Conn's Revenue Rises 9.4% In Q3, Net Climbs
By Jeff Malester -- TWICE, 12/22/2003
BEAUMONT, TEXAS — Despite substantial start-up costs to enter the Dallas-Fort Worth market, all of which was absorbed into third quarter expenses, specialty retailer Conn's boosted both sales and earnings in the three-month period.
Total revenue for the retailer of consumer electronics, major appliances, home office products and lawn and garden items climbed 9.4 percent in its fiscal third quarter, ended Oct. 31, hitting $117.4 million, up from $107.3 million in the year ago period.
Revenue includes both net sales and finance charge income. Third quarter net sales of $103 million, alone, compared with $93.6 million year over year, accounted for a 10 percent increase. Same-store sales rose 4.1 percent.
Net income increased to $5.3 million in the third quarter, compared with $4.4 million in the same quarter in 2002.
"We believe that the same-store sales performance for [the third quarter] illustrates what we believe to be the turn-around in our recent same-store sales trend," said chairman/CEO Thomas J. Frank. "Our holiday selling season is off to an impressive start, and we hope to see positive same-store sales increases for the balance of the fiscal year."
Although the bottom line was pinched by heavy promotional and advertising activity to wrest a foothold in the Dallas market, Frank said top-line performance there exceeded expectations by 20 percent in the third quarter. "You've got to go in and establish yourself in a new market, you can't dilly-dally around," he observed. Conn's opened its first three Dallas stores in September, October and November, and is on track to add upward of six additional units there next year.
Total revenue for the nine months climbed 9.2 percent, reaching $355.3 million, up from $325.4 million in the third quarter a year ago. Excluding finance charge income, net sales rose 10 percent in the nine months, to $312.4 million, compared with $284 million in the same period last year. Same-store sales edged up 0.3 percent.
Net income in the nine months for the 45-unit Texas and Louisiana retailer, came in at $15.9 million, compared with $14.5 million in the same time frame a year ago.
An initial public offering (IPO) at Conn's became effective on Nov. 14 and closed on Dec. 1. Because the closing took place prior to the end of the fiscal third quarter, the retailer's consolidated numbers include the amounts of Conn Appliances. The capital infusion will be used largely to pay down debt.
The financial statement has not been modified to reflect the merger with Conn's Inc. that occurred immediately prior to the IPO. Conn's Inc., now the present holding company, had no operating activities prior to this merger.
Conn's significant contribution of finance charges to total revenue — $14.4 million in the third quarter and $42.9 million for the nine months — was realized because the company, unlike many of its competitors, provides in-house credit options for its customers.
Historically, Conn's has financed over 56 percent of retail sales. Customer receivables are financed substantially through an asset-backed securitization facility, from which the retailer derives servicing fee income and interest income from these assets. Additional reporting by Alan Wolf
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