries and
the Company's ability to respond to those trends;
- the pricing actions and promotional
activities of competitors;
- relationships with the Company's key
suppliers;
- delinquency and loss trends in the
receivables portfolio;
- the Company’s ability to offer flexible
financing programs;
- changes in the Company’s collection
practices and policies;
- the Company’s ability to amend, renew
or replace its existing credit facilities before the maturity dates
of the facilities;
- the Company's ability to fund
operations, debt repayment and expansion from cash flow from
operations, borrowings on its revolving lines of credit and
proceeds from securitizations and from accessing debt or equity
markets;
- the ability of the Company to obtain
additional funding for the purpose of funding the receivables
generated by the Company;
- the ability of the Company to maintain
compliance with the covenants in its financing facilities or obtain
amendments or waivers of the covenants to avoid violations or
potential violations of the covenants;
- reduced availability under the
Company’s credit facilities as a result of borrowing base
requirements and the impact on the borrowing base calculation of
changes in the performance or eligibility of the customer
receivables financed by that facility;
- the ability of the financial
institutions providing lending facilities to the Company to fund
their commitments;
- the effect on borrowing costs of
downgrades by rating agencies or changes in laws or regulations on
the Company’s financing providers;
- the cost of any amended, renewed or
replacement credit facilities;
- interest rates;
- general economic and financial market
conditions;
- weather conditions in the Company's
markets;
- the outcome of litigation or government
investigations;
- changes in the Company's stock price;
and
- the actual number of shares of common
stock outstanding.
Further information on these risk factors is included in the
Company's filings with the Securities and Exchange Commission,
including the Company's annual report on Form 10-K filed on April
1, 2011. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. Except as required by law, the Company is not
obligated to publicly release any revisions to these
forward-looking statements to reflect the events or circumstances
after the date of this press release or to reflect the occurrence
of unanticipated events.
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