Conn's Sales Up, Sets Succession Plan
By Alan Wolf -- TWICE, 6/16/2008
BEAUMONT, TEXAS — Conn's, the multiregional white- and brown-goods dealer based here, said net revenue for its fiscal first quarter rose 6.5 percent to $218.6 million while net income slipped nearly 18 percent to $10.6 million, reflecting a one-time $2 million charge.
Same-store sales rose 1 percent for the four-month period, which ended April 30.
Separately, the company announced that chairman Tom Frank, Sr. will hand off his CEO title to son Tim after retiring from the post at the end of January, and will remain "integrally involved" in Conn's operations. Tim Frank is currently president/COO and joined the chain in 1995.
In addition, David Trahan, formerly retail executive VP, has been promoted to retail division president, and his counterpart in the credit division, Reymundo de la Fuente, Jr., has been promoted to president of the company's in-house credit operations.
The appointments were made by Conn's board.
Commenting on the quarter, the senior Frank said, "We are off to a solid start this year with improved execution in many areas of our company. I am very pleased by the results of our cost control initiatives, improving credit portfolio performance and sales growth in a very challenging economic environment."
The company opened two replacement stores during the quarter, opened two new Texas locations in May, and has six additional stores under development that are set to open before Feb. 1, 2009.
During a conference call CEO designate Tim Frank said the company is seeing positive trends in sales growth and from its cost control initiatives despite "headwinds from a challenging economic environment."
Excluding revenue from finance charges, net sales were up 7.6 percent to $13.7 million for the quarter, led by strong sales of LCD TVs (up 198 percent year over year) and notebook computers (ahead 12 percent).
Sales of major appliances slipped 4.4 percent during the period, but rose 12 percent in May thanks to opportunistic buys of cancelled orders and brisk room air sales. Frank said the "special purchases," plus volume buying through NATM Buying Corp., the chain's buying organization, is helping it stay aggressive in a very competitive environment, underscored by Sears' recent 15-percent-off majap promotions.
Frank said the company has also seen a positive impact from stimulus check spending, although he described the effect as "helpful" rather than a primary driver of sales.
The sales shift from majaps to CE put pressure on gross margins, but Conn's is countering the earnings squeeze through a variety of cost control measures, including personnel reductions, increased operating efficiencies and expense leveraging, Frank said.
Looking ahead, the company believes the digital broadcast transition, plus the tendency of consumers to drive less and stay home more, should bode well for CE sales during its current fiscal year.
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