Conn's Q2 Comps Climb 22%

By Alan Wolf On Aug 7 2012 - 2:12pm

Beaumont, Texas - Higher average selling prices (ASPs) and strong demand for furniture, mattresses and tablets sent same-store sales soaring 21.5 percent during Conn's second fiscal quarter.

Net sales increased 12.9 percent to $171.7 million for the three months, ended July 31, while retail gross margin, which includes gross profit from product and service-agreement sales, was up 470 basis points year over year to 33.5 percent.

Margins were buoyed by higher ASPs as the multiregional specialty chain shifted its mix away from low-priced products, although the new pricing approach, and the impact of 11 store closings last year, also led to lower unit volume.

Leading the sales charge was furniture and mattresses, which showed a 57.5 percent increase in comp-store sales. The two categories now comprise nearly 19 percent of the merchandise mix, up from 14 percent during the year-ago quarter.

Comp sales for the home office category increased 41.5 percent, driven by greater tablet sales and a 27 percent spike in computer ASPs. The gains were partially offset by the impact of the store closures, reduced unit volume for computers, and lower sales of accessories. Home office now comprises 8.4 percent of Conn's merchandise mix, up from 7 percent last year.

Major appliance comps increased 7.2 percent during the period, reflecting a 25 percent hike in ASPs but a 19.1 percent decline in unit volume, one-third of which was attributable to the store closures. Laundry comps increased 15.4 percent, refrigeration rose 7.5 percent, and the cooking category increased 17.4 percent, although milder temperatures within Conn's trading areas led to an 18.9 percent decline in room air sales. Majaps slipped from 34 percent of the mix last year to 30.3 percent during the second quarter.

CE comps rose 4.6 percent on gains in TV and home theater/audio, partially offset by lower sales of gaming hardware and accessories. The move away from low-priced, low-margin TVs led to a 32.1 percent increase in TV ASPs, although unit sales fell 20.5 percent, driven in part by the store closures. CE slipped from 31.2 percent of the mix last year to 27.1 percent during the quarter.

Service-agreement comps increased 35.7 percent to comprise 7.2 percent of the sales mix, up from 6.5 percent last year.

During the quarter the company opened its sixth Conn's Home Plus store, in Waco, Texas. Chairman/CEO Theo Wright said the new location has generated "solid revenues in July, positioning it within the top 10 percent of our 65 stores ranked on sales." The Home Plus design is larger and more furniture-focused than previous store types, and the company plans to convert 14 locations to the new format by January.

The preliminary sales results show a continuation of the company's comeback under Wright, who reversed a string of consecutive losses and led Conn's to a 163 percent increase in first-quarter profits. The chain will report its full second quarter results on Sept. 5.