By Lisa Johnston
New products on display at the American International Toy Fair, held in N
THE WOODLANDS, TEXAS – Conn’s reported record third-quarter profits of $11.8 million, compared with a year-ago loss of $12.7 million.
Total revenues rose 10.6 percent to 206.4 million, retail revenues increased 8.2 percent to $167.7 million, and comp-store sales climbed 12.6 percent for the three months, ended Oct. 31.
Contributing to the strong results was a 31.7 percent increase in furniture and mattress sales and higher customer demand for home office products and majaps, the company said.
The multiregional appliance, furniture and CE chain also cited the opening of a Conn’s HomePlus store in Waco, Texas, in mid-June and the completion of 15 store remodels over the past year.
Retail operating income was $11.6 million, compared with a year-ago loss of $8.6 million, and retail gross margin was 35.5 percent, up from 25.3 percent during the prior-year period. The margin gain was driven by a focus on higher price-point, highermargin products and sourcing opportunities, and growth in the high-margin furniture and mattress category that outpaced the overall increase in the chain’s other product sectors.
Broken out by product category, furniture and mattress comps increased 34 percent, home office comps rose 27.5 percent, comps for service-contract commissions increased 23.1 percent, majap comps grew 6.4 percent, and CE comps slid 3.2 percent.
On an earnings call, chairman/CEO Theo Wright, who has led the company’s dramatic turnaround, said the chain enjoyed solid double-digit sales increases in all major product categories except TV.
He noted that competitors’ Thanksgiving Day store openings impacted Conn’s Black Friday business, which fell 10 percent year over year, and that the company will likely change its holiday closure policy in 2013. Nevertheless, November comp sales rose 6 percent, he said.
Wright added that unilateral pricing policies (UPP) are “definitely” helping TV margins without impacting sales; that Conn’s first New Mexico store has performed well since its opening last month; and that the chain is adding three more locations this week — including its first in Arizona — for a total of 69 stores. The company will open between 10 and 12 new stores next year, he said, including stores in Phoenix and additional Arizona markets.
Separately Conn’s said it is no longer doing business with Whirlpool. Whirlpool’s brand family includes Amana, Maytag and KitchenAid, in addition to its namesake badge.
In other Conn’s news, credit division president Rey de la Fuente will step down on Jan. 31, the end of the current fiscal year, to pursue other opportunities after 14 years with the company.
Conn’s is also building its war chest by adding another lender to its loan facility, which increased its credit line by $20 million to $545 million, and by initiating a public offering of 3,591,621 shares of common stock by certain selling stockholders and 1,408,379 shares of common stock by the company. The chain will also grant the underwriters a 30-day option to purchase up to approximately 750,000 shares of common stock from the company to cover over-allotments, if any.
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