Conn’s Q1 Comps Down But Earnings Gain

Conn’s comparable store sales slid in the first quarter but a better gross margin and the company’s improved credit segment performance helped drive earnings up in the period year over year.

Net income for the first quarter was $19.5 million, or 60 cents per diluted share, versus $12.7 million, or 39 cents per diluted share, in the year-before period. Adjusted for one-time charges, net income was $19 million, or 58 cents per diluted share, versus $13 million, or 40 cents per diluted share, in the year-previous period.

Adjusted diluted earnings per share topped a MarketBeat-published analyst consensus estimate of 53 cents.

Comparable sales on a products basis fell 8.1% in the quarter year over year, and 8.2% on a total revenues basis, which includes repair service agreement commissions. Retail sales slipped 5% to $262 million from the year-earlier period. Although service agreement commissions gained 5.1% to $24 million from the year-prior quarter, product sales fell 6% to $234.4 million, with home office down 14.2% to $15.7 million, furniture and mattress down 8.9% to $88.4 million, consumer electronics down 5.1% to $49.6 million and home appliances down 0.9% to $77.3 million.

Total revenues were $353.5 million as compared to $358.4 million in the quarter a year before. Overall operating income was $39 million versus $32.8 million in the quarter a year previous.

Norm Miller, Conn’s chairman and CEO, said, “Record first quarter retail gross margin combined with the best credit segment performance in five years drove a 54% year-over-year increase in first quarter earnings per diluted share. Credit segment profitability continues to improve as a result of higher yields, better portfolio performance and lower borrowing costs. In April 2019, we closed a new ABS transaction with an all-in cost of funds of 5.26%, which was the lowest all-in cost of funds we have achieved since reentering the ABS market in 2015. Given the company’s strong financial position and our commitment to generating shareholder value, I am pleased to announce that the board has approved a $75 million stock repurchase plan.”