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Conn's Q2 Sales Fall 15%

8/09/2011 10:37:01 AM Eastern

Beaumont, Texas - Conn's said soft
demand for TVs and major appliances contributed to a 15.2 percent decline in
fiscal second quarter sales, to $152.2 million.

Comp-store sales slipped 12.8
percent during the period, ended July 31. TV sales experienced their steepest declines
during holiday periods despite a relatively strong July 4 holiday weekend, the
company said, while total comp-sale declines eased to the mid-single digit
range for the balance of July.

Conn's also reported a mix shift to
higher-margin furniture and mattresses, which helped push retail gross margins
up to 29 percent, compared with 25.7 percent during the year-ago period.

During the quarter the regional CE,
appliance and furniture chain closed four Texas stores for a total of five
during the current fiscal year, leaving 71 locations in Texas, Louisiana and
Oklahoma.

Also during the quarter the company
completed a $55 million expansion of its revolving credit facility, to $430
million, extended the term by 20 months to July 2015, and completed an $8
million real estate loan to finance three owned store locations.

 "While the sales results for the quarter did
not meet our expectations, we did deliver gross margins above the range we
targeted, and I am encouraged by recent sales trends," observed Conn's chairman
Theodore Wright. "Early indications are that we can retain a meaningful portion
of the customers that shopped at our now closed locations. Also, the two stores
with significantly expanded floor space allocated to furniture and mattresses
have delivered good results so far."

Broken out by category:

·        
CE sales declined primarily as a result of a
27.1 percent decrease in the unit sales of TVs, as the average selling price
increased 7.2 percent. The decline in unit sales and increase in average
selling prices was largely impacted by the company's strategy during the
current-year quarter, especially during the two holiday weekends, to drive
higher average selling prices (ASPs) and gross profit contribution. Also, lower
DVD player and digital camera sales contributed to the decline.

  • Major appliance sales declined during the
    quarter on lower unit sales as average selling prices increased by 5.1 percent.
    Laundry sales were down 11.8 percent, refrigeration sales were down 10.8
    percent and cooking sales were down 16 percent;

  • Home office sales declined primarily as a result
    of a 28 drop in the unit sales of laptop, netbook and desktop computers, as the
    average selling prices of those products increased by 6.6 percent. This decline
    was partially offset by sales from the introduction of tablets. While home-office
    sales declined, the company drove an increase in the amount of gross profit
    generated by this category.

  • Repair service agreement commissions decreased
    less than product sales on higher sales penetration as a percent of product
    sales, as compared with the prior year period.

  • Service revenues decreased as Conn's experienced
    lower customer repair volumes, in the current year quarter, and increased its
    use of third-party servicers during the quarter, compared with the previous
    year, to provide timely product repairs for its customers.

Conn's
will report its second-quarter earnings and operating performance on Sept. 7.